Every second of every day, there are 4.1 births and 1.8 deaths, resulting in a global population increase of 2.3 people, according to the U.S. Census Bureau. This reality, along with other important factors, are causing major shifts in demographics that will undoubtedly impact your target markets.

To successfully invest your capital, sell your goods and services, add or delete product lines, or make product alterations, you’ll need to know where tomorrow’s major populations will live, what they are likely to buy, and how much they are willing and able to spend. Answers to these questions may seem difficult to obtain, but if you analyze available data, you'll learn where tomorrow's major populations will live, their ages — an important indicator of needs and tastes — and their income levels.

99 Percent of Population Growth Will Occur in Developing Countries

By 2004, world population is anticipated to reach nearly 6.38 billion people. And although world growth rates are decreasing, the population is expected to exceed 6.81 billion by 2010 — an increase of 430 million or more than the combined populations of the United States, Germany and France. Virtually all world population growth will occur in developing countries, with India and China accounting for 21 and 12 percent, respectively.

Per capita income levels play a major role in determining whether or not to pursue a particular market. Yet, when establishing a global marketing strategy, the size of the middle class can be more telling. For example, in 2004, major global markets like the U.S., Germany and Canada are forecast to support per capita incomes of approximately $40,000, $30,000 and $27,000, respectively, according to the International Monetary Fund. On the other hand, per capita incomes in Mexico, China and India are anticipated to reach $6,000, $1,120, $530, respectively.

At first glance, U.S. producers are likely to assume that consumers in these countries can’t afford their products. However, they could be mistaken. India is estimated to have a middle class of 300 million people with purchasing power similar to the U.S. middle class. Compared to the entire U.S. population of 289 million, many would agree that an additional market of 300 million consumers with substantial buying power is worth pursuing.

Focus on the Fastest Growing Age Segment

Due to medical breakthroughs and improved diets, the elderly are living longer, healthier lives. In fact, on average, men and women are living 11 years or more than they did in 1970. Consequently, over the next two decades, the age structure of world population will shift, with older age groups making up an increasingly larger share of the total.

Existing trends indicate that by 2020, two-thirds of the world’s elderly will live in developing countries. And in that time, the elderly population in the United States and the rest of the developed world will increase by more than 50 percent. What does this mean for your business? The demand for travel and other leisure-related services, second homes and furnishings, and healthcare and related services all will increase.

Median Age Is Increasing

As the population of the elderly is increasing, the growth rate of children is decreasing. In fact, from 1998 through the year 2025, the number of children under age 15 will increase only by 6 percent. This is the result of lower fertility rates. As children become a smaller proportion of the total population and older age groups become more dominant, the world’s median age — the midpoint that separates the younger half from the older half — will rise. In 1996, the world’s median age was 26 years. By 2020, it will be 31. What does this mean for business?

According to Harry S. Dent, Jr., author of The Roaring 2000s Investor, on average, Americans enter the workforce at age 19. They get married at age 25.5 (27 for men and 24 for women), bear their first children two years later, and purchase their first homes at age 33 or 34. They trade up to the largest homes they’ll own by age 44, and fully furnish them by age 46.5 or 47.

Interestingly, average Americans also reach peak spending at age 46.5 or 47, which is the same time their children usually leave home. Dent observes that empty-nest couples then spend more on vacation homes, travel and leisure. They also become prospects for investment services and products as they approach retirement age. Since American consumer spending patterns are similar to those of other developed countries, it’s reasonable to assume that as the median age rises in those countries, consumer spending also will rise. Depending on your products or services, closely targeting these consumers may be a sound strategic decision.

Reassess Your Marketing Strategies

As U.S. and world populations shift, traders and investors must reassess which markets to pursue. For some, this may mean targeting the growing needs of the elderly. For others, it may result in providing goods and services to median age consumers in developed countries, where incomes are rapidly increasing.

To achieve your goals, it may be necessary to eliminate, redesign or add new product lines and services. However, before acting, research where your target market will be both in the near and distant future.

This article appeared in Crain's Detroit Business, October 2003. (CO)
Topic: Strategies
Comment (0) Hits: 5669



The U.S. banking industry has a long history of supporting U.S. governmental efforts to combat illegal financial operations and money laundering. Since September 11, 2001, these efforts have increased even more. With the passage of the U.S.A. Patriot Act and new legal requirements financial institutions must follow, money laundering is fiercely being fought. This effort is not only attempting to curtail criminal activity, but is working to disarm and deter terrorist organizations.

But what does this mean for businesses and the world economy? What kind of businesses are most at risk? And how can companies protect themselves against money laundering? To answer those questions it is first necessary to understand the size and scope of money laundering and how this illegal activity occurs.

Money Laundering Is Complex

In short, money laundering occurs when individuals or organizations seek to disguise or place illegally obtained funds in the stream of legitimate commerce and finance. Most commonly associated with illegal arms sales, smuggling and the activities of organized crime, such as prostitution and drug trafficking, money laundering also often lies at the heart of embezzlement, computer fraud schemes and insider trading.

For example, when criminal activities produce large profits, those involved must look for ways to control the funds generated without drawing attention to themselves. This is usually achieved by disguising the sources, changing the form of the funds (i.e. from cash to money orders or traveler’s checks) or by moving the funds to a location where they will draw the least attention.

Traditionally, money launderers have targeted banks, since banks accept cash and facilitate domestic and international funds transfers. However, the U.S. securities market may be a growing target of criminals looking to hide and move illicit funds.

The Scope and Size

Anyway one looks at it, money laundering is a significant problem — both in terms of size and scope. According to The International Monetary Fund (IMF) money laundering could equal two to five percent of the world’s gross domestic product, and based on 1996 statistics, money laundering ranges from $590 billion to $1.5 trillion. The smaller number is roughly equivalent to the value of the total output of an economy the size of Spain!

How Is Money Laundered?

After the funds are generated, the first stage of money laundering takes place when the launderer places his illegal proceeds into the financial system. This is usually accomplished by breaking up large amounts of cash into smaller sums and then depositing those less conspicuous amounts into bank accounts. Or, the cash is used to purchase a number of smaller monetary instruments that are then, in turn, deposited into bank accounts.

The second stage of money laundering is to convert or move the funds after they have been deposited into the financial system. For instance, the launderer may choose to convert the funds to investment instruments or wire them through a series of bank accounts across the globe. Another way to move the illegal funds is to disguise them as legitimate payments for goods or services.

After the second phase is complete, the final stage occurs. Referred to as integration, this involves re-entering the funds into the legitimate economy. At this point, many criminals choose to invest the funds into real estate or business ventures.

Effect of Money Laundering on Businesses and Society

Financial institutions are leading the way in the fight against money laundering. These institutions recognize the potential macroeconomic consequences and damage that could occur in their industry. They also understand the effect money laundering can have on publicly and privately held companies, regulatory authorities, capital flows, exchange rates, and international trade, as well as on national economies and workforces.

Money laundering also has steep social and political costs. If organized crime is allowed to infiltrate financial institutions, gain control of large sectors of the economy via investment, or even bribe public officials and governments, a country’s entire society, ethics and social framework could be at risk.

How To Protect Against Money Laundering

A company’s first and most important step is to establish sound anti-money laundering policies and procedures across the board. According to Jim Christie, Global Treasury Services Executive Risk Management Officer, Bank of America, “anti-money laundering programs should place a major emphasis on the ‘Know Your Customer’ approach and include compliance with the OFAC regulations, as well.”

Imperative to the success of an anti-money laundering effort is the full support of senior management and all employees. In fact, compliance to anti-money laundering policies and procedures should be part of a company’s code of ethics or basic employment standards/expectations. In addition, non-compliance with anti-money laundering strategies could be sufficient cause for employee dismissal.

A very clear anti-money laundering training program and a commitment to on-going training are two additional necessities. All employees who have customer contact (directly or indirectly) or who have occasion to see or handle customer transactions and activity, should be required to take the training, including all new hires. Furthermore, a policy should be in place that states what form of annual “refresher training” will be given and who will take it.

“Keep in mind that there are three lines of defense: (1) the line of business associates who deal with the customers and transactions, (2) the associates who set policy and monitor the activity, and (3) the associates who audit whether or not the first two lines are doing their jobs and helping to keep the company in compliance with laws and regulations,” Christie said.

Most importantly, all three lines should be equally concerned about protecting the company’s vulnerability to fraud, money laundering and reputation risk, as well ensuring compliance with laws and regulations.

Companies at the Greatest Risk for Money Laundering

In general, “any company that provides a method for criminals to either exchange ill-gotten goods for legitimate assets is vulnerable to possible money laundering. And, any company that provides a way to move dirty money from one source to another, or better yet, to many other end points in an attempt to hide the money’s origin and trail and to clean the money through this route, is highly susceptible to money laundering, said Dan Soto, Senior Vice President, Anti-Money Laundering Compliance, Bank of America.

As such, almost any company, financial institution or organization can be a potential candidate for fraud. Some examples, Soto explained, include: car dealers selling cars for “dirty cash” and the car being resold to obtain “clean cash;” a retail store selling money orders or taking money wire orders with the payment proceeds being “dirty money;” casinos allowing criminals to buy many chips with “dirty money,” and then those chips are cashed in for “clean money;” financial institutions opening accounts and handling money transactions for criminals.

Another concern is doing business with companies who either operate out of countries known for their high risk of money laundering or who are from countries known as “tax haven” countries.

Yet, not all companies operating in high risk lines of business or countries are high risk, themselves. If they have the appropriate controls in place to know their customers and detect, deter and report unusual or suspicious transactions, they should be considered normal risk companies.

Legitimate companies also must know that if they become investment recipients of laundered money, knowingly or unknowingly, their assets may be confiscated by the authorities. In addition to the financial consequences of such an action, the public relations damage can be disastrous. And, since a corporation’s reputation and integrity can be its strongest assets, protecting them is imperative.

Financial Institution Responsibilities

According to The American Bankers Association, more than $2 trillion dollars flows through the U.S. banking system daily. As such, it’s no surprise that financial institutions hold a large responsibility in the fight against money laundering. Today, they must identify and investigate any potential money laundering activity. If their management falls short of these responsibilities, they can be held liable, which may mean facing stiff fines, incarceration and of course, negative publicity.

Precedents already have been established. For example, in November 2001, the managing director of a major financial institution in France was arrested based on allegations that his organization failed to investigate suspicious banking activity that resembled money laundering.

The U.S.A. Patriot Act, which was signed into law in October 2001, expanded the scope of anti-money laundering legislation to include all types of financial institutions, such as banks, broker/dealers, mutual funds, insurers and money transfer/payment agencies. And, while many financial institutions were already faithfully complying with the Bank Secrecy Act, which required many of the same elements, the U.S.A. Patriot Act brought the requirements and compliance standards to a higher level.

Previous legislation required an institution only to monitor and report certain transactions. For example, if a customer deposited or withdrew funds totaling $10,000 or more, banks were required to file a currency transaction report. More than 12 million of these reports are filed annually.

Required Reporting and Transaction Monitoring

Although there is no magic list of rules, transactions or specific actions that cause a bank to question a customer’s business activity, as required by law and in their own best interest, banks do monitor customer activity for suspicious and unusual transactions.

In a perfect world, if a bank did the appropriate due diligence on all its customers, there would be no concern about illegal activity and money laundering. Unfortunately, that’s not today’s situation, so banks must monitor all types of financial transactions. In short, any transaction that looks unusual or suspicious as compared to a customer’s normal pattern of activity is reviewed and analyzed to determine its true nature.

Banks also are required to file suspicious activity reports (SAR) when any possible violation of law is suspected. And, financial institutions must use the most powerful and effective anti-money laundering systems available. If money laundering is detected at a bank, its only true defense against criminal prosecution is to demonstrate that it did its absolute best to detect money laundering or fraudulent activity.

According to Soto, Bank of America is dedicated to performing the appropriate “Know Your Customer” due diligence on all its existing and new customers, based on an appropriate risk-based approach. “We monitor the activity and transactions moving into and through our bank. And, as required by law and regulation, should suspicious activity be detected, processes are in place to notify areas within the company that specialize in analysis and investigation, as well to report to the government when appropriate,” Soto explained.

Impact of the Internet

Over the last five to 10 years, money laundering has continued to grow. Sophisticated criminal organizations have leveraged the accessibility, speed and relative anonymity of the internet and web-based financial programs to better perform and hide their money laundering activities. In fact, instead of having to run the risk of physically transporting currency gained from illegal operations out of a country, criminals often now are concealing the currency by transforming it into a digital format. This way, dirty money is unable to be distinguished from legal currency.

However, even though the internet has provided many with the ability to establish a variety of relationships with institutions, the means for moving and settling funds transactions still resides with traditional financial institutions primarily through FedWire, Chips and SWIFT. These systems are continually checked by financial institutions for potential money laundering transactions.

On a positive note, the internet also is being used by banks, law enforcement and other interested parties as an investigative tool for research of people, companies, transactions and countries.

The Fight Against Money Laundering

The U.S. Secretary of the Treasury is at the helm of the fight against money laundering in the United States. The Secretary is responsible for anti-money laundering regulations, and within Treasury, the authority to issue and administer these regulations resides with the Director of the Financial Crimes Enforcement Network (FinCEN). FinCEN was established in 1990 to support law enforcement agencies by collecting, analyzing and coordinating financial intelligence information to combat money laundering.

The U.S. government also recently created a new national money laundering strategy that involves a government-wide effort to combat terrorist financing and emphasizes asset forfeiture as the most direct method of depriving criminals of their illegally obtained funds. This new strategy also involves the aggressive pursuit of money trails left by criminals and terrorists in order to dismantle these groups and strip them of the funds they would use to finance further acts of terror or criminal activity.

Christie said Bank of America, through various industry committees, has been “at the table” with the government to determine what steps can be taken to identify and report potential terrorists or those who support them.

“We also have implemented processes to respond to government requests for information as stipulated in the Patriot Act, and we’ve provided government agencies and members of congress with operating knowledge and experiences to help them understand the world of money transfer and correspondent banking, as well as other facets of banking susceptible to fraud and money laundering,” Christie remarked.

A Joint International Effort

Today’s global fight against money laundering includes a combined effort involving the U.S. government and several international institutions, including the multinational Financial Action Task Force, which is responsible for setting, implementing and monitoring international anti-money laundering standards, the World Bank and the IMF.

Without a doubt, money laundering is an international problem that affects virtually every country. Financial services and businesses must be especially vigilant. “Remember, a good anti-money laundering program must start with senior management commitment and follow-through,” said Christie.

This article appeared in September 2003. (BA)
Topic: Strategies
Comment (0) Hits: 2576



Many treasurers would like to look into a crystal ball and see what the future will bring. The crystal ball, however, may not be necessary. In many ways, the future is already here, especially since real-time Enterprise Resource Planning and Treasury Management Systems, for example, are available and linked to the Internet.

These are but a few of the new technologies to come along that are pushing treasuries further and further away from paper-based, error-prone systems and closer to the peak operational efficiency treasurers seek.

How will these and other new technologies impact your business?

Web-Enabled Treasury Management Systems

Web-Enabled TMS allow multinational corporations to link treasury centers together and create stronger connections with their subsidiaries. Merging treasury centers into a single, central database gives treasurers the ability to analyze their entire group’s finances more quickly and accurately.

The single TMS database can segregate data across the corporation’s entities and groups, allowing subsidiaries to see their own financial information without letting them view or change any information that does not pertain to them.

This new technology also makes it possible to maintain a central, in-house banking structure even for companies with multiple treasuries. As a result, local subsidiaries can reduce their banking costs and manpower — and increase their forecasting accuracy.

eXtensible Markup Language (XML)

XML is a universal language used to format documents and data on the web. Its universal format allows treasurers to configure data in such a way that it can be exchanged between two dissimilar processing systems — an advantage that minimizes IT investment and provides significant savings.

XML also gives context to financial data, facilitates statistical reporting, and enables treasurers to create matrices that bring unprecedented depth to basic statistical analysis.

eXtensible Business Reporting Language (XRBL)

This web-based programming language provides a single standard for identifying and communicating the complex financial information in corporate business reports. By standardizing the way financial information is reported from every company, XRBL makes it easier for treasurers to prepare SEC filings, tax returns and other documents.

XRBL also permits the reliable exchange and extraction of financial information across all software formats and technologies, including the Internet — a benefit that treasurers with global subsidiaries will appreciate.

Single Sign-On

Treasurers who use multiple, web-based treasury systems need to repeatedly sign on to access each system. This convenient technology now allows treasurers to access multiple systems with one digital sign-on.

Electronic Bank Statements

As the demand for quicker and real-time information has grown, so has the popularity of electronic bank statements because they provide the instantaneous information corporate treasuries want. Electronic bank statements allow treasury departments to perform reconcilements, book closings and other financial activities faster than ever before.

Electronic Bill Presentment and Payment (EBPP)

With the right technology investments and strategic planning resources, EBPP can automate a corporation’s entire billing process and save substantial time and money by minimizing human errors, maximizing accounts receivable efficiency, and eliminating printing and postage costs.

Online Event Notification

Financial institutions will notify treasurers about specific events, such as the arrival of a wire transfer or the approval of a letter of credit, rather than having treasurers call or stop in to check on the status of the transaction. This online technology offers treasurers greater convenience and the ability to devote more time to productive activities.

Check Imaging

Online or CD/ROM check image viewing used in conjunction with lockbox and disbursement services can speed up a company’s reconcilement and collection processes. It also provides immediate information access, while helping to eliminate paper and storage needs from the work environment. As a result, check imaging can enhance a company’s cash management capabilities, efficiency and cost savings.

Wireless Communications

Wireless communications allow anyone with a laptop or PDA outfitted with a wireless network card to access the Internet wirelessly as long as they’re within 300 feet of a so-called “hot spot.” Through the wireless network, users can view email, download email attachments, surf the web, watch a live webcast or listen to streaming audio. The convenient wireless devices have led financial institutions to explore the possibility of offering wireless access to treasury tools.

Unfortunately, wireless communications technology has not been perfected yet. Hot spots are relatively scarce to date and there is very little bandwidth available for wireless devices, so accessing information is slower than using a PC. However, as the technology improves, wireless communications will offer unlimited potential for mobility, remote access to information, and greater productivity from almost anywhere in the world.

This article appeared in Crain's Detroit Business, September 2003. (CO)
Topic: Strategies
Comment (1) Hits: 2328



As companies vie for position and competitive advantages in an increasingly complex global financial environment, how efficiently working capital is managed takes on even greater significance.

Every dollar locked up in working capital bogs down a corporation’s financial performance. If capital is locked in the supply chain, or receivables/payables are not being managed effectively, a company is unable to use its cash flows to its best advantage. This could result in higher capital expenditures or the need to turn to the equity or debt markets to supplement cash flow.

However, once working capital is unlocked, every dollar can support investment and value creation for the present and future.

Adding Value to the Treasurer’s Role

In the past, corporate treasury served as a support center for a company’s business units. The treasurer’s responsibilities usually included overseeing payments and collections, making cash flow decisions to ensure daily liquidity, and gathering and analyzing financial information to support these efforts through activities like cash forecasting. But in recent years, treasurers have begun to play a more strategic role.

“One of the toughest challenges facing treasurers today is getting control of global cash,” notes Michael Golden, Senior Vice President of Global Liquidity Management at Bank of America. “However, the ability to control cash and maximize its use will enable the treasurer to assume a more value-added role within the corporation.”

Current Business Climate Raises Stakes

Numerous factors are forcing corporate treasurers to optimize their working capital and cost-effectively fund vital business requirements. One of the leading impetuses for corporate treasury to work at its highest possible level is an economy that has eroded revenue and put a greater focus on improving efficiency to maintain profitability. Global competition, global market volatilities and the demand for increased shareholder value also are dictating optimal working capital processes.

What’s more, as traditional external funding sources become less available and more expensive, organizations are being forced to find alternatives to debt, which include mobilizing internal liquidity to maximize yields and lower funding costs. Finally, high-profile corporate governance mandates are driving treasurers to get a clear picture of enterprise-wide cash positions, both to mitigate risk and ensure that they have the ability to meet current obligations.

As some treasurers already have discovered, maximizing the use of capital resources has allowed them to recapture significant amounts of money that can now go toward research and development, acquisitions, share buybacks, paying down debt and even dividend raising. Working capital management is an untapped treasure-trove for increasing shareholder value and improving the bottom line. Here are some suggestions how to achieve these goals.

Obtain and Manage Information More Effectively

“Getting accurate, real-time information and finding out where liquidity is are vital to the treasurer’s ability to maximize working capital,” states Golden. This is why treasury workstations interfaced with Enterprise Resource Planning (ERP) systems and their bank provider systems are some of the most powerful tools available to treasurers. ERP provides real-time financial information from every functional department within a corporation. Market subscriptions and websites also give treasury personnel access to almost any data that affect their company’s operations. Other treasury technology helps to gather, consolidate and report some of this critical information.

The real key, however, is to garner financial value from this influx of information, and use it to measure the cost of each financial decision. Treasurers need to have analytical tools to automatically sift through all this data and provide them with precise strategic information and costs. Without these tools, expenditures on information and data systems are worthless.

Many treasurers also are integrating their ERP systems with internal systems, such as treasury workstations, as well as with their banks and other key external partners to develop straight-through processes. By doing so, they enjoy the added benefit of improved cash-flow forecasting, both a key driver to achieving precise working capital management and reaching treasury objectives.

Improve Working Capital Processes Before a Crisis Arises

For many corporations and treasurers, working capital management has been viewed as a strategic priority. It is sometimes ignored in favor of other seemingly more urgent or high-profile tasks, such as mergers, acquisitions, divestitures or new product launches. Yet, by waiting for a crisis to occur before concentrating on working capital or scrambling to raise cash, treasurers can jeopardize their corporation’s financial stability. In fact, treasurers should consider which everyday tasks can be outsourced, so they can concentrate on freeing up cash.

Make Working Capital a Company-Wide Priority

Managing working capital can be a daunting task for treasurers to handle alone. “There has to be senior leadership buy-in, as well as agreement throughout the whole organization that (controlling cash) will be a priority,” says Golden. In fact, the quality of a company’s products or services, how quickly they’re delivered and the level of customer service all impact working capital. For working capital management initiatives to be successful, they must extend to the sales force, the purchasing department, production facilities, and even accounts payable and receivable.

Contact Customers Before Payments Become Overdue

One way to improve receivables payments and customer service levels is to categorize customers according to the value of their business and focus collections on those who owe the most. By contacting those customers who generate the majority of receivables before, and not after their payment due dates, companies can immediately address any problems that could delay payment.

Have a System in Place for Handling Disputes

Companies with strong working capital performance have a dispute management process in place that assigns resolution responsibilities to specific individuals. When disputes remain unresolved beyond a pre-determined time limit, they usually become the responsibility of senior staff. It’s a proactive way of doing business, and it’s a proven method for improving receivables.

Consider Obtaining Supplier Discounts for Early Payment

Although many companies negotiate extended payment terms from their suppliers when cash flows are tight, it could be just as valuable and profitable over the long run to negotiate discounts for making early payments. In fact, companies that rely on payment term extensions time and time again may find that the costs of their goods and services eventually increase to cover the expense of those extensions. What’s more, competitors who pay promptly may be enjoying discounts and other cost concessions that could be difficult to undercut.

Try To Balance Inventory with Customer Needs

While some customers may need goods for next-day or same-day delivery, others are willing to wait a week or more to receive shipment. Still others may be satisfied to receive a portion of their order the next day and the rest in a week or two. It pays to talk to customers to determine their specific needs. Rather than trying to have all orders delivered in full from inventory in one shipment, companies can stagger shipments to free up cash, floor space and operating expenses that result from excessive inventory. Many of the companies successful at managing working capital are the best at predicting demands on inventory.

Get an Accurate Measure of Days Sales Outstanding (DSO)

The best way to gauge how much cash is flowing into a corporation is to measure the DSO, which is total receivables divided by total credit sales for the period, multiplied by the days in that period. Presumably, the lower the DSO, the faster a company is converting receivables into cash. However, that isn’t necessarily the case. A DSO can be low because a company is issuing credit notes to clear disputed items — a practice that doesn’t generate additional cash.

To get a more accurate measure, compare the actual DSO, as described above, with the best possible DSO (the DSO that could be achieved if all customers paid at their exact payment terms). For example, if all sales were made at 30-day terms, the best possible DSO would be 30. The true performance measure is the difference between best possible DSO and actual DSO. Measure it and break it down into three components: disputed debt, bad debt and delinquent debt — and then address the problems that have created those debts.

Fine Tune Receivables, Payables and Inventory

Any working capital management initiative should include immediate action to improve all three areas in an organization: revenue management (receivables), supply chain management (inventory), and expenditure management (payables). A strategy that encompasses all three will prove to be the most rewarding. For example, recent studies show that large multinationals have improvement potentials in the range of several hundred million dollars. At the P&L level, returns on investment can be as high as 10 times.

Choose the Right Financial Partner

Golden feels that “liquidity management is a key component of working capital management.” What’s more, he firmly believes that “liquidity management structure and solutions need to be tailored for every business.” When choosing a bank provider, make sure they have the tools, techniques, capabilities and consultative approach to devise the appropriate solution for you.

This article appeared in September 2003. (BA)

Topic: Strategies
Comment (0) Hits: 3680



What new technologies will impact treasurers and CFOs and change corporate finance in the not-so-distant future? A number of current and emerging technologies will allow treasurers to manage real-time information, eliminate boundaries for cross-border transactions, conduct business anywhere with wireless connectivity, better protect the corporate financial infrastructure and much more.

What’s Driving New Technology?

According to Susan Colles, Client Delivery Consultant for Bank of America, much of the new technology is “led by the demand for more message-driven and real-time activity to coexist with batch-oriented legacy systems. Enterprise Resource Planning and Treasury Management System vendors are developing technologies that will assist treasury staff requesting data on an ad hoc basis. This will encompass the deployment of web services, XML messages, and the unattended delivery of data.”

In addition, there are true science-fiction-style technologies, such as artificial intelligence, that could dramatically change the way treasurers conduct business. Here are some of the technologies foreseen as having the greatest influence on treasurers within the next five years.

A Single Standard

XBRL (Extensible Business Reporting Language) is a web-based programming language that creates a common language and a single standard for financial data. This means the way financial data is reported will be the same from company to company, simplifying the preparation of SEC filings, tax returns and other documents by treasurers. XBRL allows data to be used by any software program, across any platform, and in any country, offering the compatibility treasurers need, especially if their companies have offices throughout the world.

XBRL also tags financial data and gives it context, improving the accuracy and speed of corporate reporting. With XBRL’s precise tagging, financial information can move easily between domestic and foreign corporate divisions without needing to be manually re-keyed or passed through translation software. This is currently necessary because U.S. currency is kept separate from foreign currency and cash entries are automatically sorted according to each country’s accounting standards.

Once manufacturers begin to release XBRL-compliant software, this new language may very well become the standard for financial reporting.

Business Intelligence Software

At its most basic level, Business Intelligence (BI) software can help treasurers gain control over company data, centralize systems and use the web to gather information on both their business and competitors. BI software can go even further — it can offer search results that trigger customized database questions and answers. For instance, BI software can alert treasurers to production problems, assist them in finding solutions and provide all relevant data so treasurers can take action and make informed decisions.

At its most advanced level, BI software resembles something from Star Wars. New BI software will have an intelligent search agent, known as an avatar, that accesses internal databases, collects data, analyzes the information and presents it to the user. The avatar, which has a name and digitized face, can be questioned directly about daily product sales, returns, company rankings, etc. The avatar will use the internal databases to answer as many questions as possible.

Digital Cryptography

Cyber security has been an issue since the creation of the internet. Although perfect security is virtually impossible to achieve, mitigating risk is the key to internet security. One way to safeguard financial transactions is with public key cryptography (PKC).

Unlike conventional cryptography where messages are encrypted by a sender and decrypted by a receiver using the same password, PKC gives each person a pair of keys. One is a public key, which is usually printed in a confidential directory. The other is a private key, which is kept secret. Anyone can send a message with the public key, but it only can be decrypted with the private key.

Of particular interest to treasurers, PKC also can be used for authenticating digital signatures on either or both ends of domestic and global financial transactions.

What’s Ahead?

According to Colles, “Bank of America is very involved with numerous standards organizations, such as the Interactive Financial Exchange Forum, RosettaNet and TWIST, to stay abreast of the latest technology changes.” To learn more about the infrastructure and new tools that will help you prepare for the future, contact your Bank of America Global Treasury Services Officer.

This article appeared in June 2003. (BA)
Topic: Strategies
Comment (0) Hits: 2064



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