1. How firms manage FX risk is critical
73% of webinar attendees indicated that they work for global companies, while the remaining 27% indicated that they were looking to expand globally. For similar firms that work across multiple territories, cross-border FX payments present five key challenges:
- Managing FX liquidity
- Setting buy/sell trigger points
- Accessing accurate and timely FX rates
- Getting real-time oversight
- Issue management
Failure to manage these challenges will leave firms unable to provide adequate funding for payments, chase any outstanding payments from the settlement process, or make value-added decisions. Any delays in decision-making that stem from sub-optimal information can lead to missed opportunities and potential losses.
Having accurate and timely data is therefore essential for organisations to navigate the complexities of cross-border FX payments. Decision-makers should be mindful that the optimal path forward will likely be to integrate their control systems with an FX trading system.
2. Regulation is an ongoing challenge for global firms
All regions deal with payments in specific ways, which represents a significant challenge for global firms who must maintain regulatory compliance across multiple territories. This was echoed by webinar attendees, 77% of whom pointed to regulation as the biggest risk their company faces.
Firms expanding into new countries will want a thorough understanding of the regulatory landscape. For example, US companies looking to expand into European regions will need to address how they comply with safeguarding regulations, which exist to protect client assets.
Breach of governance and risk structures under safeguarding rules carries severe financial penalties and reputational risk. Regulators will ultimately judge firms based on the quality of their risk and governance control frameworks.
Managing client money at a customer level is therefore the best option for firms looking to create a more granular process. Webinar attendees upheld this sentiment, with 44% affirming that they already manage client e-money at the desired customer level.
3. In-house solutions can be inefficient
While 44% of our attendees revealed that they now use a third-party system, 50% acknowledged that they still rely on an in-house solution. Looking to the future, firms might want to consider if an in-house solution is really the most effective approach.
Companies should be aware that even the best in-house solutions quickly become legacy systems. Even worse is that operational inefficiencies arise when we continue using these outdated solutions, which often rely on internal servers. They also require continual hardware maintenance and are not scalable to accommodate business growth.
A good indicator of an outdated solution is that a large team is needed to support its processes. Not only is this a drain on precious resources, but it also necessitates manual intervention – a much riskier proposition.
Moving data management systems away from internal servers and onto a cloud-based solution will be essential if firms want to address these inefficiencies.
4. Better control is the way forward
Organisations will need superior data control if they are to manage the risks of processing cross-border payments. Those who want to stay ahead of the curve should consider how technology can transform their data management by providing better data auditability, visibility, and lineage to show reports in MI for auditors.
Looking ahead, best-in-class solutions will be global in nature and manage cross-border transactions through a centralised framework. Whether they are inbound and outbound payments or inter-currency transfers, having all the information in one place will provide firms with full control of the underlying data.
It is only with superior data control and visibility of process flow that global organisations can mitigate the regulatory and data-related challenges they face.