Canadian Treasurer Magazine Spring 2015

Canada’s magazine of Corporate Finance

Spring 2015 • www.canadiantreasurer.com

Trendwatch: The future of consumer financing

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Effective Leadership: Turn conflict into creativity

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A look at what is trending in treasury management AML: beneficial ownership determination

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Canada’s magazine of Corporate Finance

Spring 2015 • www.canadiantreasurer.com

Table of Contents Departments & Columns 4

Industry Watch

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Events

Treasury Management Report From being in the cloud, to bulls in bear markets, treasury management is evolving

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In the Cloud AR is a business driver, not just a cost centre

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How Treasurers Can Be In A Bear Market Challenging times present risks to careers, but also opportunities to distinguish oneself with leadership…

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Optimizing the Global Treasury Footprint “Take time now to build a strong foundation before the velocity of growth accelerates too fast and forces you into reaction mode.”

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Features

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Regulatory: AML Who are the beneficial owners?

How is it verified?

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Trendwatch iPhones, aging consumers, and the future of consumer financing

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HR Management Effective leadership: The five behaviours required to turn conflict in to creativity

In the next issue: Good investor and stakeholder relationships are the key to a sustainable enterprise. We look at the various aspects of stakeholder relations and discuss best practices for effective stakeholder management.

Spring 2015

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Industry Watch

EY’s 2015 banking outlook: Time to redefine the core of a bank Canadian banks need to reinvent themselves through simplification of businesses, deconstruction of products and an end to global universal banking, according to EY’s Global banking outlook 2015: Transforming banking for the next generation.

In the aftermath of the financial crisis, new regulations, investor sentiment and evolving customer behaviour are challenging Canadian bankers’ commitment to global universal banking. EY’s report shows that around the world, banks operating on a global scale reported average ROEs of around 7.5% in 2013, while large banks with a less diverse business and geographic footprint achieved an average ROE of around 10.7%. Canadian big six banks had an even higher ROE of 15.54%.

“Banks themselves are starting to realize that the creation of new products is often less efficient and profitable than expected,” says Andre de Haan, Canadian Leader, Financial Services at EY. “The time has come for banks to simplify.”

Simplifying businesses

According to the EY report, there’s little correlation between the breadth of a bank’s product offering and its market share. As a result, banks need to examine what’s truly core to their business. Parts of the business that don’t add value need to be improved. If that’s not possible, they need to be identified as non-core or provided to customers through an alternative supplier.

“In addition to reassessing business lines, banks need to re-evaluate their internal operations. If certain back-office functions don’t add a competitive advantage, banks may consider outsourcing them,” says de Haan.

Deconstructing products

By breaking products into their component parts, banks will enable customers to pick and choose products that truly suit their needs. If banks succeed at differentiated offerings, they’ll increase share of wallet, reduce the cost of operations, and show regulators they’re treating customers fairly.

The need for transformation

For more than a decade, a mix of consolidation and competition in Canadian banking has created complex organizations, with diverse portfolios of products, operating across multiple business lines. According to the report, Canadian banks will need to fundamentally transform their strategies and operating models based on these five key drivers: 1. Quest for growth 2. New era of competition 3. Redefining of the core of the bank 4. Technology-driven reshaping of banking 5. Redefining of organizational structures

Spring 2015 Volume 25 Number 14 Publisher / Corporate Sales Mark Henry mark@canadiantreasurer.com Editor Karen Treml karen@canadiantreasurer.com Contributors Hayden D.M. Hayden, Author and Consultant John Landry, Head of Treasury and Trade Solutions – Canada, Citi Kurt Matis, President and CEO, FTNI

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“The banks that focus on their core businesses and redesign themselves to be more flexible, lean and more responsive to customer demands, will be the most successful in the coming decade,” says de Haan.

EY is a global leader in assurance, tax, transaction and advisory services.

The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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Industry watch

Cybersecurity awareness top of mind for internal auditors Internal audit professionals are making strides in meeting cybersecurity and data privacy standards, says ‘ From Cybersecurity to Collaboration: Assessing the Top Priorities for Internal Audit Functions’, a report by Protiviti.

Much work remains, with many of the surveyed organizations rating themselves as less than “very effective” at addressing their cybersecurity risks.

However, the results are significantly better for organizations in which the board of directors has a high level of engagement with information security risks, and those that include cybersecurity in the annual audit plan.

“Across the globe, businesses are continuing to experience cybersecurity issues, challenges and breakdowns. Our survey shines a light on the evolving set of challenges faced by internal audit professionals as they work to incorporate cybersecurity frameworks into business processes,” says Brian Christensen, executive vice-president, global internal audit and financial advisory, Protiviti.

“Those professionals who continue to engage board members and define cybersecurity measures within their annual audit plans will be poised to effectively mitigate future threats.”

More than 800 internal audit professionals, including chief audit executives (CAEs), participated in Protiviti’s ninth annual survey to assess the top priorities for internal audit functions. Along with a review of cybersecurity management and processes, the survey assessed general technical knowledge, audit process knowledge, and personal skills and capabilities.

Protiviti’s survey shows a clear, positive correlation between a high level of board engagement in information security (30 per cent of respondents) and an organization’s ability to acceptably manage cybersecurity risk. There is a similar relationship between having

defined cybersecurity measures in the annual audit plan and the successful management of cybersecurity risk. For example: ◉◉ Nearly half of organizations with a high level of board engagement (47 per cent) rate themselves as “very effective” at identifying cybersecurity risk, compared to just 19 per cent of other organizations. ◉◉ Seventy per cent of organizations that include cybersecurity in the audit plan have a cybersecurity risk strategy in place, compared to 42 per cent of other companies.

More than half of this year’s respondents (53 per cent) note that cybersecurity evaluation has been included in their current audit planning. Of those organizations, 60 per cent have used the NIST Cybersecurity Framework to measure and evaluate existing programs.

Across respondents, many CIOs have also taken particular interest in collaboration with the audit committee, reporting on both cybersecurity and IT related risks (43 per cent).

According to survey participants, the top five most significant cybersecurity risks are: ◉◉ Data security (company information) ◉◉ Brand/reputational damage ◉◉ Regulatory and compliance violations (tie) ◉◉ Data leakage (tie) ◉◉ Viruses and malware

In its report, Protiviti offers 10 recommended action items that CAEs and internal audit professionals should consider implementing as part of their ongoing efforts to help their organizations strengthen cybersecurity.

Technical knowledge – top five priorities

Internal audit professionals assessed their competency in 35 areas of technical knowledge, indicating whether their knowledge is adequate or requires

improvement. Based on these findings, the top areas for technical knowledge improvement include: ◉◉ ◉◉ ◉◉ ◉◉ ◉◉

Data Analysis Technologies ( GTAG 16 ) NIST Cybersecurity Framework Mobile Applications Continuous Assurance The Guide to the Assessment of IT Risk ( GAIT )

Audit process knowledge – top five priorities

Respondents also evaluated 35 areas of audit process knowledge in terms of improvement. These top priorities include: ◉◉ Auditing IT security ◉◉ Computer-assisted audit tools (CAATs) ◉◉ Data analysis tools for data manipulation ◉◉ Marketing internal audit internally ◉◉ Monitoring fraud

As in previous years, the results show that internal auditors are intent on improving the way they leverage technology to analyze data and create new efficiencies to free up resources.

Results also indicate an increased desire to adhere to new guidance and standards in order to advance existing IT audit plans, and more effectively communicate the importance of these audit practices to key stakeholders.

Personal skills and capabilities

In addition to enhancing skills in new technology and applications, internal auditors remain committed to increasing collaboration with other departments and functions in the organization. CAEs and internal audit professionals seek to improve and leverage their personal skills such as persuasion, their relationships with board members, and their internal and external networks in order to balance multiple priorities and strengthen the function’s strategic contributions to the organization.

For breaking news and in depth new features, visit our website at www.canadiantreasurer.com

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Spring 2015

Regulatory Industry Watch news

Enterprises find success in recurring revenue business model but gaps remain A benchmark research study conducted by Ventana Research and sponsored

by Aria Systems found that while overall satisfaction with recurring revenue businesses are high, only 33 per cent of organizations are satisfied with the performance of the operations that support them. The study, ‘Ventana Research Recurring Revenue Benchmark’, is the first of its kind to look at this growing area.

The results underscore the value enterprises place on recurring revenue systems for increasing the top line and improving customer engagement, but reveal that satisfaction with systems and processes declines the

closer respondents are to their recurring revenue operations.

“Overall only one-third of organizations are satisfied with the systems they currently use to support recurring revenue,” said Mark Smith, CEO and chief research officer, Ventana Research. “For most, their lack of satisfaction is due to functionality, flexibility and lack of integration capabilities. The challenge now is to overcome these bottlenecks to improve efficiency and deliver greater value to customers.”

Overcoming system limitations appears to hold the greatest key to success.

More than 60 per cent of all respondents indicated that it was difficult to collect

the information needed to manage recurring revenue and ensure that it is accurate, complete and current.

Yet, those with third-party dedicated billing systems were more satisfied with their recurring revenue operations, citing several benefits. More than half noted that they are able to create invoices in multiple formats, that billing required less effort, and that the system produced accurate data to support their recurring revenue operations.

One of the areas needing greatest improvement was customer engagement; with 55 per cent of those surveyed citing difficulty in maintaining customer engagement. Better cross

selling, upselling and customer retention were also called out as needed improvements.

“If your enterprise is having difficulty maintaining customer engagement then customer satisfaction and revenues will suffer. As we’ve consistently seen, monetization success means navigating the complexity and scale of global billing processes to not only ensure proper handling of transactions but the care of each customer interaction throughout the lifetime of the customer engagement,” said Jon Gettinger, SVP of Marketing, Aria Systems.

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TREASURY MANAGEMENT Regulatory news

In the Cloud AR is a business driver, not just a cost centre

By Kurt Matis

T

“When you automate processes, you can shift resources from manual oversight and reconciliation to data analysis – leaving humans to do the work we’re best at …”

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hese days, when it comes to accounts receivable, change is the only constant. In 2013, 50 per cent of B2B remittances were made by cheque – a 75 per cent decrease from 2004.

With automated AR, mobile purchasing, and web transactions all on the rise, the payments industry is seeing lots of change and it’s not going to stop any time soon.

Customers love the convenience of paying bills online, banking with their mobile devices, and being able to quickly and accurately track their payment records. Companies have responded by offering multiple payment methods and channels, building and investing in separate platforms to make sure they meet their customers’ needs. The problem, of course, is that the resulting solutions are siloed, requiring increased training, oversight, and manual reconciliations that cost time and money and are prone to error.

It’s a big problem. According to a 2014 study by ACI Worldwide and Wiese Research Associates, more than half of U.S. businesses use siloed electronic bill presentment and payment (EBPP) solutions – costing them $1 billion each year. So how can you stop spending money on manual work and start giving your business a competitive edge? By consolidating your platforms and processing payments in the cloud.

Simplify your systems When you automate processes, you can shift resources from manual oversight and reconciliation to data analysis – leaving humans to do the work we’re best at: interpreting data; identifying challenges and inefficiencies; and building strategies that deliver solutions. Let the computers do the highly repetitive, manual stuff. That’s where the value of automation can be easily implemented.

Straight-through processing (payment acceptance, processing, and posting in a single

pass) helps you create consistency and efficiency in process rules and workflows, regardless of what payment method was used – once you’re on one system, it shouldn’t matter whether the payment was in cash, cheque, ACH, credit card, or mobile payment. You’ve got one ‘goto’ platform and repository for streamlined oversight and management of all payments across your entire business. Being on one integrated receivables platform also delivers enhanced reporting and reconciliation since all payments are running through a unified interface.

Consolidating all your payment methods and channels onto one platform saves you costs by eliminating manual work, but it also does something much more valuable. By combining all those data streams into one system, you can incorporate data analysis into your environment, turning a cost center into a strategy engine that can give you realtime visibility into your receivables stream. By analyzing your remittances, you can find ways to improve your processes, make your company more profitable, and understand the factors that led to success – or not – for any given time period. Knowledge is power, after all. Better yet, the data is free and you’ve had it all along – you just haven’t had the ability to sift through it for the good stuff.

Streamlining your platforms also helps you gain in flexibility – particularly if your business operates overseas, or has unpredictable surges in cash flow. For example, one FTNI customer once had over 25 different banking relationships, each with different processes for check scanning and reconciliation. At the end of each month, they had to manually reconcile it all. It was a headache until they moved to straight-through processing on one integrated receivables platform. Since then, they’ve been able to significantly consolidate those banking relationships down to less than six – thus reducing complexity and ultimately processing

Spring 2015

TREASURY Management and posting payments faster. The customer can see what’s being processed and posted across their entire business in real time and they can manage their system centrally.

Secure your data with the cloud (yes, the cloud) With cloud computing, straight-through processing is now an affordable and effective reality – but concerns about security and complexity may be stopping you from adopting the very technologies that can help you take your security to the next level.

The fact is, moving to the cloud is not the threat you might imagine it to be. In fact, it may actually increase the security of your data, by putting it in the hands of security experts. Cloud providers hire security experts who are up to date on industry certifications like PCI and HIPAA compliance. They have to be: security is not a part-time job for them.

What’s more, they don’t have just one or two security experts on staff, they build dedicated security teams. And they can help you move to a truly secure payment model without spending tens (or even hundreds) of thousands of dollars. You can make the move on your own timeline, giving your customers time to adopt the new platform as they like. And because cloud computing utilizes flexible pay-asyou-go pricing, you can make changes as the market demands (and your business grows) without large upfront costs and the delays of purchasing, implementing, and maintaining hardware.

Partner with a pro When you’re looking for a payments partner who can help you transition your receivables processing to the cloud, look for expertise in the payments industry first. By establishing expertise in payments, your new partner will be intimately aware of all the applicable compliance requirements. You don’t want a vendor who’s going to use your company to cut their teeth on PCI compliance.

You want someone with the ability to do large-scale processing, who has all the certifications for your market, and has best practice security measures in place to further protect your critical data. And,

Spring 2015

if you think you might expand, make sure you’re working with a company who can handle your growing needs. You want a partner who has the capacity to keep up with your growth and the insight to help you navigate the ever-changing payments landscape.

Look for a vendor who partners with a reputable cloud hosting provider, as well. You’re not just looking for a payments provider; you’re making sure that whoever they are running on has security built in as opposed to bolted on.

Look for someone who takes security as seriously as you do. For example, at FTNI, everything we do is subjected to the same security standards as our creditcard processing (PCI) – in other words, it meets the toughest standards in the industry. Another vendor might have a different level of security when it comes to personally identifiable data (PII). There’s no such thing as your data being too secure. With all the advances in security, there’s a lot to consider when you’re faced with deciding what measures will best suit your business. Partnering with proven providers who can bring expertise in both payments and cloud security can help you understand how your business benefits from the latest security protocols, such as end-to-end encryption, multi-factor authentication, and multi-layered security at the hosting level.

For example, end-to-end encryption (E2EE) is one of the most talked about proactive security measures right now. At its core, E2EE ensures that all payment data remains encrypted not only when in transit (i.e., from initial entry into your payment system interface all the way through processing and posting), but also while payment data is at rest (i.e., after payments have posted and are stored via archiving requirements). Be sure to find a partner who will help ensure that you’re leveraging this and other best practices to ensure the highest security standards are in place to protect your payments data.

immediate business needs and easily add additional functionality in the future.

If you’re still leery of moving all your payment processing to the cloud, you can space out your deployments as business needs arise. Start where your current pain is. Are you looking to accept online payments? Are mobile payments your next frontier? You don’t have to eat the proverbial elephant in one bite. By moving to a single, cloud-based receivables processing platform, you can address your current needs while also building the foundation for the strategic consolidation of your legacy systems and processes. You can develop new business process as the need for them grows, mapping them to the next stage of development as you – and your customers – are ready.

The bottom line: The cloud’s the thing There’s never been a better time to start taking advantage of the new technologies that are driving B2B payments processing.

We’ve moved from paper-based invoices and manual reconciliation to electronic invoices, credit cards, ACH payments, and now, online and mobile payments. With all these new ways to pay, it’s easy to get mired in platform chaos – but doing so comes with increased costs and opportunity loss.

Find a partner to help with the technology and get your business onto one platform.

Do that, and you’ll lower your costs and strengthen your decision-making process with sweet, free data.

Kurt Matis is the President and CEO of Financial Transmission Network, Inc. (FTNI). He brings more than 25 years of financial and operational management experience and insight to FTNI’s clients. Before founding FTNI, he co-founded L&M Energy Partners, LLC., where he designed and rolled out the company’s Automated Contract Tracking Software, which is used by customers throughout the U.S. From 1999 to 2003, Mr. Matis was the Chief Financial Officer of R.J. Thompson Holdings (RJT), which was acquired by TD Waterhouse. He received his BSBA from the University of Nebraska

Move at your own pace

at Omaha with majors in Finance and Banking, and

Cloud-based payment processing easily adapts to your schedule and unique business needs. Because you don’t have to buy and configure hardware, you can start with the highest-leverage projects to address

his MBA from Creighton University, for which he was inducted into the Beta Gamma Sigma Honor Society.

Mr. Matis holds a CPA certificate with the State of Nebraska and is a member of the AICPA and the Nebraska Society of CPAs.

CANADIAN TREASURER

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TREASURY Management

How Treasurers Can Be Bulls In a Bear Market Challenging times present risks to careers, but also opportunities to distinguish oneself with leadership …

By John Landry

T

he saying ‘fix your roof when the sun is shining’ is widespread and sound advice. With the luxury of sunny skies or high oil and gas prices, structural change is easier. And whether we are referring to home maintenance or business infrastructure, it is usually simpler to accomplish tasks when the environment is in fine form. But that doesn’t make the opposite untrue. That is, when things are not so nice – be it inclement weather or the precipitous decline of energy and commodity prices – hunkering down or pretending challenging forces aren’t impacting your organization with potentially terminal consequences isn’t the solution. Action is all the more important for surviving or, better yet, prospering.

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Squeezed on cost Recent developments globally and locally in Western Canada have put significant pressure on energy firms directly and broadly across their buyers and supply chain network. Earnings are under immense pressure. Suppliers and service providers are being squeezed on cost and terms. Many companies across the industry are downsizing. More than a few are seeking mergers or expecting to defend against takeovers. The corporate landscape in Western Canada has, within a short period of time, entered into a state of flux.

The collapse in oil prices witnessed in the latter part of 2014 is considered by many experts to be a reality that will not subside anytime soon. The global Brent benchmark has fallen beneath the $50/barrel threshold for the first time since May 2009 and the energy industry

Spring 2015

TREASURY Regulatory Management news

is undergoing a widespread slowdown.

The effects on the broader economy are – and will be – numerous. Producers are seeing lower per-unit profitability, which will hopefully remain above costs to extract and deliver. In turn they are already putting tremendous pressure on infrastructure, services, support, and their entire supply chain to drive down costs.

Each player in the supply chain will be pushing its suppliers for lower pricing.

Pressured ecosystem At the same time, working capital across the business ecosystem will be under considerable pressure. Suppliers and buyers will be energetically negotiating alternatively for shorter and longer payment terms. Procurement teams will be working through their key supplier lists for opportunities to drive down price, reduce pricing tiers and push out on payments terms. Hopefully they will also be focused on ensuring the loyalty and viability of their partners. Organizations will take differing approaches from ruthlessly driving down near-term cost at the potential risk of their supplier and buyer relationships to focusing on finding more advantageous but mutually sustainable arrangements.

Credit outlooks will likely deteriorate, making credit facilities, issuances, and contingent lines more expensive and scarce at the very time when they become most important.

Acquisition opportunities will arise for those corporations with the means and intent to hunt. According to a recent Citi/Mergermarket survey, almost half of respondents indicated that they anticipate M&A to increase in the next 12 months. To prepare, firms in a defensive position will need to garner their financial resources and ensure every bit of value, cashflow and liquidity availability possible is recorded.

Firms have already and will continue to shed staff, even within the most important functions in an effort to drive down costs.

None of this is conjecture. These shifts are already happening, and are very much a call to action to treasurers for the sake of their firm and for the sake of their professional outlook.

Spring 2015

Positive measures In this environment, treasurers have an opportunity to confront the issues facing them and their organizations head on and enact positive measures in a volatile climate. In this regard, consider the following: 1. History repeats itself. This is not the first nor last cycle our economy will see. Learn from the last downturn during the late 1980s and through the 1990s; what worked and what didn’t?

The firms that had already tightened up their financial infrastructure and made adjustments early in the cycle had the best outcomes. They survived, even thrived, as competitors struggled or were consumed.

2. It is not too late. Periods of ambiguity can encourage inaction. Without clear direction forward, and perhaps with fewer resources available, the tendency to put decisions on hold or undertake significant change is understandable.

This is exactly the time when leaders in treasury have their greatest opportunity to add value, to inspire their teams to action and to ensure their own personal professional advancement.

3. Prioritize and focus on the quickest, most impactful changes. Enterprisescale changes such as treasury workstation implementations or complete banking partner movements may not be practical. However, there are incremental initiatives that can be much more pragmatic and impactful across many measures. For example, implementing a ‘supply chain finance program’ in conjunction with procurement teams’ renegotiation efforts can result in simultaneous wins for a firm and its suppliers.

Treasurers can soften the pain from terms extension and repricing by offering suppliers earlier payment while working capital is enhanced on for parties simultaneously.

These programs support the goals of procurement teams and treasury teams by either reducing working capital needs or enhancing profitability with returns on a firm’s own capital in the program. These

programs are typically greenfield, so they don’t require a myriad of resources to change existing banking arrangements. A bank with global expertise in these programs can provide supplier onboarding resources and launch in very short order with minimal resource requirements on the part of treasurers. As incremental programs, they also create an opportunity to enhance a treasurer’s relationship with their bank providing the supply chain solution, without impacting other bank relationships.

Quick wins Enhanced liquidity solutions can also be quick wins. Greater liquidity access and enhanced yields are obvious benefits and can typically be implemented in short order. As with supply chain programs, they can also reinforce a bank relationship which treasurers may need for support if the turbulent economic cycle continues.

Challenging times present risks to careers, but also opportunities to distinguish oneself with leadership. A treasury professional who is championing initiatives that are impactful enhances their value to the firm. If a treasurer’s firm is likely to be an acquirer or an acquire, being in the position of leadership on quickly implemented, value-adding initiatives such as those outlined above improves his/her profile and professional opportunities going forward. Having initiatives on the go – provided they are impactful and well-managed – can make treasurers indispensable.

It’s unclear how the recent economic events will play out or over how long a time period. What is clear is that treasury professionals can be impactful in positioning their companies and themselves for the best outcomes possible.

Treasurers would be wise to reach out to banking partners and solicit their suggestions. A strong partner will be able to share ideas from other firms, historic cycles, and the best thinking from markets around the world.

John Landry is the Head of Citi’s Treasury and Trade Solutions business in Canada.

CANADIAN TREASURER

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TREASURY Management

Optimizing the Global Treasury Footprint

“Take time now to build a strong foundation before the velocity of growth accelerates too fast and forces you into reaction mode.”

By Geri Westphal

M

anaging rapid growth is difficult at any time, but when the growth comes from offshore it can be especially difficult due to local country regulations for doing business and moving funds. Keeping pace with the plethora of country-specific regulations while making sure the business can thrive and grow can be a bit like being a hockey goalie – you need to be agile and flexible while making sure nothing gets by.

According to Factset, The S&P 500 (exFinancials) cash and marketable securities balance has hovered around the $1.37 trillion mark for five quarters with a peak in balances in Q4 2013 at $1.41 trillion. Forecasters predict that nearly 70 per cent of the world growth over the next few years, projected to be 3.4 per cent

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for 2015, will come from emerging markets, with China and India leading the way with approximately 40 per cent of that growth.

Defining the structure With all of this in mind, the most important word of advice for those just beginning their international expansion is to stop and take time now to build a strong foundation before the velocity of growth accelerates too fast and forces you into reaction mode. Don’t wait. Define your treasury structure now so that you are ready when the business really starts to grow.

You might be surprised at the number of large rapidly-growing multinational organizations who do not have global policies and procedures in place. They have policies and procedures, but often times they vary from country to country.

Taking the time to review and standardize

Spring 2015

TREASURY Management global policies and procedures is a critical first step in optimizing your treasury footprint. These policies and procedures should be broad enough to cover the most common business activities across the globe, yet strict enough to make sure activities stay within the authorities granted to those as part of the overall board resolutions and delegation of authority documents. The fewer touch points, the better. And the simpler, the better. Once you’ve written the policies and procedures, make sure you can actually operate from them by testing each and every step. If something needs tweaking, now is the time to get that done.

Optimizing tactical operations Many large multinationals have used the Single Euro Payments Area (SEPA) as a catalyst for standardizing their messaging formats for payments with all their transaction banking partners across the globe. The SEPA project was used as a jump starter for additional changes, including SWIFT implementations and improved automation within their ERP and TMS systems. The ISO 20022 XML format that is a SEPA-native format is quickly becoming the standard as a strategic choice for messaging beyond payments into workflow solutions like e-BAM, e-invoicing, and e-billing. This format is also commonly used for FX and other trade confirmations.

To further increase efficiency, treasury organizations should consolidate cash to the fewest places possible by establishing either physical or notional pools depending on the local regulations.

Pooling is a critical step for obtaining global visibility and control over cash. This type of project can be rolled out in phases with the easier regions like Europe and parts of Asia being quite straightforward in the set-up and implementation, while other regions like China can take a bit more consideration and finesse.

Another way to optimize tactical operations is to move common activities like payroll, AP, and AR to a sharedservice center. Once an organization has made the decision to create a sharedservice center in one or more global locations, treasury can often piggyback this structure by creating a regional

Spring 2015

treasury center to consolidate tactical treasury operations away from the corporate headquarters or out of the hands of the local business managers into a treasury center mandated for these types of activities.

The creation of a netting center and/or payment factory allows your organization to minimize the number of external transactions by netting payments across subsidiaries or consolidating payables to common vendors. This structure brings added efficiency by minimizing the

renminbi or RMB internationalization, for example, was a headline story for most of 2014 with many more options now available for managing excess cash, loaning RMB, and invoicing in RMB. Although some believe these changes are “not ready for prime-time” and they have decided to take a wait-and-see approach, experts are encouraging those with current or new business in China to move forward and implement new strategies now so that you are strategically ready as these markets really start to open up.

“To further increase efficiency, treasury organizations should consolidate cash to the fewest places possible by establishing either physical or notional pools depending on the local regulations…” number of actual transactions, reducing cross-currency exposures and minimizing transaction fees. It increases visibility and control and maximizes the use of available cash across the enterprise.

The in-house bank The creation of an In-House Bank is seen as the pinnacle of optimization strategies for treasury and is quickly becoming a popular initiative among large multinational corporations. The In-House Bank is able to take deposits, pay interest, make loans, and charge interest for the parent and all subsidiaries as appropriate.

Simplified cash flow, greater visibility, and improved liquidity are three major benefits of this type of structure. Although the setup of this type of structure requires a lot of coordination between treasury, tax, and legal, the time is well spent when offset against the savings associated with the structure, including fewer FX and cash transactions, improved net interest, and increased control.

As treasury globalization continues, the focus on process efficiency and innovation becomes even more important for treasury professionals. They must consider out-of-the-box strategies for unlocking working capital and optimizing global structures. This will help them stay ahead of the growth that their companies will surely see over the next few years and beyond.

Geri Westphal, Director, Peer Knowledge Exchange for The NeuGroup, oversees several treasurer-level NeuGroups including: The Treasurers’ Group of Thirty (T30) and The Treasurers’ Group of Thirty 2 (T30-2).

Prior to joining The NeuGroup, she spent more than 20 years in a variety of treasury roles, most notably as Assistant Treasurer for Oracle from 2000-2005.

The NeuGroup has been a trusted thought leader and respected advocate for global finance and treasury practitioners since 1994. With a network of more than 330 members and 16+ peer groups, The NeuGroup brings together treasury and finance professionals to share their knowledge and experience in a unique forum that combines meetings, benchmarking studies, and online

Stay ahead

discussions. Our exclusive structure allows members

When managing international growth it is important to stay ahead of new regulations as best you can. Get ahead of new regulations. Be quick. Be nimble. The

the opportunity to build a network to measure, compare and improve their treasury and finance management based on direct input from fellow practitioners. Visit us online at https://neugroup.com.

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Regulatory

AML– Beneficial Ownership Determination Who are the beneficial owners?

How is it verified?

By Matthew McGuire

A

nti-money laundering consultants across the country are crying foul about efforts by the regulator to clear up compliance expectations. Until December 2014, areas of regulatory uncertainty were resolved by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) hotline, by confidential policy interpretation requests, through deficiency letters in the examination process, or by paying an outside advisor. Many of those advisors have cancelled their golf memberships over the holidays since FINTRAC published the complete text of every single one of its policy interpretations on their website.

Even policy interpretations requested by examiners to their FINTRAC kin are included in the set, which consist of over 1,000 opinions separated into 13 topics. In alphabetical order, here are those topics; ◉◉ ◉◉ ◉◉ ◉◉ ◉◉ ◉◉

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Administrative Monetary Penalties (9), Ascertaining Identification (285), Beneficial Ownership (34), Compliance Regime (73), Ongoing Monitoring (9), Business Relationship (20),

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Regulatory ◉◉ ◉◉ ◉◉ ◉◉ ◉◉ ◉◉

Money Services Businesses (86), MSB Registration (58), Record Keeping (144), Reporting (342), Third Party Determination (37), Politically Exposed Foreign Person (32), and; ◉◉ Other (73)

With enough time and google, any reporting entity or compliance professional can resolve areas of ambiguity and guidance gaps. These interpretations, although without the force of law and not binding on reporting entities, have become the defacto rule book for reporting entities to understand the expectations of FINTRAC and help avoid Administrative Monetary Penalties.

Reporting entities can disagree with FINTRAC’s position and adopt contrary practices, but only if they relish the adrenaline rush that comes from federal court argumentation.

Beneficial ownership determination One particularly frustrating topic the policy interpretations almost resolve is that of beneficial ownership determination – an obligation brought about by legislative changes that become effective in February 2014. Essentially, it requires financial institutions and securities dealers to take reasonable measures to verify the accuracy of the information they collect about those that own or control 25 per cent or more of their clients that are entities (corporations, partnerships, or trusts) – and then to keep that information up to date on a risk-sensitive basis. Three often-posed questions arise from that new obligation: ◉◉ How do I figure out who the beneficial owners are? ◉◉ What is considered a reasonable measure to verify the beneficial ownership information I collect?

FINTRAC has helpfully responded to 34 questions that get us closer to answers, which we have set out according to those queries.

1. How do I figure out who the beneficial owners are?

FINTRAC is looking for the following

Spring 2015

people to be identified as beneficial owners; whether a corporate, or noncorporate entity, directors, anyone who directly or indirectly owns or controls 25 per cent or more of the shares in a company. In the case of a trust, FINTRAC also identifies the trustees, as well as any beneficiary or settler of the account as a beneficial owner. Prior to verifying the accuracy of this information, it should theoretically be collected from the prospective client. There is no limit on the class of person connected to the prospective client from whom the information could be collected.

In one policy interpretation, FINTRAC recognized that non-voting shares should be considered when determining an natural person’s percentage of ownership, but did not explain how the calculation would be performed – for example, whether voting shares are given the same weight as non-voting shares in calculating a percentage total.

It is clear from the policy interpretations that the concept of ownership and control are separate but potentially overlapping categories. In the case of a corporation, the legislation speaks to the control of shares, whereas in the case of partnership it specifies control of the entity. An issue not addressed by the policy interpretations is whether share control could conceivably be achieved by derivative or convertible instruments.

Similarly, whereas directors may control 25 per cent or more of a corporate entity (because there are only three directors, for example), it is not clear whether they by definition control 25 per cent or more of the shares.

2. Assessing what constitutes reasonable measures for verifying beneficial ownership information collected?

FINTRAC considers asking the client to provide the relevant documentation as reasonable measures to validate ownership information. Although reporting entities may rely on the information provided by the client, they must exercise judgment in determining whether the documentation is complete and appropriate. FINTRAC refuses to confirm the exact measures required to confirm the accuracy of the information

provided by the client, and the reporting entity must therefore change tactics or add additional measures when a submission does not meet all specified requirements.

The FINTRAC policy interpretations have specified the following as acceptable means of documenting beneficial ownership, so long as they contain sufficient information to verify all of the required beneficial ownership information (sufficient information is not specified in any of the policy interpretations): ◉◉ CRA Schedule 50 ◉◉ Corporate registry profile ◉◉ Client Attestation

FINTRAC does accept that the accuracy of beneficial ownership can be achieved by getting an individual to certify to attest to the accuracy of the information. It does not appear to limit the classes of persons that would be reliable as attestors, nor did it explicitly agree that an attestation by the applicant’s lawyer or accountant was necessarily more reliable than from an officer or director. One method of achieving attestation is through webbased forms, such the Attestanet platform.

Regardless of the method employed, all reporting entities must ensure that the documentation used to satisfy beneficial ownership requirements identifies ownership, control, and structure of an entity in order to be compliant with the new legislation. Failed verification requires a default to high risk and identification of the most senior officer of the entity.

Even though reporting entities have this new resource from FINTRAC to better navigate and interpret the legislation, there is no substitute for professional judgement and well-documented approaches to defend against poor exams and penalties. You may also wish to consult an otherwise unemployed AML compliance advisor.

Matthew McGuire, CA, is the National Leader of MNP’s AML Services line, part of the firm’s Investigative and Forensic Services practice. To learn more about FINTRAC compliance requirements, contact Matt McGuire at 416.263.6959 or matt. mcguire@mnp.ca, or your local MNP Advisor.

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Active pharmacy approach improves health outcomes, cost management As prescription drug costs increase, empowering employees to make effective health decisions is an essential cost containment strategy

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mployee benefits play a key role in both the recruitment and retention of top talent. Until recently, benefit plans have been viewed as the sole responsibility of human resources leaders, but CFOs are increasingly involved in benefit plan decisions, collaborating with HR in an effort to manage and mitigate the rising costs of these plans.

Prescription drug benefit claims comprise a significant portion of the cost of benefits and have historically come close to doubling every 10 years. Newer specialty drugs that can cost up to hundreds of thousands of dollars per treatment also represent a clear financial risk, especially to smaller and medium-sized Canadian companies.

In 2013, for example, specialty drugs represented just 1.3 per cent of claims but 24 per cent of prescription drug costs, up from 13 per cent in 2007. For patients that are suffering from rare and serious conditions, this increase comes

PHOTOS JENNIFER O’NEILL

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with many potential life-changing outcomes: delaying disease progression, avoiding surgery, improving quality of life, improving productivity, and prolonging life. These significant benefits will lead to even greater utilization in the future.

In 2014, spending on high-cost drugs continued to grow at alarming rates. New treatments for relatively common diseases such as hepatitis C were introduced in the Canadian market at exorbitant ‘orphan drug’ pricing.

Orphan drugs are among the most expensive medications in Canada. These medications treat extremely rare conditions and diseases with small, specific populations – typically less than five in 10,000 people. The high price tag of orphan drugs is necessary – and justified – to fund manufacturer research and development costs for these and future medical breakthroughs that might not otherwise happen.

In October 2014, Health Canada approved

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SPONSORED CONTENT

Michael Biskey, president of Express Scripts Canada (far left), and Steve Nowak, director of sales and marketing, Express Scripts Canada, have worked with Liz Galloway, CFO, SCI Logistics (above right), and Maria Atkins, vice-president of human resources, SCI (above left), to enable the company to realize cost savings for its employee healthcare solutions.

a new drug indicated for patients with genotype 1 of the hepatitis C virus. There are an estimated 250,000 patients with hepatitis C. Despite its potential to treat thousands of patients, this new drug is priced at a staggering cost of $71,000 per 12-week treatment.

This is just one example of new drugs with orphan-drug price tags that treat common diseases. Rewarding pharmaceutical breakthroughs is undeniably important to the discovery of future treatments and cures; however, payers and patients have limited resources and simply cannot afford these prices.

A combination of government pricing reforms and increasing generic drug use has flattened the upward trend of drug spending over the past couple of years, but a return to high historical norms is now underway. “The increases we’ve seen – and

Spring 2015

will continue to see – are far in excess of general inflation,” says Michael Biskey, president of Express Scripts Canada. “It is a significant drag on profitability for employers and a major concern for CFOs.” With high-cost drugs entering the market, the need to respond effectively has never been greater, says Biskey.

“Plan sponsors can no longer rely on the wave of less-expensive generics to control drug costs.

“To sustain a meaningful pharmacy benefit, it’s essential to take action now to strategically manage the benefit, implement smarter programs, and offer holistic clinical support to ensure that all patients are able to achieve the best health outcomes possible.”

Express Scripts Canada research shows that up to one in three dollars spent on pharmacy benefits are currently

wasted. Through new approaches that empower employees to make more effective decisions, organizations can optimize prescription drug spending to improve employee health outcomes and profitability while ensuring plan sustainability.

Cost drivers A significant factor in prescription drug cost increases is the fact that there are fairly minimal controls on expenditures, says Biskey. Unlike other purchases that a company makes, employees and their dependents make drug benefit plan decisions individually. As a result, there is no one party responsible for negotiating the price or terms of the product, or for approving expenditures. Purchasing decisions can be made by hundreds or thousands of people, providing limited or

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SPONSORED CONTENT historical tracking and cost controls.

“CFOs know that if you don’t track your costs, you can’t measure them. And if you can’t measure them, you can’t manage them,” says Biskey.

Express Scripts Canada defines waste as “spending more without improving a patient’s health outcomes,” such as paying unnecessarily high prescription fees or taking a more expensive drug when less expensive and equally effective alternatives are available.

These examples of waste are easily quantifiable, says Biskey. “We can see that patient ‘A’ takes ‘X’ drug and pays ‘Y’ for it. We also know there is a lower-cost, equally effective alternative, and so the patient could get the same drug or an equivalent medication at a lower cost.”

Much more difficult to quantify is the impact of non-adherence to medication, he notes. “Our research shows when patients aren’t filling their prescriptions as directed or following their doctor’s advice. The data shows that adherence is a huge problem in Canada. For example, one of our research studies found that only 50.3 per cent of people with diabetes are adherent to their medications,” he reports.

Non-adherence may lead to worsening chronic disease. Patients get sicker, which may in turn lead to additional drug costs, lower productivity, and disability.

Delivering solutions Express Scripts is an international prescription drug benefit manager that

provides drug benefit solutions to 40 per cent of Americans and, through Express Scripts Canada, more than seven million Canadians. Over the past 10 years, it has been one of the fastest growing companies in the S&P 500.

The company uses its trademarked Health Decision Science – a groundbreaking approach that applies behavioural sciences, clinical expertise, and insights gained by managing millions of prescription claims – to engage plan members to make better health decisions.

The proven result is improved health outcomes for employees and their families, and significantly reduced spending waste.

Express Scripts U.S. has also developed a predictive model that identifies noncompliant patients with 95 per cent accuracy. Express Scripts pharmacists reach out to non-compliant patients to identify the barriers to adherence and help patients follow their doctor’s advice.

Services such as automatic refills can ensure the patient always has their drugs on hand, making it easier for them to look after their health.

Engaging the employee When Express Scripts Canada launched five years ago, its approach represented a cultural shift within the Canadian prescription benefit industry, says Steve Nowak, the company’s director of sales and marketing. “Patients who are filling prescriptions have been conditioned to behave in a particular way. By engaging

The ‘Active Pharmacy’ solution

“Express Scripts Canada’s active pharmacy model means we have a direct relationship with plan members – we don’t just fill prescriptions, something we call ‘reactive pharmacy,’” says Steve Nowak, director of sales and marketing. “Our pharmacists are there for employees and their families through the entire process.

It might be as simple as letting you know you’re due for your refill, or alerting you when there are more affordable and equally effective options available for a specific medication. When it’s appropriate, our pharmacists will discuss your prescription with your doctor.”

The Express Scripts pharmacist is an active member of the health-care team, advocating on behalf of the patient. “Assuming the doctor agrees with us – and in 81 per cent of the cases they do – we then reach out to the patient and present some options to them. Ultimately the employee is still making the decision, of course, but they’ve received expert support from their entire health-care team.

“It’s a very different process than traditional pharmacies,” says Nowak.

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plan members and facilitating informed decisions, Express Scripts changes this behaviour.

“We’re patient advocates – we help them make sound decisions about dispensing fees, brand versus generic, and refill rates.

We work with patients, physicians, and employers to provide research-based information at the right time to facilitate the best outcomes.”

The result is a significant positive impact on benefit plan costs, Nowak adds.

Health Decision Science is focused on consumer behaviour as it relates to decisions about health, which is much different than buying clothing, a car or a home.

“It’s very personal thing,” says Nowak.

“Often people do not share these decisions with anyone, not even their significant other.”

In this environment, it is essential that the solutions provided to plan members are relevant to them, timely and based on quantifiable data, he explains. “When you combine all of that with behavioural science, there is a powerful shift as individuals realize there are solutions available that make more sense for them.”

Once employees are engaged in the process, their reactions tend to be very similar, says Nowak. “The response we hear most often is, ‘Oh my gosh, can my family and friends use this service too?’”

A collaborative partnership model Express Scripts Canada works closely with employers to provide optimized custom tools that educate and empower employees, including onsite sessions with pharmacists to create a high level of comfort.

“We don’t have a retail strategy,” says Nowak. “Our delivery path is through employers, so we need strong, collaborative partnerships to fully deliver on our solutions.”

The Express Scripts active pharmacy approach is dramatically different than traditional pharmacy models, he says.

“Typically, pharmacy in Canada is reactive – it responds to patient needs after the fact. Our pharmacy is proactive – we work one-on-one with each plan member.”

And the program is working, says Biskey.

“The year we launched, some very dedicated

Spring 2015

SPONSORED CONTENT clients, including SCI Logistics, helped us introduce our approach to the Canadian market as a pilot project. In the second year, our client base grew by 300 per cent; in the third year, which we just completed, it grew by 360 per cent.

“More and more, our approach is being recognized as the gold standard for our industry, something we are very proud of.”

Making the business case Express Scripts Canada works with employers of all sizes and in all sectors, from some of the country’s largest organizations to those with less than 10 employees.

To ensure that a potential client will benefit from the company’s innovative approach, the Express Scripts’ benefit experts first review the employer’s claims history to determine if there is a proven business case.

“We work with HR and the CFO, and once the business case is documented we are closely involved in tailoring a launch campaign,” says Nowak.

“Along the way, we’ve simplified our approach – our aim is constant improvement in terms of product and service delivery,” says Biskey.

“Traditional programs in Canada have always managed drug claims. But by working with plan members at the prescription dispensing level, before it becomes a claim, our approach is changing behaviours, improving health outcomes and reducing spending waste. That’s where the real opportunity is.”

About Express Scripts Canada. From its corporate headquarters just outside Toronto, Express Scripts Canada transforms the way organizations and employees think about and participate in their drug benefit plan. Express Scripts Canada provides pharmacy services to thousands of Canadian patients. Through its proprietary consumer intelligence, clinical expertise, and patients-first approach, Express Scripts Canada promotes better health decisions for plan members, while managing and reducing drug benefit costs for plan sponsors. Express Scripts Canada is indirectly owned by Express Scripts Holding Company.

Spring 2015

Collaborative approach reduces drug spending by 20 per cent The Express Scripts pharmacist is an active member of the health-care team, As drug cost inflation represents a growing risk to the profitability of organizations, CFOs are playing an increasingly critical role in the employee benefits process. For many organizations, the limited controls on drug spending may have a significant impact on the cost of the drug benefit.

When the CFO and HR leaders work together to establish targets and manage costs, the collaboration delivers improved cost management while also providing a benefit package that helps attract and retain top talent.

Prior to its partnership with Express Scripts Canada, SCI Logistics’ options for controlling its health-care costs from a finance perspective were limited, says Liz Galloway, the company’s CFO. The organization was concerned with achieving plan savings without taking away employee options or benefits from a health-care perspective. Their evaluation of the Express Scripts Canada program identified an attractive balance between achieving cost savings and providing better solutions and more options to the employees.

“We have realized those cost savings,” says Galloway. “Our program is not mandatory. Instead, we offer a higher reimbursement rate when employees use the program. Each employee chooses whether or not they want to take part.”

Partnering with Express Scripts Canada also provides opportunities for SCI employees to minimize out-of-pocket costs. For example, the employees are responsible for the cost of prescription dispensing fees, so the drug benefit program is designed to minimize fees by providing a 90-day supply rather than a 30-day supply when appropriate.

For companies that cover the cost of dispensing fees, this approach results in additional plan cost savings, says Galloway.

In addition to the savings that SCI realizes as a result of reduced drug spending waste, the program provides improved co-ordination with the benefit plans of spouses as well, she notes.

The Express Scripts Canada program was first introduced through employee education, says Maria Atkins, vice-president of human resources at SCI “Prior to the plan we had 80 per cent coverage and we went to a plan that is flexible – 85 to 100 per cent.

“However, for employees not using Express Scripts Canada, we reimburse 50 per cent of the cost of maintenance drugs. It’s important to our employees to have choices, to manage their health the way they want.”

Atkins points out that the employee education needs to be ongoing and delivered in different ways and at different times. For new employees, SCI has an orientation program that takes them through the benefits plan. “They may not necessarily pay attention to things like the lower dispensing fees unless you point them out,” says Atkins.

Participation trends have been positive, she says. “We offer the benefits to about 900 employees, and of those there are about 380 that use maintenance drugs; 43 per cent of those employees choose the Express Scripts service. We’ve seen good results.”

“From a CFO perspective, adopting this type of service is a collaborative effort between HR and finance,” says Galloway. “There are a lot of areas that need controls from a cost perspective but also require sensitivity to the employee perspective.”

Through the CFO-HR collaboration and partnership with Express Scripts Canada, SCI has already reduced their overall drug spending by about 20 per cent.

Just as importantly, adds Galloway, “We also have seen the benefits of convenience and an improvement in adherence. So it really is not just a cost analysis.”

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Trendwatch

iPhones, Aging Consumers, and the Future of Consumer Financing

A

decade ago the consumer financing sector was in the midst of integrating internet technology. Phone calls remained the dominant communication method connecting businesses and lenders, and documents were generally exchanged via fax or courier. The potential of the internet to simplify and hasten document sharing and communication was in its infancy. These days it is impossible to imagine doing business – including consumer financing – without the internet. Yet even as the internet’s potential is slowly realized and integrated in consumer financing, new disruptive technologies, trends, and behaviours are emerging that will continue to shape the industry.

Instantaneous financing results Many see technology as a great enabler for consumer financing, making it increasingly convenient, secure, and fast.

A faster internet combined with improved application processes will see the emergence of near-instantaneous, in-store loan application results, while advances in smart phone technology will enable a quicker, more convenient way of doing business. Improvements in technologies such as digital signatures, internet security, and loan application processes will also aid this – creating a future where borrowers will be able to safely complete point-of-sale loan applications with almost instantaneous results.

Smart phones, smart business Smart phones represent a great opportunity in consumer financing, Mr. Carter predicts, “Communication between businesses and lenders is quickly moving from email and phone to text. As this technology improves the trend will continue and soon we could see the majority of business transactions done between lenders and their partners, and lenders and consumers, done over platforms such as iPhones, Android devices, and tablets.”

An evolving consumer Changing technologies will not only alter

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the way consumer financing is offered, but consumers demand it too. Rob Williamson, finance director at LMG, says “People are becoming more apt to doing things – including financing – over the internet and through the phone than they are face-to-face because of their confidence in the technology facilitating these transactions.” The result will be shoppers entering stores and dealerships with pre-approval for loans to buy the bigticket goods and services they want. While this may seem like it will make life easy for businesses – it will actually require them to work increasingly closely with credit providers. This is because consumers will need to easily and quickly access credit pre-approval services through businesses’ websites or directly via businesses’ consumer financing providers.

More flexible lenders Accordingly, the days of a cookie-cutter approach to offering consumer financing being successful are dwindling. As technology advances, expectations shift, and consumers demand more – business expectations will also change. Chris Brown of Lifeline Business Solutions’ sees a future where there will be increased pressure for lenders to be flexible so that they can meet changing user needs.

Mr. Brown learned a lot of valuable lessons pioneering in-store consumer financing at Yamaha Motor Canada dealerships in the late 1990s. Primary amongst these was the need for lenders to be flexible enough to meet businesses’ various needs. “To me the biggest challenge lies with the providers,” he says. “Our success was based on our lending partner being flexible when it came to looking at things like different options of how to run the program, how to set its parameters and how to set rates based on credit worthiness.

Future-wise, we will need more lenders that are willing step outside that financing box, and be innovative and flexible to meet changing needs.”

New Markets and Opportunities There will forever be new markets and opportunities for consumer financing to

tap into. More recently K-12 tuition, career colleges, and home renovation sectors have started embracing it, and are slowly overcoming initial consumer doubts about using credit to buy services. Increasing convenience and an aging population will continue to present new opportunities. Mr. Carter predicts non-elective healthcare could soon follow as provincial governments slow access to the system. “Canada’s population is aging, and patients in BC already need to wait 9 to 12 months for a knee replacement,” he says. “An aging population will apply more pressure to the hospital system, meaning it could become just as common for nonelective healthcare to use consumer financing in the same way elective healthcare currently is.” An ageing population could also mean increased demand for home improvements and repairs – growing home renovation financing opportunities. As Canada continues to change, so will demand and opportunities for financing evolve. In the future any market dealing with expensive goods and services will likely have the chance to integrate consumer financing.

Conclusion Consumer financing will present many new opportunities and challenges for Canadian businesses. While advancing technology and simplified systems will make it easier for businesses to use it – they will also increase the cost of missing out. Smart phones may make doing business more convenient – but they represent a whole new system that needs learning. It will also become vital for increasing numbers of businesses in different sectors to learn how to use consumer financing, as providers branch out into to new markets. Imagine a world where consumer can use monthly payments to buy almost any goods or services they want, getting preapproval on an iPhone and walking away with their new toy that day. This is the future of consumer financing –and it’s closer than it may seem.

Article courtesy of the team at Crelogix Acceptance Corporation.

Spring 2015

HR Management Regulatory news

Effective Leadership The five behaviors required to turn conflict into creativity

By Hayden D.M. Hayden

C

onflict is the number one thing that stops progress, ruins relationships, and stymies results. Effective leaders must know how to deal with conflict in a way that promotes creativity.

This creativity is manifested through five key behaviors: curiosity, shifting perspectives, naming the need, making requests, and conscious choices.

Spring 2015

1. Be curious!

Conflict arises when there isn’t room for everyone’s ideas to be heard or solicited.

Curiosity involves staying open to new ideas and asking questions that generate ideas that build upon, not detract from, what you think you already know. Leaders tend to ‘poison the well’, short-circuiting brainstorming before it actually gets started by contributing their own ideas before anyone else can share. This prevents others from contributing because they latch

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HR Management

onto the leader’s ideas and shut down their own creativity.

To avoid this, use open-ended questions that start with the word ‘What’, because these questions aren’t looking for a particular answer like people (who), time (when), location (where), reason (why), or process (how). Finding the answer requires digging inside their memory and logic storehouse to tap into their wisdom, experience, and insights. ‘What’ questions are ‘wisdom access’ questions for this very reason; they allow you to tap into the wisdom of yourself and those around you.

2. Shift your perspective Henry Ford once said, “If you think you can or you think you can’t, you’re probably right.” Our perspectives determine our feelings and define our actions. When our perspectives are negative, we’ll generate negative feelings and usually act them out. If you ‘think you can’t’, you’ll probably feel discouraged and lack the drive to find solutions. The same is true with neutral or positive perspectives. If you ‘think you can’ you’ll probably feel more empowered and at least attempt to form strategies and look at alternatives.

For every situation, person or challenge there are a plethora of perspectives. The key for you as a leader is to challenge your perspective, especially when it is negative, to come up with at least an equal number of neutral and positive perspectives.

Use curiosity, and ask yourself, “What else might be possible?” Then select the perspective that will move you toward your objectives.

3. Name the need Needs are universal to human beings and they are ‘why’ we do things. People express their needs every day when they speak and act. Our needs are right out there, in plain view, in our language and in our behavior.

The problem is that many of us haven’t been trained in how to hear and read these needs for what they are. Even worse, we might ignore the needs of others because we are so busy championing our own need or position and simply reacting to others reactions.

Judging, blaming and complaining are

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a few ways that people express that their needs are not being met. Unfortunately, it’s a very ineffective strategy for trying to meet those very needs because the negative behavior actually creates disconnection and resistance from others, placing them even further away from meeting their needs.

To identify the need contained in a statement, simply begin with the complaint, blame, or judgment you are hearing. “You just wasted two hours of my time.” Identify the negative feelings.

Wasted. Focus on the topic in the statement. Time. The underlying need that is not being met will become more obvious when you identify the negative reference to the topic. Need for efficiency. Often, the unmet need, like efficiency, is the elephant in the room. Once you name the need, the conflict loses its charge and then you can talk about creative ways to meet that need.

4. Make requests One of our greatest needs as human beings is to have a say in our lives, to have autonomy in the way we choose to work and run our lives. As leaders, responsible for fulfilling the vision and mission of our organizations, we tend to make decisions and send directives down to those responsible for tactical actions.

Then, what happens when we don’t allow them autonomy over their response and there is pushback or upset over the plan or strategy? Is it viewed as a lack of teamwork, engagement, or commitment?

Is ‘no’ an acceptable response?

Consider whether you have made a request or a demand. Requests have three possible answers – yes, no, and counter.

Demands have one possible answer – yes.

You know you are making a demand disguised as a request when ‘no or counter’ is not acceptable and you get upset. When people hear a demand they think they have only two options – to submit or rebel.

Ask yourself, “Why do I want people to do what I want them to do?” Is it because they ‘have to’ or because they choose to. Use a negative response as an opportunity to uncover additional information that may ultimately provide a better solution rather

than creating a crisis to overcome. People will choose to do something when they get in touch with their needs that will be met.

5. Conscious choices Have you ever heard someone say, “I have no choice, I have to do it?” What does this say about them? Should we take them literally? Do they really believe that choices don’t exist and, therefore, the obvious solution is the only choice available? Perhaps they really aren’t conscious of the power of choice. The mind-set and perspective of ‘I have to’ or ‘we have to’ is not that uncommon.

Unfortunately, it usually produces a great deal of stress and conflict in our lives.

Even in very challenging situations, we have the power to choose our response.

At every moment, you have the choice to be curious or defensive, to choose a positive perspective that moves you forward or a negative perspective that shuts you down, to focus on the underlying needs that are not being acknowledged or met or on the attacks and criticism you hear, and to make requests of others or place demands on them. Ultimately, you have the power to make conscious choices in every aspect of your life to support the results you really want. The choice is yours.

Hayden has more than forty years of experience owning, operating, and developing companies, and has consulted with hundreds of businesses throughout his career. Specializing in corporate interventions, leadership development, communication, and operational improvements, he has worked with companies in a variety of industries - from international law firms and manufacturing companies, to national insurance companies and service companies, to healthcare systems, to NASA and the EPA. His wealth of experience has given him a unique understanding of conflict management and communication challenges. His mission statement is, “I help individuals and groups of people shift from a paradigm of reaction to a paradigm of consciously creating results they really want for their lives both professionally and personally.” Thus his philosophy, “Everything in our lives we create, promote or allow.”

Hayden is the author of Conscious Choosing for Flow: Transforming Conflict into Creativity.

Spring 2015

Vendor Classified

Coming events

2015 Events

Integrated Payments Solutions January 11-13 National Retail Federation The Big Show New York, NY www.nrf.com

March TBA IIR USA PrePaid Expo USA Orlando, FL www.iirusa.com/prepaid

January 14-15 NAPCP Canada 2015 NAPCP Canadian Commercial Card and Payment Conference Toronto, ON www.napcp.org/

March 31-April 2 Electronic Transactions Association 2015 Transact San Francisco, CA www.electran.org

February 3-5 Smart Card Alliance 8th Annual Payments Summit Salt Lake City, UT www.scapayments.com/

April 2 Lloydmedia Inc. - Payments Business Magazine Mobile Payments Workshop Toronto, ON www.paymentsbusiness.ca

February 3-6 ABA Insurance Risk Management Annual Forum Orlando, FL www.aba.com

April 13-16 NAPCP 17th Annual Commercial Purchasing Card and Payments Conference San Antonio, TX www.napcp.org

February 15-17 ATMIA ATMIA Annual Conference Las Vegas, NV www.atmia.com

April 15-17 ABA Risk Management Forum St Louis, MS www.aba.com

February 19-20 InfoTech Canadian Financing Forum 2015 Vancouver, BC www.financingforum.com

April 19-21 Treasury Management 2015 TEXPO San Antonio, TX www.texpoconference.org

March 2-4 BAI BAI Payments Connect Conference Phoenix, AZ www.BAI.org March 11-12 CFO Magazine CFO Rising East Miami, FL www.cfo.com

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April 19-22 NACHA, The Electronic Payments Association, Payments 2015 New Orleans, LA www.nacha.org April 20-24 RSA RSAConference 2015 San Francisco, CA www.rsaconference.com

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Spring 2015

CANADIAN TREASURER

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