Obtaining Deeper FX Insights with Customizable Risk Management Solutions

Joseph Drambarean:

Welcome back to FinTech Corner. We’re here at AFP 2023. I’m Joseph Drambarean, your host here, and I’m joined by Scott Bilter from AtlasFX. Thank you so much for dropping by and I’m really excited about our conversation. We have an announcement we just made recently.

Scott Bilter:

We did Indeed, yes.

Joseph Drambarean:

So I guess to kick things off and just make the audience a little bit more familiar with what’s going on here, what did we announce and what do we hope to achieve through the partnership between Trovata and AtlasFX?

Scott Bilter:

Yeah. Well, so we really announced we have an arrangement where Atlas customers are going to get a discount on Trovata, Trovata customers get a discount on Atlas. We’re really trying to bring the two together as a good bundled solution where we’re really solving what we see as the two biggest pain points that our common customers have. And you guys we’re both really deep in expertise in our areas and we realize that we are not going to be able to do what you guys do. You guys aren’t going to be able to do what we do. It’s just kind of the way to bring the best of breed solutions together for our customers. So it’s really, I think, better than sort of a try to do everything TMS solution that doesn’t do everything very well.

Joseph Drambarean:

So it seems almost like counter-cultural approach, just walking around the show floor here and just looking at the alphabet soup, if you will, of these large offerings that you see with the traditional TMS players. This approach is almost more modern in the sense that we take the best of our capabilities and create a value bundle that provides almost a customized approach for the customer. And I am curious on the FX side, especially considering the competitors that are out here on the show floor, why does this approach bring an advantage, and especially from the Atlas effects perspective, what is it about your approach that provides value that when you think about the other players that are around us that we can be talking about with customers to provide them a solution that is unlike any other?

Scott Bilter:

Yeah, I mean there’s a lot of folks that when they look at looking to check the box when it comes to FX risk that are sort of a put your exposure here solution, then they take it from there and maybe they can check the accounting boxes or they can do some mark to market or hedge accounting. But all the stuff that has to happen before that to understand where your exposures are, no one really wants to get into that. And so what we do is, well before all that, getting into the ERP data extraction, basically a lot of things come down to pain points are data, pain points, data problems and or process problems. And so we really try to solve the whole FX risk management workflow. So starting with the ERP extraction and getting down to that transaction currency detail from the ERP or multiple ERPs, getting that and playing it back to the customer in a digestible way.

And then from there, that’s really the building blocks for a lot of the analytics that we are then capable of doing that no one else can do without that. So yeah, it’s really important to get that first step and really folks do not want to, a lot of the solutions out there, they’re not even attempting to do that. So it’s a really important piece to get that data, understand the workflow, create all the connections, try to automate everything that’s manual. We’re very much in agreement in terms of our approach there and the different areas that we work in that you just want to take the manual error out of things. You want to get that whole sticky workflow and just a really good solution for the clients that they understand.

Joseph Drambarean:

What’s interesting when we approach the topic of connectivity and providing a robust interface, whether it’s APIs, files, whatever it might be to banks, one of the things that we’ve realized, especially working with clients is that our actual expertise of just having done that for a while now is playing a role in the overall leverage that the client is getting by working with us. And I get a sense that there’s very similar things going on with your group and how you approach not only the connectivity part, but creating a cohesive solution and that expertise is an important part of the backdrop.

Scott Bilter:

Yeah, absolutely. And so my background and the other two co-founders of Atlas, we started our careers at Hewlett Packard. And so we come at things from the practitioner’s perspective, so we know the pain points, we experienced ’em, so we know the minds that we wanted to keep our customers from stepping on. And I think that was absolutely key for us. So I was doing this at Hewlett Packard for a number of years and run the foreign exchange and corporate finance group there and then ran FP&A there. And so a lot of that interaction of sometimes FP&A and treasury are like ships passing in the night at a lot of companies, and they need to understand they have common issues with FX rates for planning purposes and things like that. So we would try to bridge the gap for them. But I think it’s been really crucial for us to understand from a complex environment at HP that everything has to be configured to your specific needs.

Everyone would love to have a solution that you just build something and it works. You deploy everybody, you’re good, you move on to the next one. Infectious management is just simply not that way. No. So in some ways, our moat is that we’re doing the work that just people don’t want to do because we understood from the beginning that you need to spend that time, have it configured specific to the client’s needs, understand what their workflow is, where their exposures are generated. Everyone has some different things about accounting rate methodologies, inter corporate interactions and where their exposures are rising. And so you really need to address that and figure out the workflow. We can often find some very specific low hanging fruit early on to help the process improvement side, but it really needs to have a solution that stitches all that together and has the data to do it. So yeah, it’s sometimes a little bit more upfront to get that done, but then once you have that, it’s just something they don’t want to let go of.

Joseph Drambarean:

And one of the things that comes to mind just when you think about that background is that there are a lot of vendors that are sitting here at AFP trying to productize and genericize complex things. It happens to be the case though, that on this particular topic of FX when working through these problem sets for large corporates, it tends to be a little bit more difficult to just corner and productize and just say there’s a one size fits all. It’ll just work for everybody. And I think that’s one of the things that I’m most excited about in this partnership is because of that depth of experience. And not just that, but the clientele that you already work with today, it seems as if you have the posture to be able to create the right solution for every client. And I think that the devil is in the details, especially when it comes to FX. And I don’t think that there is a one size fits all solution. And I’m curious if you’ve seen the same thing in the market.

Scott Bilter:

Yeah, for sure. There’s really no, yeah, it’s not a one size fits all. There’s, as I mentioned, just even something as simple as the account rate methodology that you choose that can determine on the balance sheet hedging side, we do balance sheet and cashflow hedging. But balance sheet in particular, if you have a daily account rate, you’re probably not forecasting a balance sheet. You’re probably just playing catch up every single day and adjusting trades in theory every day. Not everyone has a big enough team to do that, and they may compromise and hedge once a week or things like that, but likely not forecasting a balance sheet. If you have a month end rate, you probably are in need of forecasting a balance sheet. And that is really difficult for people to do.

Joseph Drambarean:

Absolutely.

Scott Bilter:

And there’s often reliance on someone to send a forecast in that that person really has no ability to actually do that accurately. They don’t understand the whole interaction between the income state and the balance sheet or the information that they would really need to do that well, and they may just trend something and do a poor job of it. So that’s where the pain points we had at HP having gone through that and changed things over time, and we can help fix that. And even in the future, use AI to even help and go alongside of that and look at things that we’ve built and have an AI version along with that and see over time give ’em the choice of what might be the best way to forecast a balance sheet. So yeah, lots of things there that can improve upon what’s often being done out there, what we see today.

Joseph Drambarean:

To put our futurist hats on for a second, you broached the topic, so I feel comfortable jumping into it a little bit. One of the things that we’ve done over the last day or so here at AFP is just kind of try to get our arms around what is the tolerance, if you will, of AI to play a role on your team, whether you’re in treasury or planning or in the general and broader finance function. And I’m curious from the perspective of FX hedging and looking at that problem set, will we ever get to a point where AI can replace the intuition that a person, for example, on your team might have in problem solving for a large corporate with all of the different variables that they account for. Do you think that that is something that is possible, or do you think that it’ll always be a hybrid of the technology and the automation that it can bring with a human actor providing the insights?

Scott Bilter:

I think it’s more likely to be a hybrid. I do see, so I think you can apply AI to sort of the company’s private data set and gain some insights and hopefully take away some manual processes there or some forecasting that could be improved upon. I think it does well with very large data sets. Unfortunately with some things with hedging, for example, you might get some end of quarter or end of year tax bookings that really throw off your balance sheet. It’s not a lot of data points. It happens once a year if it’s an end of year booking. And to try to predict what that would’ve been based on previous stuff, probably not going to get very far with that. So probably more of the freeing up time. A lot of folks have been talking about AI is going to be taking 80% of 80% of the jobs, that type of thing. So I think it can play a role in just about everything, including some of the forecasting challenges people have. But at the end of the day, that’ll be freeing up time to then figure out the one-off still that are going to be important in that process.

Joseph Drambarean:

So let’s get back to the partnership. Talk a little bit about next steps. So if we’re meeting clients on the floor and we’re talking about not only how do they manage their cash and liquidity, but do the advanced use cases of their FX exposure and managing risk and all of the things related to it, what are the next steps? How do folks get involved? How do they reach out and what does the process look like?

Scott Bilter:

So yeah, it probably depends on where their main connection is today, whether it’s with Trovata or with us. And so if they’re any interest in getting that package together, I think we’re ready to field all the calls as you guys are, you’ve been a great team to work with and I’m amazed seeing the stuff that you guys have done. So happy to spread the word and get people to understand what that solution is really looking like on the cash and liquidity side. And then at the same time, your folks that have those connections with companies that we don’t have that contact with, bring that introduction over and we’re happy to show and have an intro call demo with anyone to just sort of high level, show what we’re doing, the problems that we’re solving, get a sense of what their pain points are. There’s usually a lot of common pain points, but everyone has different levels of pain in different areas, so we always want to make sure that the solution is going to make the most sense, and it just kind of go from there. So amazing. It starts with a conversation, really.

Joseph Drambarean:

Absolutely. Well, really appreciate you taking the time to stop by FinTech Corner, and I hope you enjoy the rest of the AFP conference. And this was FinTech Corner.

Scott Bilter:

Thank you very much. Appreciate it.