Project Description

Video length: 32:44

Operator:  Hello.  And welcome to today’s webcast.  All lines have been placed on mute to prevent any background noise.  Please note that today’s webcast is being recorded.  If you would like to view the presentation in a full-screen view, click the full-screen button in the lower right-hand corner of your screen.

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It is now my pleasure to turn today’s program over to Danny Peltz.  Group Head EVP of Treasury Management and Payment Solutions.  Danny, the floor is yours.

Danny Peltz:  Thank you, Carmen, and good morning or afternoon and welcome to Managing Treasury Risks in Challenging Times.  My name is Danny Peltz and I’m the Group Head and Business Leader of Wells Fargo’s Treasury Management and Payment Solutions Group.

First off, I want to start off by acknowledging that times like these are very unsettling.  Everyone reacts differently.  However, we have all been impacted by COVID-19, one way or the other.

It’s affecting our families, our workplaces, our daily lives, our economy, and our fellow citizens throughout the globe.  It’s a truly unprecedented time.  It’s personally unprecedented, and it is uncharted territory for your business.

I want you to know that Wells Fargo understands its responsibilities at times like this.  We understand that we are an essential service and are currently demonstrating resiliency and have plans in place to ensure we remain resilient.

We are, first and foremost, committed to the safety of our team members and to serve our customers and communities throughout this in any event.  Case in point in recognition of the economic impact of this event on our consumer customers, last Friday, Wells Fargo announced it temporarily suspended residential property foreclosure sales, evictions and involuntary auto repossessions.

On top of that, the Wells Fargo Foundation announced it will increase its charitable donations by $175 million to help address food, shelter, small business housing stability and public health organizations impacted by COVID-19.

Financially, we are also here for you.  Wells Fargo’s balance sheet has the capital and liquidity needed to be a source of strength at this and anytime.  We are well prepared to support your needs, as evidenced by our strong capital position and continued focus on financial and credit risk management.

Our common equity tier one ratio well above both the regulatory minimum and our internal target as of December 31st, 2019.  Additionally, Wells Fargo, like other large banks, conducts rigorous financial stress tests, including the Federal Reserve’s annual CCAR tests to ensure we maintain sufficient capital resources to withstand severe economic and market conditions.

In terms of our own operations, last week, we implemented our resiliency plans, including having as many members of our team who could work from home, where we need to staff critical operations or customer facing activities at Wells Fargo facilities.

We’ve instituted social distancing, enhance cleaning, and are providing premium pay.  We are truly fortunate to have so many dedicated team members and understanding customers as we shift to this temporary new normal.

We know that you play an essential role in helping maintain your business’s operations during this time.  Wells Fargo is committed to continue to provide the services you rely on, and communicating as clearly and as often as we can, as we support you through this fluid situation.

Our relationship managers, treasury consultants, and customer service support groups are very resilient and available to you to provide the advice and service you expect when you need it.

I also invite you to visit the commercial coronavirus update site, which will be regularly updated with information resources related to treasury operations, business continuity and risk management.

This site is accessible on the commercial and treasury management pages of, as well as through the commercial electronic office, also known as the CEO, our online portal.

As the largest domestic treasury management bank, Wells Fargo has a unique perspective on how to help customers like you prepare for business disruptions.  And today’s lineup of speakers will share their guidance and expertise on navigating these difficult times.

I hope your business senses and families stay healthy throughout this unprecedented event.  I’m now going to turn this discussion over to Jessica Murphy, Head of Commercial Rates and Foreign Exchange Solutions to share a risk management framework for business continuity planning.  Jessica?

Jessica Murphy:  Thanks.  Thanks very much, Danny.  I absolutely want to echo Danny’s sentiments.  We know each of you play a vital role in your business continuity, and the planning you’re doing for your organization.  We’re here today to support you.

One of the major challenges of business continuity planning is that you’re asked to develop plans to operate basically every aspect of your business in less than ideal conditions.  You need to anticipate potential issues from various angles.  You need to stress your system and then ensure you have not only plans A and B, but likely also plan C through G.

And, of course, you’re asked to do all of this at a time when you and your team are likely under a significant amount of personal and professional stress, which is likely why you’ve made a few minutes to join our webinar today.

We recognize that there is no one size-fits-all solution here.  But our goal is to provide an outline on key topics to address, give you some insights, or at least good questions to be asking, and then overall help you minimize the impact to your business of scenarios like this and navigate this time of uncertainty with resilience.

As a global systemically important financial institution, Wells Fargo has a broad lens not only into our own business continuity planning, but also the approaches of our various clients across numerous industries and geographies.

Areas of risk that require consideration during times of market stress, natural disaster, global disruptions, or of course, the current unforeseen event, COVID-19, include topics like your operations, this is your people, your processes, your systems, finances.

This should include things like market risk, your liquidity, the overall credit environment, forecasting.  How often have all of you been asked to update your forecast or your models over the past few weeks?  Are you monitoring your supply chain, your vendor risk, and of course, reputational risk?  This list could absolutely go on.

But when you’re framing your overall business continuity plans, we would propose two key foundational items.  First, ensure that you’re getting up to date information to inform company decision making in the fluid situation.

Thinking partners can be particularly useful in this regard.  We can provide economic research updated forecasts, rates, product lists, procedure outlines, and also share broader information on measures being implemented across the market.

As always, it’s ultimately up to you and your team to make the right decisions for your company.  But taking steps in advance to ensure that you’re getting helpful timely, fact-based information from a variety of sources will prove prudent.

You should work to get yourself and your team on appropriate information flow, you can leverage online portals email distributions, of course, keep a list of key contacts handy.  Make sure it has email, phone numbers and increasingly relevant mobile numbers.

A real-time example of this playing out is the fact that on March 16th, the Philippines, a country of more than 100 million people announced the lockdown such that their currency, the Philippine peso, to no longer be delivered to onshore bank accounts.

While the currency market ended up reopening the next day, this is an example of a relatively minor, but still unexpected disruption that could have impacted your business operations.  And whatever required banking partners to get in touch with appropriate contact at your company to discuss payment contingency plans.

This leads to the second foundational aspects of operating in a BCP environment.  This is having or, at least, trying to quickly put in place a risk management framework.  An effective framework or policy establishes thoughtful guidelines and guardrails that senior management is comfortable operating within while still allowing flexibility and nimbleness to react to the situation at hand.

Establishing these policies in advance is, of course, ideal.  But we recognize this is not always possible.  So to the extent you’re looking to refresh your existing framework, or establish a new mode of operating for the current environment, we would like to outline here some risk management best practices.

We fully recognize that the application of these steps will vary substantially across industries.  Those of you in the healthcare space are facing very different challenges and the clients we work with in the restaurant and retail sectors.

Let’s face it, though, no one has it easy right now.  So let’s walk through this diagram, which provides an outline for operating under less than ideal conditions, regardless of the unique situation that your business is in.

First, confirm clear corporate objectives.  This may sound obvious, but actually you would be very surprised how many conversations I’ve been a part of with management teams, where this is not clearly communicated, particularly in times of crisis.

Confirming clear corporate objective provide strategic guidance and focus.  This allows teams to make decisions quickly or with limited information.  For example, depending on how the current crisis impacts your business, the objectives may be, above all, we wish to mitigate reputational risks, whereas the different leadership teams may be providing guidance that the company is well positioned to emphasize production of a product that’s now in short supply, or that they see a specific market opportunity and wish to fill it.

Leaders have a critical role in driving business resilience, especially in the midst of uncertainty that has to walk the appropriate line between being decisive and being adaptable, and actively stay in front of their teams, and lead.

Monitor the status of your employees.  Again, it sounds simple, but it’s often difficult to put into practice real time, especially depending on the size of your team.  The status aspect of this point has to do, of course, with the safety of your colleagues and employees, but it should also encompass their overall ability to perform their job functions.

For example, following the wildfires in California, many were without power.  So while they were reachable by cell phone, their ability to join lengthy conference calls or work from a laptop for eight hours a day was absolutely impacted by not being able to recharge.

From a business resiliency standpoint, it’s also really important to have clear backup plans for your various employees.  So, for example, in the current environment, with a number of cities announcing shelter in place directive, you may want to establish that your New York team will move to a work-from-home status immediately and that any responsibilities that cannot be completed in that setting, which may be as simple as printing should be transitioned to a different location.  Another consideration is ensuring that you have a diversified but appropriate set of proxies in place for any key authorized signers.

Identify and prioritize critical activities and key risks.  This is certainly difficult part of the overall exercise.  There are so many contingencies and dependencies in each of your businesses.  Ultimately, the best path to business resilience involves getting way into the details, rolling up your sleeves and doing the necessary work to be prepared.

In addition to actually operating your business, those of you on the financial side, the CFOs and treasurer’s in our audience, are going to need to identify whether the event at hand will impact your company’s access to liquidity, or affect your ability to refinance upcoming debt maturities.

There are also other concerns.  For example, something as simple as ensuring the payroll goes out to the critical staff, or that someone has appropriate remote access to handle the rolling of your various corporate investments.  Certainly not a time to be selling into the market accidentally.

Assess risks and differentiate what can be controlled, mitigated or hedged.  As the situation unfolds, it may become clear to some of the critical risks you’ve identified could actually be hedged.

For example, concerns about your company’s exposure to a certain currency, which is experiencing uncharacteristic volatility, and, therefore, is likely to impact your costs or your revenues can be hedged in the foreign exchange market.

In the past few weeks, we have seen this transpire with a number of currencies.  But I’ll give you two specific examples.  The Mexican peso has depreciated in the past few weeks more than 30 percent and the pound sterling is currently sitting at a 35-year low against the U.S. dollar.

Similarly, in the midst of certain types of global crises, for example, where we find ourselves today, global interest rates move dramatically because central banks move to support the economy and facilitate refinance activity.

Over the past few weeks, benchmark rates like the 10-year treasury have experienced massive volatility and touch new record lows.  Some companies have been working to determine if they should use this environment to draw down on corporate credit facilities.

Others have been proactively accessing the bond market, given new benchmark rates, although they’re paying elevated credit spreads and higher new issue concession levels than normal.

Some of our clients have also felt that the current market presents an opportunity to swap floating rate debt to fix.  And still others have made the decision to increase share repurchases, given the meaningful drops in the equity markets.

Whether you find yourself in one of these situations or a different one, it’s really important to note that if we’re talking about race, F.X, commodities or investments, there is a difference between hedging to manage risk, and speculating during times of volatility.

Establish controls and anticipate challenges.  The exercise of anticipating potential obstacles and providing backup plans and controls is invaluable.  It’s something you want to empower employees at every level of your company to do.

Actually, it may also be worth revisiting your escalation procedures and ensuring that the team you have is comfortable raising their hand and proactively identifying issues, even when it inconveniences someone.

A simple example of a control update may be determining that in the case of moving to remote working conditions, all processes that formally required physical signatures will now move to a dual approval process.

You can do this over email now with the original signer and their manager.  It’s also important to consider shifting activities that you had done previously over the phone or in-person meetings to electronic channels or portals.  But don’t forget (since you) have appropriate controls, such as transaction size limits and place.

Ensure communication and effective reporting.  As much as it’s important to trust employees strive for efficiency, mistakes and errors are much more likely to occur during times of change and stress.  Whenever possible, establish consistent and clear channels of community.

The value of a routine daily check in cannot be misestimated, especially given the current health focus nature of the COVID-19 crisis.  With more than a third of Americans working from home, I want to propose a few basic tips that you should consider.

First of all, implement a morning and evening routine to enforce separation between your work life and your home life, even though you’re not leaving your house.  Secondly, find time to organize your workspace and make sure that corporate materials remain separate from personal items.

Find virtual ways to be present with your colleagues and clients.  This may feel unnatural as if you’re bothering people, but staying connected is critical.  Don’t assume that people know what you’re working on or doing all day.  Provide frequent but hopefully concise updates.

The value of clear reporting cannot be misestimated either, even if it requires some additional time investment to get up and running.  Effective reporting allows executives to anticipate issues and then act decisively, for example, making a decision to divert key resources from one area to another.

And last, but absolutely not least, track progress against objective and update routinely.  Truly, this can be the most frustrating part of operating in a business continuity environment.

In my personal experience, it is always humbling how frequently even the best plans have to be redone, updated, or occasionally scrapped completely.  It’s critical to take time to document what you’ve done, and why.

It may also make sense to establish a core working team or even a situation room to drive this process and the necessary routine updates.  No matter how you decide to approach this, maintain your confidence, persevere, and then pivot as dictated by the changing situation around you.

Hopefully, the seven-step framework and the corresponding questions we provided in the slides have given you some tools and ideas that you can begin utilizing right away.  So on this note, let’s transition to discussing some technical guidance, and how you can apply a framework like this to keep your treasury management operations running smoothly.  I’m pleased to introduce Matthew Obergfoll, Regional Executive for Treasury Management Business, Matthew?

Matthew Obergfoll:  Thanks, Jessica.  We understand you’re likely in a BCP situation.  So we’ll talk about ideas that can apply to any stage you might be in.  Let’s take a moment to identify some of the challenges of working remotely for a treasury team.  I’ll pose some questions so you can assess which of these you might need to consider.

Access to your financial systems.  Are you on premise or cloud based?  Who makes entries into your worksheet, accounting systems, workstation or ERP?  Do they have remote access to your financial systems reliably support remote access?

Payments.  What happened to the receipt and approval of invoices in a remote environment?  Do you make payments to other countries?  As foreign governments make decisions on closures of businesses, it could affect payments in for foreign currency locally.

If you are still sending checks, where do you print?  Do you use micro bank?  Do they require a wet signature by a signer?  How would this happen in a remote environment?  How do you invoice your customers?

Where will you send them if they close their office?  How will you receive payment in a remote environment?  Do you receive payments from other countries?  If you have lockbox and receive returns by mail, where will they go?

If the U.S. Postal Service experiences delays or shuts down, what are your alternatives?  What about reporting approval cash positioning?  How are they going to get done?  Look, that’s a lot to consider.

But during disruptions, you not only need to ensure you have access and controls in place to run your business.  You also need to have a communications plan that includes employees, banks, suppliers, customers, and key partners.

So far, we’ve just been thinking about process.  Let’s not forget, whatever you hacker, scammer, and fraudster is probably thinking right now, lack of communication and business disruptions mean opportunity for someone to take advantage of your organization.

Fraudsters can take advantage of situations after natural disasters by impersonating vendors, contractors, even charitable organizations.  In the wake of Hurricane Katrina, scammers sent emails impersonating the American Red Cross, taking readers to a fake website to solicit donation.  Technology is often used to commit fraud differing technology investments that mitigate fraud exposes companies to multiple risks.

Fraud has many forms, all of which are important.  In this environment, there are areas of risk in which we believe you need heightened focus.  Imposter fraud.  Fraud attacks are inevitable for most businesses, and fraudsters are getting smarter and more patient.  Imposter fraud, also known as business email compromise, is a significant threat to your business.

Business email compromised is where a fraudster impersonates a vendor, a company executive or another trusted partner, ultimately tricking you into making the payment to them.  In many cases, fraudsters create a sense of urgency to encourage individuals to react in the moment without regard to standard protocols.

Account takeover.  Another serious fraud threat, we’re fraudsters, use your online credentials to gain access to your email system, taking over as you to make an authorized payment.  This means that they are making an authorizing payment as you using your credentials, a process that can happen via malware, or even social engineering.

Ransomware.  Ransomware is a form of malware that lock the user out of their files or their device, demanding an anonymous online payment to restore access.  This typically enters your network through spam.

Third-parties can provide more information and the Secret Service or FBI want to help you plan before it happens.  Simply put, we encourage you to consider each of these and working on mitigating those risks.

Why are we starting here?  These problems when compounded could be bigger than expected.  As you can see on the slide, the numbers here have material impact.  In the event, you experienced all of these events, the cost would be over $800,000.

That excludes the emotional impact, time involved, forensic accounting costs and potential vendors and customers affected.  For many of you, this is your responsibility.  You have an opportunity to protect your company.  So let’s jump right in and get you the information you need.

What are some of the actions you can take?  Research.  Look into third-party resources.  Proactively reach out to the Secret Service, FBI and your Wells Fargo Treasury consultant for fraud education.

Controls.  Implement dual control, especially in a remote environment.  Ensure you can authenticate and confirm the identities of requesters.  Make sure you have guidelines for how employees connect network and (memes) paper out of the office.

Avoid miscommunication or fraud by verification in another method, verify emails by phone and vice versa and please don’t call the number on the email that you received asking for an emergency wire to (be set).

Solutions.  There are multiple solutions where you share information with the banks that confirms the payments you made are the ones you approved.  You have the option to review the client or pay exceptions.

Treasury operations under VCP conditions, you need to communicate.  Frequently, clearly, and at every level of your organization.  We recommend establishing routines such as a daily check in (routines).

Organizationally, and within groups you’ll need to build a communication or action lo that assesses operation acts to stabilize operation, establishes escalation processes, and then assesses operations, again.

Consider beginning and end-of-day meetings to determine what went right, what went wrong and what needs to be different tomorrow.  Some companies leverage command centers or hotlines to surface urgent item.

In terms of documentation, determine what is documented as a reference tool and what needs to be documented, so others can pick up additional path for impacted staff.  For auditors, if you went out of procedure document why you went out a procedure for review.

If you get an audit request months from now, about records or activity that happened in March 2020, could you deliver that?  Are you able to comply with all of the requirements of regulatory bodies in the BCP environment you connected?  You’ll also need to record new processes, operational or other that you can review them after your BCP event to determine what should stay and what needs to be done.

Looking at this slide you’ll see a simple procure to pay flow and then a sale to cash flow.  Challenges occur when the flow is interrupted.  Paper-based processes rely on people who know what the process is to be in the office and focus, the loss of a key employee, an approver being out sick or an entire office working remotely breaks the process.  Whether it’s approving invoices for payment, signing checks, sending invoices or posting exceptions.

Here are some examples of how to address these challenges.  Actions.  Move your vendors’ payments invoicing and receivable options to electronic methods that you can improve remotely while still following your controls.

Speaking of controls, make sure you have documented rules for approval levels, dual control approvals and approved second medium of communication.  Multiple solutions exist to help you streamline the effort to receive, route, approve and pay invoices.

Similarly, you can choose a variety of options to help you electronically bill and receive payments from your customers.  These steps mitigate the impact of employee los – extended leaves, working remotely and of other challenges and help you mitigate progress.

Technology continues to enhance the way we live, gain information, do business, interact with one another, and now more than ever prepare for the unknown.  In 2019 during the H1N1 outbreak, governments were able to leverage mass messaging to keep people informed of the concerns and precaution.

We seen this process duplicated in everything from weather updates to amber alerts.  Today, we face new challenges, ones that are hitting and affecting businesses more than ever, a challenge that forces us out of regular business routines.

The challenge really reveals the risk of not having technology deployed in your organization.  The bottom line is how do I access our accounts and keep our business running in the event that our work becomes impacted by a BCP event?

You may be wondering, “What is my responsibility here?  Is it too late to take action?”  It is not.  “How do the actions I take now affect others around me?  How do they impact my ability to do the job I’m supposed to do?”

The good news is that mobile banking has come a long way in the last few years.  Similar to other technological advancements, we’ve continually enhance our abilities.  So mobile capabilities are available and robust enough to tackle some of the major challenges we just walked through.

With mobile tokens, you have an alternative to your physical token to gain access to your banking information.  We suggest you set up mobile token capability on your smartphone so that you have a way to access your account and can perform transactions in the event you don’t have your physical token available.  Please contact your banking partners on how to set up and use mobile tokens.

Update online user profile.  You should ensure that your user profile is up to date in case banking partners need to reach you.  Please include a valid phone number, mobile phone number and email address.

Remind all users in your company to update their profile information as well, and to take their physical tokens home with them each time they leave the office.  For currency (e-users), you can access mobile token information at the website listed on the bottom of this slide.

Working capital.  Effective Working capital management is a leading indicator of financial strength and especially important during times of financial stress.  If you can’t pay the bills, or even worse, on payroll, you’re in trouble.

In working with financial executives, we’ve repeatedly heard that an effective working capital strategy must focus on both sides of the equation – cash inflows from A.R., cash outflows from A.P.

During emergencies, sound working capital management may reduce the amount of credit you need to run your business.  While you can work towards improving your cash conversion cycle, you’re often focused on measuring your own progress without benchmarks to measure again.

Many businesses believe their working capital management is strong.  However, according to the AFP over a five-year period, only 70 percent of S&P five company – 500 companies have, historically, achieved top quartile performance.  Conversely, 66 percent of S&P 500 companies never reach top quartile.

According to the latest PwC working capital report, the global working capital opportunity is $1.3 trillion.  What would $1.3 trillion in unrealized cash conversion mean to businesses in current time?

Fortunately, you’re partnered with an experienced working capital consulting team.  We’ve done over 5000 working capital studies with proprietary technology providing organization, both public and private, insight to where there are opportunities lie and providing them industry and segment specific benchmarks to measure themselves against.

For those of you with excess liquidity, make sure that you have an up-to-date investment policy so you can navigate through the new interest rate environment.  Be sure to consider your investment policy or create one as you work with key partners in assessing how to deploy those funds.

Concurrently, review your procedure for drawing down lines and any other funding measures you may need. We know these are unprecedented times for you and your business, and we are here to help with the right guidance and support to make smart thoughtful business decisions.

Again, we encourage you to check out our resource website.  And if you need help, please reach out to your relationship team and treasury consultants to help you prepare and manage any future risks.

As we wrap up, I want to thank everyone for taking the time to join us today.  And we wish you the best as you navigate in these challenging times.  Please do everything you can to stay safe and healthy.  And let us know how we can do our best to support you.  Thank you.

Operator:  Thanks to all of our participants for joining us today.  This does conclude our webcast and you may now disconnect.  Have a good day.