2018 and All That
Tags: BREXIT, cash culture, extending duration, FX volatility, iTreasurer, January 2018, President Trump, prime money market funds, regional treasury, regulations, Societe Generale, tax reform, treasury systems
Some may recall the book "1066 and All That," a tongue-in-cheek look at English history starting with the Norman Conquest. The full title was, "1066 and All That: A Memorable History of England, comprising all the parts you can remember, including 103 Good Things, 5 Bad Kings and 2 Genuine Dates."
Could 2018 the US be as momentous? Will there be more good things than bad? A few bad kings and genuine dates? Possibly. One date that is upon us is President Trump's first anniversary coming later in January. And it’s been a first presidential year like no other. For some it’s been dark days, for others a new dawn. And for probably all, a lot of head shaking and head scratching. But despite all the hullabaloo, things are changing, and for corporate treasuries the next year will see a lot that concerns them, including tax reform, regs, FX volatility and Brexit, just to name a few.
Thus, on page 1 of the January issue of iTreasurer, we take a tour of some of those topics and what may be in store for treasurers in the year to come. One of the larger questions wrapped inside the tax reform bill—and perhaps flying under the radar for all but corporate finance teams—is cash repatriation.
Some $2.6 trillion in US corporate profits is sitting in overseas bank accounts, about half of it in cash. What will companies do with that money? Recent press reports and other research indicate cash returned to shareholders and dividends. For now, that leaves the sizeable number of NeuGroup members with a lot of cash parked overseas sitting on the sidelines waiting for reform outcome before making future investment decisions.
In our “Anticipated Exposures” section on pages 4-5, we discuss the importance of creating a cash culture within companies, which means raising awareness of cash and cash management; improving visibility and forecast accuracy; and driving cash efficiencies and overall cash management performance. Also, how regional treasury roles need to punch more than their weight, which means getting a more well-rounded treasurer in the position. Also, a look at how cash will continue to trickle back to prime money market funds in 2018 (trickle being the operative word).
Our meeting briefing this month is for the Assistant Treasurers’ Group of Thirty or AT30. At its meeting in September in Palo Alto, the group discussed treasury organization, planning for tax reform and cyberattacks. Also, what a hard Brexit means for multinationals, cash forecasting for when business lines are changing and talent rotation programs.
Starting on page 11, we take a look at a model developed by Societe Generale that can help companies decide whether it’s worth it, when extending duration, to issue one long bond or two or three shorter-duration bonds. What the bank has come up with is a comparison model “that shows various permutations of what kind of tenors to issue and the cost differences between them.”
The goal of the duration extension calculation model is to allow users to compare the associated costs of issuing long bonds vs. multiple short bonds (which combined, would match the duration of the long bond).
On page 15, we take a look at the pain that can result from trying to reconfigure a company’s often tangled, outdated and cross-purposed systems and processes into something simple and straightforward. “For companies using multiple treasury systems, banks and other providers of whatever they need or want, things can be very complicated. Like a juggling act that includes plates, knives, forks, chainsaws and a live kitten, treasury’s tool box can get overwhelmingly complex. Thus, the department’s strong urge to simplify and streamline,” write the authors.
Enjoy the issue.
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.