Here’s the most-cited takeaway mentioned by participants at the end of a recent HSBC NeuGroup Industry Treasurers’ Roundtable in Singapore: Throwing big money at a problem can be counterproductive to innovation, while being resource-starved often fosters new thinking about problems and spurs innovation. That observation by Darren Hubert, Chief Technology Officer for Microsoft Services in the region and echoed by Jennifer Doherty-Hayes, HSBC’s Asia Innovation Team Lead for Global Liquidity and Cash Management, struck a chord with treasurers trying to reach digital transformation goals without the support of IT or big budgets. You’ll find more insights in the roundtable summary by clicking here.
What's Neu - News from the The NeuGroup Network of Peer Groups
By amichels, January 30, 2019
By mkmoore, January 30, 2019
NeuGroup is pleased to announce that Scott Flieger has joined the Company as a senior executive advisor for meeting facilitation, customer success and other client engagement, business development and related content services.
Mr. Flieger has had a long and extensive career in the investment grade bond market with a wide range of roles in both the new issue and secondary markets, and as a chief operating officer. During his 40 year career on Wall Street, he has held positions in debt syndicate, debt capital markets, the bank loan market, and bond trading. Mr. Flieger was most recently with Deutsche Bank and also worked previously at JPMorgan, Credit Suisse and Bear Stearns.
“We are very pleased that Scott is joining the platform. He brings a wealth of knowledge in the investment grade capital markets and a real appreciation of the issues facing both our Peer Group Members and Peer Group Sponsors”, said Joseph Neu, Founder and CEO of the Company. “We are confident that our Members and Sponsors will benefit from Scott’s experience and insights”, Mr. Neu added.
Mr. Flieger resides in New York City with his wife and two daughters.
By jneu, December 17, 2018
A joyous, happy organization will deliver more.
I want to begin this post by saying that all of us at NeuGroup wish you and your families and friends a wonderful, joyous holiday season and a very happy New Year. And in keeping with the warm spirit of the season, I want to share with you some thoughts on joy and happiness and the value of cultivating them throughout the year. They come from a NeuGroup member’s presentation and offer concrete reasons and methods for making the feeling of happiness a priority within treasury and the broader organization that finance serves:
• Happy people deliver more. As more treasurers pay attention to culture following Peter Drucker’s maxim “Culture eats strategy for breakfast,” it makes sense to make happiness a cultural staple. The way this member’s treasury looks at happiness is the joy you feel as you move toward your potential. The goal is to build a happy workplace, which means to provide challenging and exciting career opportunities, embrace diversity and inclusion and reward superb execution and breakthrough thinking.
• Measure happiness. To foster a happy organization, you must measure organizational health, which the member’s treasury does with quarterly surveys of its staff worldwide. The results aggregate into a happiness index that treasury monitors closely. The survey addresses agreement with statements such as “I play an important role in treasury success,” “I am paid competitively,” “I have access to development opportunities,” “I have a challenging job,” “I feel my contributions are recognized” and “My contributions are properly rewarded.”
• Tap into what motivates people. For example, if you have treasury operations offshore, let staff rotate to other locations, even temporarily, to allow people who like to travel to swap jobs/locations for a month. This helps along processes and cross-fertilizes best practices globally. “This generates a huge ROI,” noted our member, “and it makes people happy.”
• Embrace change as opportunity. Reflecting on the departure of a senior treasury staff person, our member noted that while it was a big loss of talent, “It opened up an opportunity to shift his responsibilities to others on the team to make them happy.” Also, if treasury has effective processes, policies and controls, it can earn the trust to change its organization to what works best—be it new people being directly responsible or best practices developed anywhere being embraced as the new standard operating procedure.
So again, I wish everyone, both inside and outside of treasury, a joyous holiday season and a happy New Year. And taking a page from our member, I truly hope your happiness is the joy you feel as you move toward your potential.
Capital Allocation Challenges, a Tool to Alleviate KYC Blues, and Sharing Tips on Dividing the Corporate Wallet
By amichels, November 26, 2018
Here are some of the key takeaways from the ATLG-2018 H2 meeting in Milwaukee hosted by Harley Davidson and sponsored by Bloomberg:
Capital Allocation Feedback and Cat’s Approach. Members shared insight into managing stock repurchase programs. Ed Scott, group leader and former Caterpillar treasurer, described the industrial company’s approach to allocating capital efficiently.
• Takeaway: VWAP and gaming the system. Using VWAP to measure the effectiveness of a buyback program amounts to treasurers gaming the system, members agreed, since its value lies in measuring the short-term execution of buybacks, not determining return of capital to shareholders.
• Takeaway: Allocating the Cat way. Ed walked members through Caterpillar’s journey to develop a process to allocate capital. The basic measurement, called Operating Profit After Capital Charge (OPACC), is calculated by multiplying a capital charge times the assets deployed in the business unit required to generate revenue and profit. The resulting capital charge on assets deployed is subtracted from operating profit to obtain OPACC.
• Takeaway: OPACC has consequences. To generate increasing, positive OPACC, capital was generally allocated by “feeding” business units and product lines with increasing OPACC and “starving” those moving in the opposite direction.
Bloomberg’s Solution to KYC Pain. Treasury, legal, tax and other departments are typically involved, and there’s a dearth of standardization.
• Takeaway: Bloomberg’s Entity Exchange to the rescue. The web-based product encrypts pertinent documents at rest and in transit; enables treasury to organize corporate entities and maintain documents centrally; provides a single version of truth across the company; gives controlled access and user entitlements to a wider range of teams, including the banks; reduces KYC’s time and repetition by auto-matching documents and auto-filling forms; and provides a full audit trail.
• Takeaway: Give banks what they need, not what they want. Members groused that inconsistencies in banks’ document requests can result in corporates providing important information that isn’t required by KYC. Entity Exchange’s document library should prevent that from happening, said Betty Marcus, KYC/AML product specialist at Bloomberg.
Tricky Bankers: ATs Exchange Tips for Managing Syndications. An ATLG member explained the process her team follows to manage bank relationships, starting with identifying the services for which to measure fees. Then they develop a template for forecasting fees and recording actuals; compute optimal fees given the corporate’s wallet size; measure the gap to optimal fees; and converse regularly with banks about their needs.
• Takeaway: Lots of data but still many unknowns. Fees for programs such as credit cards are paid by other market participants, so estimating their benefit to the banks is difficult.
• Takeaway: Who really syndicates the deal? When asked how many of them do most of the work on their revolving credits, most ATLG members raised their hands. “We spend nine months teeing it off, then bring in the [bank] joint-lead-arrangers to sign off on it,” one member said.
By thoward, November 20, 2018
Members of NeuGroup’s Corporate ERM look to get the board to understand risk better.
NeuGroup Corporate ERM members met in lower Manhattan on the city campus of St. John’s University to discuss a host of topics, including board interaction and interest, ERM program effectiveness and creating a risk culture across the organization. But much of the discussion concerned the board, whether it was getting board buy-in or good ways to keep the board informed or just communicating risks to the board that was most on the minds of members at the meeting.
In the ERM pre-meeting survey, all respondents say their company’s board takes an active role in the oversight of risk. Nonetheless, in several sessions, the board came up as an issue in terms of interaction and educating it on ERM risks and the function’s importance; overall, there was a slight sense of frustration with the board when it came to ERM.
Here are a few of the takeaways:
• Communicating the importance of risk. One member told the group that he was having some difficulty communicating with the board and getting it to see risks when it comes to tech; the problem is the board doesn’t grasp the importance of certain technology risks. His ERM team was looking to get the board to look at “why it should care.” It’s often the case, he said, that board members don’t get it and this could be due to how it communicates with the board; “how to get their attention in a fast pace environment.”
• Are they really getting it? Another member added that it was a challenge to get the board to look beyond the image onscreen. “How [do you] get someone to really take the time and deep thought to look at all the risks without thinking that it’s only another chart and getting through it without trying to get through it as painless as possible.” Another member says that its board has added millennials so that they can better comprehend technology risks.
• No outside influence. This member also uses different tactics when it comes to communicating risks to management, and in turn, getting them to discuss their views of topline risks. This includes putting management a room without phones to play through the risks as an exercise. Also effective was sitting down with each business unit member individually to get more information.
• Pre-board meeting scout report. Understanding individually what the board members style is a key factor to success for one member. This means trying to get a better sense of the questions it will ask, figuring out who the champions are and who among the board “are you still trying to bring along on journey?” This means “targeting presentations to those who need more help on the journey.” It also helps to have an ally on the board to move things forward, said one member.
By amichels, November 08, 2018
The pilot meeting of the Tech20 High-Growth Treasurers’ Peer Group sponsored by Bank of the West/BNP Paribas and hosted by ServiceNow included asking what first drew participants into treasury. Many started in accounting and almost all of them said they liked that treasury is forward looking and supports driving business growth. That treasury also tends to touch most aspects of the business in helping to drive it forward also has appeal.
This forward looking-theme carried through to all the other pilot meeting sessions. Here are some of the meeting’s key takeaways:
- Cash awareness a matter of culture, so start building it. One challenge for growth company tech treasurers is their firms are used to generating so much cash that they tend to ignore the need to forecast and use it efficiently. So treasurers at such firms must do even more to build a culture of cash awareness to gain better visibility and cash forecasting accuracy for when it becomes more mission critical in the future. One treasurer created stickers and buttons to hand out to everyone in the company to get them thinking more about free cash flow.
- Step back to assess new bank relationships. As growth companies outgrow their incumbent banks they need to build a new bank group. This is not a decision they should make quickly. The consensus of the group was that they should step back and do their homework, figure out who are these banks, what are their capabilities, what coverage and commitments do they get and what kind of person will cover them, and do they know what they are doing. Also important is how the credit underwriting is done.
- Find out what matters to the C-suite. One treasurer told the group he had been trained to understand what matters to his bosses and then figure out how to align his own treasury objectives to what they care about. If your boss cares about ROIC, then treasury’s mission can be about that. To find out what matters to your boss, sometimes you just have to get lucky. When he started his latest treasurer role, it was at a company with a several-decade history but no real treasury activity to guide him on what the C-suite valued from its finance function, so he had undertaken a study of what it had done and what it had not, including share repurchase, which the firm had not done. One day, the CEO came in and said the stock was priced too low and he wanted to buy some back. It turned out share repurchase was something he cared about. “It is often better to be lucky than smart,” the treasurer noted.
Treasurers Discuss Brexit Uncertainty, a Promise of Term SOFR, Allocating Capital and Global vs. Local Banks
By amichels, November 05, 2018
Here are some highlights from the 2018 fall meeting of the Treasurers' Group of Thirty Large-Cap Edition in New York, sponsored and hosted by BNP Paribas.
Brexit Deal or Not, Divorce Will Remain Uncertain. A Brexit deal must arrive soon, but it will still be tentative given that major political obstacles remain before the March 2019 deadline. Hedging the possibility of a no-deal outcome may be wise, as well as prepping account structures for the eventual breakup.
• Takeaway: A deal is just the start. To reach a Brexit deal, the UK and European Union (EU) must agree on the border status between the UK’s Northern Ireland and the Republic of Ireland, which remains an EU member. They also must agree on a nonbinding political declaration—a statement of intent. Even when a deal is reached, it must be passed by the UK and EU parliaments.
• Takeaway: Prep but don’t panic. BNP bankers recommended establishing “shadow accounts” in the EU, in order to later migrate cash-management structures efficiently.
Term SOFR on the Table as Libor Replacement Gains Traction. As concerns about Libor deteriorating mount, the infrastructure for Libor replacements is developing quickly.
• Takeaway: Term products on the drawing table. Regulators have resisted developing “term fixings” for SOFR, which settles overnight, to avoid challenges faced by Libor. However, term rates are favored by corporate borrowers managing cash. The Alternative Reference Rate Committee (ARRC), which developed SOFR, recently announced plans to publish three-month and six-month rates based on the Secured Overnight Funding Rate (SOFR), the US’s so-called risk-free benchmark rate.
Capital Allocation: No Easy Matter. In a session exploring optimal strategies for high-level capital deployment, members heard about allocating capital more effectively, ranging from theoretical ideas to specific efforts by peers.
• Takeaway: Business drives capital. The treasurer of a major retailer said that a wide-ranging analysis, including internal assessments, white papers and talking with peers, concluded that more emphasis should be put on producing growth. Best-in-class peers committed to targets including cash flow, working capital and cash balance-- not just dividend increases and share repurchases.
• Takeaway: Buyback funding alternatives. A BNP Paribas client funded share repurchases with convertible debt, buying back the stock at spot through an accelerated share repurchase and selling the convertible bond at a significant premium to spot. A valuable call option lowered its rate significantly.
By mkmoore, November 05, 2018
Treasurers’ Group of Thirty meeting gets underway on November 29 at host Avaya’s Santa Clara, CA headquarters.
As T30 meets for the group’s 13th year, the treasurer members are keen to discuss their top-of-mind issues. Using pre-meeting surveys and benchmarking, members decide what they wish to discuss, a hallmark of NeuGroup peer group knowledge exchange process.
After a round-robin of each member’s projects and priorities, meeting sponsor Standard Chartered will give the group an overview of the new thinking in keeping borrowing costs down in an era of rising interest rates. The bank will also present on share buyback trends and practices. As many companies have decided that repatriated funds will go toward share repurchases, members will discuss the strategy trends including whether buybacks drive management away from value-accretive projects or induce more efficiency and rigor in decision-making.
During a roundtable session, members will discuss rethinking the art and science of capital allocation decisions and metrics, including on what basis capital allocations are determined: WAAC, NPV, RaROC or risk-adjusted NPV. Member companies who have made substantial changes to their capital allocations approach because of US tax reform will share their experiences.
In a member-lead presentation, the topic of reevaluating treasury roles and responsibilities and how they fit within organizational structures will be addressed. Treasury professionals are continually asked to do more with the same, or fewer, resources. Meanwhile, roles and responsibilities for those charged with performing treasury duties continue to expand, often well beyond core treasury activities. Understanding how companies compare is also difficult due to the differing demands of businesses that have developed unique treasury structures.
Companies across the NeuGroup Network are routinely evaluating treasury roles, responsibilities and structures to best scale finance functions, prepare for growth, adapt to new technologies and proactively manage increased treasury scope. In this session, members will assess typical and atypical roles and responsibilities, compare them across organizations and examine how they fit within them. The goal is to help members better scale teams and maximize efficiencies and effectiveness.
By thoward, November 01, 2018
Cyber security, ERM and Emerging Risks, Ethics & Compliance Program audits to be discussed at NeuGroup Internal Auditors’ Peer Group Meeting. Members will also get a tour of Microsoft’s Digital Crimes Unit.
The Internal Auditors’ Peer Group is gearing up for its second-half meeting of 2018. Members will delve into a wide range of topics, including now familiar topics including cyber security, ERM and emerging risks.
Here is a brief synopsis of some of what will be discussed and questions that will be addressed.
Cybersecurity. A discussion of current maturities of cybersecurity programs at member companies, including whether Securities and Exchange Commission guidance from February 2018 has been followed. Background: in February, the SEC voted unanimously to approve a statement and interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.
Digital Crimes Unit Tour. Microsoft’s DCU is dedicated to fighting global malware, reducing digital risk and protecting vulnerable populations. The tour will show how the DCU combines big data analytics, cutting-edge forensics and novel legal strategies to protect data, help consumers gain control of personal information, and help keep seniors and children safe online. The DCU is made up of an international team of attorneys, investigators, data scientists, engineers, analysts and business professionals based in 30 countries, all working together to transform the ongoing fight against digital crime.
ERM and Emerging Risks. How are companies identifying emerging risks before they happen? Many boards of directors are asking IA and ERM to identify the unknown risks. What are the sources?
Audit Department Road Maps. IA is always looking to improve how they engage with stakeholders. This helps IA reach its organizational objectives as well as quality audit outcomes. Mapping out a step-by-step process is a good exercise to identify activities in each phase of an audit and can create new insights for stakeholders, management and internal auditors alike.
By jzawacki-lucci, October 29, 2018
The Global Cash and Banking Group’s 2018 H2 meeting last month in New York, sponsored by Bloomberg, which hosted, and Citibank featured lots of talk about one option to ease the universal pain point of know your customer (KYC) compliance.
Members Band Together to Solve an Industry Issue
Jim Aschmeyer at The Coca Cola Company has been pounding the proverbial payment to pull together several large multinational treasury teams, Bloomberg and Citibank to move forward on a solution to KYC and AML headaches. His passion is clear, and it was exciting to hear his story and dream of the possibility of painless KYC processes and adherence to AML regulations. The goal is clear: “If we look at the data as a deliverable, the information is all there. Mapping is the next step” to giving banks what they want and allowing us to say, “I love ya, but don’t call me,” Jim said. For more on Jim's KYC mission, click here.
Cautious Optimism for Bloomberg’s KYC Solution
Bloomberg presented Bloomberg Entity Exchange, its solution to the relentless KYC documentation requests and ALM regulatory requirements facing global treasury groups. The tool was met with a mix of excitement and skepticism about whether it will get to the roots of the issue. It is by far more than a glorified SharePoint or Dropbox site; but if banks still want paper originals, time-consuming paper shuffling will continue, regardless of where the backup is housed. Obstacles include onboarding participating banks, complicated legal agreements and adding signer management functionality. As Jim said, we “don’t have all the answers yet, but we have a starting place.”
Looking Differently at KPIs
Another member company presented her way at looking at KPIs, starting with the company mission and tying in the core values that treasury provides the overall organization. She offered a compelling look at how and why they try to distinguish between KPIs, operational metrics and leading indicators, saying, “I don’t want a report. I want an indicator that tells of me of success or failure versus the operational metric of activity.” Also, the focus should be on analytics, not mere calculations, to highlight performance.
A Bit Big Brother, but Better Security
Citi presented additional security that is now available to CitiDirect users which generates a “user persona” for everyone logging into the system, using IP addresses as a base security layer, how users type (i.e., hunt and peck or two-handed), what you typically access and how typically you use data. Big Brother tracks everything a user does from your end to enhance your account security. Although member pushback was that “the security issues we face are because vendors are getting hacked,” Citi reported as many as 3,000 hack attacks every half-hour on CitiDirect; so, it’s comforting to learn the extent to which the bank is going to make sure your accounts are safe.