What's Neu - News from the The NeuGroup Network of Peer Groups

Blog entry
By aorwick, August 16, 2018
The FX Managers’ Peer Groups 1 & 2 will kick off NeuGroup’s 2018 H2 meeting cycle with talks on the global economy, model FX programs, hedge instrument selection and much more. 
 
Between Brexit, brewing trade wars and volatility in the Turkish lira, 2018 has provided FX managers with plenty of points for discussion. What is the global economic outlook, and how will it affect corporations doing business on a global scale? FXMPG members will seek answers from sponsor Standard Chartered at their meeting, taking place September 5-6 at Medtronic in Minneapolis, Minnesota. Get ready to explore strengths and weaknesses in global leadership and emerging markets, and the impact they will have on the USD and FX markets. 
 
Meanwhile, the FXMPG2 will take an in-depth look at a mega-cap member company’s FX program at its meeting hosted by Societe Generale in New York City on September 12-13. The presentation includes background on the business, an outline of policies, and description of hedge decision, trading and accounting approaches. From strategy to processes and instruments to metrics, no detail of the program will be spared. 
 
Later, members get the chance to ask, “Options vs. forwards, or options and forwards?” Both groups will consider the FX policy and decision framework that is needed to allow for a strategic switch between hedge instruments. Plus, hear more on how to use dynamic hedging and cost-effective ways for managing EM balance sheet risk. 
 
Also on the agendas: dashboard demos, roundtables on talent and training, and exposure ID and forecasting from A to Z. 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
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Blog entry
By thoward, August 13, 2018
Fitch says pre-planning bankruptcies make filing faster; meanwhile bankruptcy filings on the rise.
 
There are quick loans and quicky divorces, get-rich-quick schemes and quick passports. Add to the list bankruptcies. Companies are spending significantly less time in Chapter 11 bankruptcy lately, which is a boon for the ongoing viability of their businesses as well as creditors. However, it’s not for every firm. The trend has emerged just as companies’ Chapter 11 filings have jumped. 
 
A special report published August 7 by Fitch Ratings, “Shrinking Length of US Bankruptcies: Analysis Reveals Faster Credit Recoveries on Recent Cases,” finds that the median duration from bankruptcy-petition date to confirmation date of the reorganization or liquidation plan has shrunk significantly. In 2017 it declined to four months, compared to five months in 2016, and seven months among cases between 2003 and early 2018. Read more here.
 
Also this week, new lease-accounting standards become effective at the start of 2019, less than five months away. But there’s a problem, according to Deloitte: Companies don’t think they’ll be ready in time. 
 
Deloitte says a recent survey, conducted during a May webinar by the consulting firm, found that 41.3% of respondents were somewhat concerned about their ability to implement the standard by January 1, 2019, while 5.8% were very concerned. That is a slight improvement over the month before, when 42.1% were somewhat concerned and 7.2% were very concerned. 
 
However, those numbers are disquieting given respondents then had just seven months left to prepare, and a few months earlier the Financial Accounting Standards Board (FASB) had approved two ways to ease the transition. Read more here.
 
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.
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Blog entry
By amichels, August 06, 2018
Most MNCs still have more than a month to contribute to pensions and save on taxes.
 
Pensions, 401(k) plans and other retirement accounts are no joke. Not having enough money in them is one big reason so many people across the world have a fear of the future—a fear now fanned by worries that robots will eventually make many workers obsolete. But while pensions are no laughing matter, managing them while balancing the other financial needs of a company requires a firm command of what every great comedian has: excellent timing. 
 
The timing of pension contributions by multinationals got more interesting after US tax reform passed at the end of 2017. While the lower corporate rate of 21% is great for MNCs for obvious reasons, the reduction from 35% meant a lower tax deduction for pension fund contributions for qualified plans. The good news for corporates: the window for making contributions and getting the higher deduction did not close at the end of 2017. But for most companies the window will shut in mid-September.
 
That reality has sparked many NeuGroup members with pension responsibilities to wade deeper into the contribution waters in 2018. The topic drew plenty of attention at peer group meetings, as did the related subject of pension de-risking, including annuitizing some liabilities. We got a fresh reminder of all this after Raytheon last week said it would make a $1.25 billion pension contribution by Sept. 15. For more on what Raytheon and other companies are doing, read more here.
 
Reality Check for Fintech’s Disruptive Potential 
 
Treasurers straining to keep up with digital transformation can’t ignore the growing number of fintech startups offering solutions that could change how MNCs work with their banks—most of which are increasing their collaboration with fintechs. But a new report says bank concerns over security, financial stability and scalability are holding back the growth of fintech startups in the wholesale payments space. 
 
The report by Aite Group, “The Wholesale Payments Fintech Vendor Landscape,” says, “Most of these challenges are issues that larger, more established fintech firms and financial services providers can overcome more easily given their existing regulatory compliance, understanding of the market, and proven track record of deployments and clients.”
 
But the report’s author, Aite Group senior analyst Gilles Ubaghs, says it would be wrong to write off startups in the wholesale payments space. “There’s a big role for fintech startups to play,” he said. “They will have a big influence, even more than they are now, but it’ll be via partnerships of some form with larger players. That’s where they’re going to grow. They’re too small to go it on their own.”
 
Part of the proof that startups have a long way to go in the payments space is, of course, market share. Aite’s survey of banks found fintech heavyweights, such as ACI, FIS and Fiserv, dominate the wholesale payments landscape, accounting for 58% of bank infrastructure. Big IT vendors, including IBM and Oracle, account for 19%. Midsize fintech players account for only 6% of infrastructure, while startups hold an average of just 3%. 
 
“Therefore, their current direct impact in terms of wholesale payments infrastructure remains negligible,” the report says. “From a wholesale payments perspective, current bank positioning remains well-established, with little sign of any immediate threat of critical disintermediation. The Uber or Airbnb of wholesale payments looks increasingly unlikely.” 
 
Mr. Ubaghs expects to see more acquisitions and investments in startups by large fintech players and banks as well as ongoing collaboration in incubators. And, he says, the negligible market share startups have now “means that they have scope for significant growth, particularly as financial institutions become more comfortable with working with these smaller firms in less mission-critical areas of wholesale payments and other areas of the bank.” 
 
 
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.
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Blog entry
By thoward, August 01, 2018
This month’s issue of iTreasurer dedicates more than a few pages to tax reform. That’s because despite its passage, the Tax Cuts and Jobs Act of 2017 still has a few wrinkles to iron out or, in the case of the story on page 1, a lot of spaghetti to unravel. We also take a quick visit to Dublin to provide a quick snapshot of the SAP treasury management conference that took place there in early July. We also take a look at the evolution of a cloud-based systems implementation provider. Along the way we look at IBORs, ISDAs and tax evasion. 
 
First up, repatriation. Bringing trapped cash home sounds great to companies, but there are a lot of unknowns. That’s why the new tax rules are likely to keep tax and treasury departments busy over the next few years. And the unprecedented pace of the process resulted in a law creating interpretative uncertainties and potentially unintended consequences. But what’s for certain, according to NeuGroup peer research, is that most of the cash is going to buying back stock.
 
In our Anticipated Exposures section, we take a look at corporate readiness for the end of IBORs, particularly the scandalized Libor. With support potentially ending for global IBORs in just three years, while a broad array of market participants indicate some awareness of initiatives to adopt a new risk-free benchmark, only a tiny percentage have done anything about it. Also, with Brexit underway, the International Swaps and Derivatives Association is readying itself for any legal fallout with French and Irish ISDA master agreements. Currently companies can choose to use English, New York or Japanese law to settle international derivatives disputes. 
 
On page 6 is an update on the recent SAP treasury conference in Dublin. The conference was pertinent to a variety of maturities in terms of where companies find themselves on the SAP platform timeline. “Companies using SAP find themselves along a spectrum that ranges from early versions of its ERP to the ever-evolving S/4HANA,” writes contributor Anne Friberg. “Where they stand depends on when they implemented SAP and whether they have an installed, on-premise version or use a private or public cloud (SaaS).”
 
The featured peer group summary this month is from the Treasurers’ Group of Thirty Large-Cap Edition meeting, which was held at Starbucks HQ in Seattle. Large-cap treasurers continue to grapple with the implications of tax reform, as well as cyberthreats, talent, technology and how it will change the role of treasury.
 
On page 11, NeuGroup Advisory Board member Peter Connors, of Orrick, Herrington & Sutcliffe LLP, and his colleague Joshua Emmett take an in-depth look at the new tax laws, particularly the treatment of passive income or Subpart F income. “Subpart F income is includable as ordinary income,” write the authors. “Until the enactment of recent tax reform legislation, if income of a CFC was not Subpart F income, the US shareholders did not have to include it when calculating their income for the current year, and the tax was effectively deferred. This has changed.”
 
Finally on page 14-15, contributor John Hintze discusses the newly rebranded e5 Solutions, which, after being acquired by Germany’s Hanse Orga Group, now goes by Serrala and offers more than SAP, e5’s previous single implementation services offering.
 
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.
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Blog entry
By jneu, August 01, 2018

I am excited to announce that Martin Trueb has joined NeuGroup as a senior executive advisor. Martin has been a trusted member of our advisory board for two decades and a very active member of our treasurer-level peer groups for almost as long. He will help us launch one of our new groups, The Tech20 Treasurers’ Peer Group High-Growth Edition, this fall and will be providing leadership to additional groups as needed. Martin will also join our other senior executive advisors to offer members across our network advice and mentoring based on their vast experience in treasury and finance. In Martin’s case, this includes building appropriate treasury and finance infrastructure to support company growth and transformation.

Martin Trueb recently retired from Hasbro, Inc. where he served for over 20 years as the Senior Vice President & Treasurer.  Based in Pawtucket, RI, Hasbro, Inc. is a global play and entertainment company committed to creating the world's best play experiences.  From toys and games to television, movies, digital gaming and consumer products, Hasbro offers a variety of ways for audiences to experience its iconic brands, as well as premier partner brands.

Thanks to my association with Martin and Hasbro, I have seen the tremendous evolution of the company, including its transformation from a traditional toy company to an entertainment brand platform taking full advantage of our current digital age.

As Senior Vice President and Treasurer at Hasbro, Martin established a global Hedge Committee to monitor foreign currency cash flow exposures and develop strategies to mitigate the risk of changes in foreign exchange rates.  Early on, he established an International Treasury Centre (ITC) in Switzerland to consolidate non-US cash and short-term debt.  Over time, he partnered with the global finance teams to evolve the ITC into a true global treasury operation to execute all aspects of cash management (bank relationships, payments, receipts, funding, capital structure and foreign exchange issues).

Martin was also responsible for creating integrated financial models to forecast financial statements (P&L, B/S and Cash Flow), cash position (receipts and disbursements).  He was an early proponent of treasury software and oversaw the implementation of a variety of systems, including FXpress, FXall, Selkirk, Treasura, and most recently, Reval. 

In addition to his core treasury responsibilities, Martin managed Hasbro's global insurance programs (property, casualty and D&O) and was able to reduce the total cost of risk by over twenty percent.  He also managed Global Credit & Collections and started shared service centers for the Americas, Europe, Middle East & Africa and plans for the Asia-Pacific region. 

Martin received a BS degree in Marketing from California State University, Fresno, an MBA in Finance and International Business from the University of California, Berkeley and speaks Portuguese and Spanish.

I encourage all NeuGroup customers to welcome Martin and connect with him in his new role with us.

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Blog entry
By thoward, July 30, 2018
With US tax reform, Canada will have to take proactive measures to protect its tax base.
 
Slashing the US corporate income tax rate 14 points to 21% will all but certainly reduce the likelihood US companies will choose inversions to countries with lower rates. And while the tax overhaul is unlikely to draw full-blown inversions back to the US, companies should reconsider their cross-border configurations—especially with Canada.
 
US reform fits into a global trend of countries seeking to attract companies—the proverbial race to the bottom, as some may call it. The average 25% rate comprising federal and state taxes puts the US slightly below the average of the top 30 countries in terms of GDP and slightly above the OECD average. For other countries, especially neighboring ones like Canada, the US’s biggest trading partner, the more important change may be less its southern neighbor’s more attractive tax rate, and more its own relatively less attractive one. What’s a Canadian to do? Follow the Irish example? Read more here.
 
More Libor
 
Despite overall inertia about moving away from the London Interbank Offered Rate, there have been a few proactive organizations that are at least looking to amend the language in the documentation. The problem is that just changing the language may not be enough, according to Fitch Ratings. And unless it’s revised again, some $4 trillion in syndicated loans could be repriced. If this happens, it may “affect a company's cost of debt, which may ultimately implicate credit quality if altered significantly.” Read more here.
 
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.
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Blog entry
By thoward, July 23, 2018
Clearinghouses have sped up the timeline for their offerings of new reference rate futures.
 
Accelerating the march toward replacing interbank offering rates (IBORs), major clearinghouses have announced six months ahead of schedule their intention to clear swaps based on the new risk-free reference rates (RFR). This is an important step toward building the types of cash products corporates use. 
 
The swap news arrives as futures exchanges slowly build trading volume and open interest in 1- and 3-month, RFR-based futures contracts. The Fed’s Alternative Reference Rates Committee, which devised the secured overnight finance rate, reiterated at a July 12 roundtable that increasing liquidity in futures and cleared swaps will be key to the creation of more sophisticated products, making RFR-based financial products more usable for corporates and other end users. Read more here.
 
Also this week, whether it’s automation or digitalization, when it comes to technology, practitioners just want ways to improve treasury efficiency, and things like controls, process flows, and how they can help to grow the business. In the automation space, this is happening via improving ERP performance while for digitalization, finance departments are looking to apply robotic process automation, or RPA, to the basic stuff so that an already lean treasury can focus on its core responsibilities. Read more here.
 
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.
 
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Blog entry
By afriberg, July 13, 2018
The International SAP Conference for Treasury Management in Ireland showcased the variety of paths offered by SAP. Sidecars, anyone?
 
Dublin showed off its sunniest Irish disposition last week during the International SAP Conference for Treasury Management. The sponsors and exhibitors in attendance included many SAP implementation consultants as well as vendors of add-ons designed to enhance whatever SAP version customers are using. Here are some key observations from the perspective of a treasury person without direct SAP experience:
 
The many flavors of SAP. Companies using SAP find themselves along a spectrum that ranges from early versions of its ERP to the ever-evolving S/4HANA offering.  Where they stand depends on when they implemented SAP and whether they have an installed, on-premise version or use a private or public cloud (SaaS). New functionalities become available first in the public cloud version, which offers quarterly upgrades. Few companies start from scratch to implement S/4HANA. Rather, they need to transition from an earlier, usually on-premise SAP version to the cloud-based S/4HANA. 
 
Ditch the RFP? In a dynamic presentation about the cash and banking transformation at BP, speaker Peter Keenan recommended considering doing away with the RFP. Heresy, you say? Well, the RFP process is a lot of work and assumes you know exactly what you want and need. Instead, why not ask SAP and other vendors to “come and sort it out for us” by identifying what they think is the best path forward, and then compare the solutions offered?
 
Choose the right integrator. Many consultants, of course, are eager to help implement SAP for you. We won’t take sides, but several were represented at the conference and all had happy customers there. Most important is for the consultant to truly understand your starting point, evolving needs and desired end-state—and to be responsive to your timeline and resource constraints. They must also understand the systems and applications with which the SAP implementation needs to integrate.
 
Sidecar: not just an old-school cocktail. Implementation consultants at Serrala (formerly known as Hanse Orga) say there is a middle ground between the “old” SAP ERP and S/4HANA. Serrala’s Jochen Stiebe says as long as you have an S/4HANA database (as your single source of truth) and get the liquidity planner (“the heart of HANA”) to work by properly routing accounting and bank statement data into it, all other treasury modules can be added on to the setup using SAP’s FIORI applications. Mr. Stiebe refers to this middle road as the sidecar, but says not many consultants have experience with it.    This subject deserves a more detailed article—so keep reading iTreasurer and NeuGroup.com. 
 
Add your toppings. One of treasury’s many frustrations is proper governance around data sources and how they get fed into the ERP environment. A company called Brisken offers an add-on data provision and governance solution that uses a “bring your own data” approach, where you have the licensing relationships with Reuters, etc. That means Brisken is not a reseller of the data to you, although “data included” solutions may be developed in the future. 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
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Blog entry
By thoward, July 13, 2018
There’s a lot of talk about transitioning away from Libor but the how-tos are in short supply.
 
For this Friday, some familiar phrases: Easier said than done. Talk is cheap. Easy for you to say. These are likely the thoughts of current holders of debt pegged to Libor, when told they need to “transition away” from the scandalized reference rate to the more reliable Secured Overnight Financing Rate (SOFR) from the Fed or the Sterling Overnight Index Average (Sonia) from the UK. “How about you ‘transition away,’ Mr. Regulator??!!” they might also think. Those regulators are saying Libor will end by 2021.
 
The problem is Libor is deeply entrenched, both in institutional and retail loans. According to Bloomberg, there are $170 trillion of swap contracts alone still tied to Libor rate. Then there are the mortgage-backed securities that involve quite a few more trillions. The contracts for these MBS do provide a “fallback” clause if Libor is temporarily unavailable. But there’s probably nothing about the end of Libor, experts say. So it leaves a lot of haziness when it comes to the legal aspects, and some reports suggest issuers of MBS could be tangled up in years of litigation following the 2021 cutoff.
 
And it’s all the technical and legal stuff that is leading to lethargy on the part of those who should be transitioning away. They know about Libor and SOFR and Sonia and 2021. But they’re just not doing much about it yet. According to Financial Conduct Authority head Andrew Bailey, it’s a challenge. “The biggest obstacle to a smooth transition is inertia [and] hopes that Libor will continue,” he said, according to Bloomberg. 
 
His claim is backed up by recent survey data from the International Swaps and Derivatives Association as well as from informal NeuGroup discussions. ISDA, along with a handful of other major US and European trade associations, released results of their long anticipated “IBOR Global Benchmark Transition Report” in late June. The survey indicates respondents are gearing up for the transition, given 76% have at least started internal discussions about it. However, only 11% of respondents have allocated budget to the initiative and 12% have developed a preliminary project plan, while nearly a quarter of respondents have yet to initiate a program to support the transition. This is the case, the report’s authors note, despite survey participants saying they may have been more aware of the transition to risk-free rates more than the market as a whole, given its “core” consisted of trade association members, and 30% are members of RFR working groups.
 
NeuGroup members’ responses to queries by Bloomberg executives leading a session on the issue at a late May meeting suggested most corporates fall in the quartile that has yet to initiate a program. Half of the 20 corporate attendees acknowledged that their companies held debt or derivatives maturing past 2021, but none mentioned any definitive plans to prepare for the transition. Read more about it here.
 
Meanwhile, the scope of the Committee on Foreign Investment in the United States or CFIUS, which weighs in on whether a transaction is kosher for national security purposes, is creeping outward. The Gerald Ford-created agency has been very active in the last 18 months or more, examining, kyboshing, holding up and occasionally approving foreign purchases of US assets. It stopped China's Ant Financial's attempt to acquire Moneygram, prevented a Chinese investment firm from buying US semiconductor company Lattice, and more recently, aided in President Trump’s decision to block Broadcomm’s attempt at a hostile takeover of US chipmaker Qualcomm. The message here? Be very careful. As a tool, it seems to fit president Trump’s hands very well, to the extent that any transaction, no matter how seemingly unrelated to national security, is subject to review by CFIUS. Less understood is that even minority investments by foreign investors can result in the US company itself being classified as a “foreign person,” subjecting it to CFIUS review as if it were a foreign firm.
 
“That means that future investments or acquisitions by the American company, of US businesses will be subject to CFIUS review, just as if the American company were a Chinese, or German or Canadian firm,” according to a report recently published by Pillsbury Winthrop Shaw Pittman LLP. Read more about it here.
 
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.
 
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Blog entry
By thoward, July 12, 2018
The global swaps and derivatives watchdog adds France and Ireland to its dispute resolution destinations.
 
When a company hedges its FX risk, it uses derivatives to cover itself against the possibility of an adverse change in currency exchange rates. The International Swaps and Derivatives Association, the group that governs derivative use worldwide, decided this week to do a little hedging of its own with the release of French and Irish versions of its master agreements. This was done, it said, in order to guard against the possibility that EU users might not want to employ English law after Brexit. Adding France and Ireland to the available dispute centers – currently the UK, New York State or Japan – allowed the association to “prepare for some of the possible outcomes” following Brexit, ISDA chief exec Scott O’Malia said. 
 
But they might not be needed, according to Marc A. Horwitz, an attorney for DLA Piper. “These agreements may be useful for two domestic parties (e.g., a French bank trading with a French corporate) who wish to resolve disputes in local courts under local law, but otherwise [they] likely will not have much application.” Read more here.
 
Also this week, despite new benchmarks announced to step in if and when the infamous and tainted London Interbank Offered Rate exits, there are not a lot of products out there to help MNCs transition from the scandalized benchmark. Of the prevailing new benchmarks, there is the Secured Overnight Funding Rate, or SOFR, from the New York Fed, and the Sterling Overnight Index Average, or SONIA, from the Bank of England. However, there are not yet many products based on either one. Meantime many companies are uncomfortable continuing to use longer-term Libor-based loans given regulators globally have set 2021 as a deadline beyond which banks no longer must contribute to Libor panels. Read more here.
 
Finally, treasurers know there are great benefits to automation and moving to cloud solutions. But they should be careful in their considerations because TMSs can be expensive and end up not working out; or they include functions that aren’t needed. That was one of the takeaways from results of a broad survey of US and Canadian corporate finance executives by staffing firm Robert Half.
 
“What is the cost in relation to the potential benefits?” said Kenneth Kirk, CFO of Sepro Mineral Systems, in Langley, British Columbia, who participated in the survey. He added that the cost can be high because some automation software is pricey. “And a lot of the solutions are overkill. They look nice but aren’t practical. Vendors often make these solutions look a lot easier to operate than they are.” Read more here.
 
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.
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