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

Blog entry
By aorwick, June 14, 2018
Institutions like Deutsche Bank are interacting with fintech providers to bring new solutions to banking clients — including treasurers — to harness data, process payments and better meet the needs of customers in the new digital age.
 
Ted Howard, iTreasurer Managing Editor and NeuGroup Associate Director, sat down with a panel of experts from Deutsche Bank and Hyperwallet to discuss fintech trends and solutions for treasury. 
 
Click here to watch a replay of the live webinar. 
 
During this event, you will: 
 
• Learn how leading institutions like Deutsche Bank are taking a community-based approach to solving client problems with fintechs to better meet the needs of customers in the digital age.
• Better understand the role of fintech in treasury transformation projects.
• Discover the ways in which banks and fintechs are serving their stakeholders by working together as collaborators.
 
Watch the recording to learn more about Deutsche Bank's community-based approach to serving clients. 
 
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 afriberg, June 13, 2018
Members of the EuroTPG convened for their H1 meeting in sunny Stockholm recently and the themes that captured the most attention were the advantages that treasury can leverage from information technology; trends and innovation in cash management, including the pros and cons of virtual accounts; and how to deal with sanctioned countries, a significant issue for a subset of the members. Here’s some of what you missed.
 
Key Takeaways:
 
• Wait, what? Virtual accounts will not solve all my problems? Following a lively debate over virtual accounts in a session led by guest speakers from Danske Bank Sweden, members concluded that the supposed panacea of virtual accounts was, well, not quite there. The selling point of virtual accounts is that many physical accounts can be eliminated, saving fees, and virtual subaccounts with their own account numbers will allow easier reconciliations as well as POBO and ROBO. But much can be achieved through setting up an in-house bank and IHB account structure in the ERP (not at the bank) to deliver the same benefits. One member said his business case for virtual accounts just “went from yes to no,” so members are advised to do the cost-benefit analysis carefully and assess alternatives for meeting the same objectives. Read more about the rise of virtual accounts here. 
 
• Creativity to deal with sanctions. Several members have no choice but to sell to countries that are under trade sanctions, making collecting from customers a challenge; a couple of members mentioned not being able to collect and take out significant amounts of money from Iran. Sometimes, opportunities open up to get cash out indirectly via another country, but these windows are not consistently reliable. Some cite creative ways to use the cash, like holding meetings and events in a trapped-cash country, or buying and exporting commodities. Given a choice, members steer away from customers in sanctioned countries, usually relying on trade compliance or in-house legal teams to identify potential transgressions rather than making this a treasury responsibility. However, some argue treasury should be involved to limit the credit risk posed by sanctioned countries.
 
• How to leverage first-generation dashboards? Static reporting via spreadsheets or ERP outputs is increasingly being replaced or complemented by real-time dashboards which create opportunities for more dynamic discussions around liquidity needs, FX exposures and counterparty risk levels, for example. But what’s the next frontier? What additional data—internal or third-party—is required (economic forecasts, FP&A, etc.) to automate more of the forecasting aspects of treasury’s work by way of second-generation dashboards that provide predictive analytics? We heard what’s on the drawing board for one member who is grappling with the predictive capabilities of dashboards. And we look forward to learning about other members’ progress on this at coming meetings (with demos!).
 
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, June 12, 2018
The Internal Auditors’ Peer Group began its 2018 calendar with a lengthy opening session to kick off its meeting at Uber in Palo Alto, California.
 
Members and guests discussed a wide range of topics, including a look at technology to address various challenges, including SOX controls and audit hours. Participants exchanged ideas on educating management in what they actually do (and how business units shouldn’t be afraid of IA); they also talked about the challenges of diversity in internal audit and finding qualified candidates. 
 
Talking technology. Members discussed the various systems they have used and, in many cases, the failings of each. Protiviti got high marks for control rationalization but got less than stellar ratings for documentation. Others mentioned Workiva as good for reporting. One system that most agree does a good job with SOX is SoxHub from a company called AuditBoard. Read more on SOX and Protiviti here.  
 
• Takeaway: Find what works for you. Finding the right system for your department always comes down to what your department needs vs. what the industry says or peers say you need (or what they use). Unfortunately, trial and error (and the expense thereof) is still the norm. Nonetheless, based on member input, SoxHub sounds like an effective tool.
 
Educating management. Despite the growing importance of IA’s role, what the function does is in many companies still is misunderstood. There are other audit-like functions or ones that get confused with audit. IA may also be perceived as being brought in because of a problem. “People still aren’t used to audit,” said one member. “Some ask, ‘why audit? What did I do wrong?” 
 
But now the function is gaining wider acceptance as audit’s skills – for example in data analytics – become more widely known. Through data analysis, IA can offer insights as to what’s going on in the company in tangible ways. Some members report being called upon to do non-audit reviews. They’re also being tasked with helping build enterprise risk management functions (although the goal here is not to be seen as the owner of ERM). All of this is leading to some audit departments being able to add headcount. 
 
• Takeaway: Proselytize. It doesn’t hurt to market yourself to let management know what you do and what you are capable of doing—in non-audit ways, as in data analytics and mining. Several members of the group have done work for business units with the understanding that it is not an audit and won’t be an audit unless something egregious is discovered. Communication is best, and letting internal “clients” know how you can help the business, and in some cases strategy, can do wonders for budgets and headcount.
 
Diversity. Like the rest of the world, internal audit departments are trying to figure out the best path to creating a diverse environment. As members discussed, it’s a very complicated issue, involving not only race and gender but just as importantly, age. All the challenges can run up against one another as managers try to solve one or the other. 
A challenge many IAs face is recruitment. One member suggested the idea of word-of-mouth recruitment vs. just sending out a job description to a website (which, while generating lots of resumes, rarely produces the right candidate). IA “has to be proactive about recruiting,” said the member. “Ask colleagues who they know vs. just going on fishing expeditions.”
 
• Takeaway: Seek and you shall find. There is a lot of competition out there for creating a diverse department. Instead of just posting job descriptions, IAs must be more proactive in recruitment. They also have to be sensitive to each part of the diversity strategy and how tweaking one part may create problems with another.  
 
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, June 11, 2018
Fitch Ratings says there are noticeable differences that negate recession red flags.
 
“If we're in the sixth inning, we have our sluggers coming to bat.” That was Warren Buffet this week telling CNBC that there was “no question” that the economy is strong. It’s a good thing because there are indicators out there that suggest the economy is at a tipping point. According to some, the expansion that started in 2009 is way past its sell-by date. That is, since expansions usually last around five years or so, this latest one is on borrowed time. 
 
And according to Fitch Ratings, the credit cycle is elderly and default rates are low, which in the past meant that a recession was around the corner. On top of this China is slowing. However, Fitch says, there are “notable differences” this time around and in any case, companies could handle whatever comes.
 
One reason is that the US Federal Reserve loan officer survey continues to show easing standards for large and middle-market firms, whereas credit was starting to tighten in the later stages of the previous two credit cycles. In addition, the US high-yield distressed yield ratio stands today at just over 4% and has remained below 10% since the fourth-quarter 2016. Read more here.
 
Also this week, May was a banner month for stock repurchases, driven in large part by one company: Apple. According to Birinyi Associates, there were 107 new repurchase authorizations made in May for a total of $176.8 billion. The firm said “a significant portion” of May’s total value was Apple’s announcement of $100 billion in planned repurchases. “This announcement was the single largest share repurchase authorization ever,” Birinyi said in its June 4 bulletin. 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 aorwick, June 07, 2018
Here’s some of what you missed at the ATLG 2018 H1 Meeting in Summit, N.J. 
 
Move Over, Libor. On April 3, the Federal Reserve Bank of New York began publishing the new Secured Overnight Financing Rate (SOFR), and in early May the CME launched SOFR futures. Now SOFR’s fate depends largely on the market’s willingness to accept the Libor substitute. 
 
• Takeaway: Futures indicate SOFR’s future. Liquidity in the CME’s one-month and three-month SOFR futures has been light, but watch for growth. Trading in them will enable the development of curves to price other derivatives.
 
• Takeaway: Corporate impact is now. Half of ATLG survey respondents said their companies have Libor-based debt and derivatives extending past 2021. That’s the target date for SOFR adoption, and pricing Libor-based products may become difficult. 
 
The New Tax Puzzle. Pushed by the need for tax revenue, congressional Republicans’ new tax law retains elements of worldwide taxation, although it does eliminate the “stranded cash” bugaboo. Section 956, which treats loans by foreign affiliates back to the US parent as taxable distributions unless strict conditions are met, was almost repealed but mysteriously reappeared in the bill at the eleventh hour, thus narrowing the exemption for returning overseas earnings tax-free. And the law’s new GILTI and BEAT provisions guaranty the US will collect taxes on at least some non-US earnings. The trick for corporate tax and treasury departments will be juggling those components. 
 
KPMG recommends treasury top three issues treasury should discuss with tax colleagues:
 
• To what extent is the company legally restrained or facing withholding taxes or other financial penalties in terms of bringing cash back, which costs can be controlled, and are there offsetting foreign tax credits?
 
• In which currencies is previously taxed income (PTI) denominated, and how much will it cost at any given time to bring it back in dollars?
 
• Is this the correct time to repatriate cash given specific FX rates, and is it better to monitor the currency markets opportunistically?
 
Bring It On, Bloomberg. Bloomberg terminals may be pervasive, but many ATLG members haven’t been using them to their full potential. Executives from meeting sponsor Bloomberg provided a high-level overview of the latest tools. New currency valuation tools can reveal counterintuitive intelligence—China’s renminbi is now overvalued from a historical perspective. Treasury executives can query their companies’ bank group in the traditional way to generate a median FX forecast, then gauge its likelihood by doing scenario analysis using Bloomberg’s FX Probability Calculator. 
 
• Takeaway: The euro’s many faces. It is important for corporate treasury to recognize that behind the front-page number there are multiple prices and levels of competitiveness that impact where to build a factory and other strategic decisions. 

Following are NeuGroup Founder Joseph Neu's key takeaways from the meeting:
 
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 aorwick, June 06, 2018
With big data, treasurers can analyze a larger data-set across a larger number of years, giving a better view of cyclical trends and other important analysis. NeuGroup explores how you can integrate AI and big data to meet the unique needs of your treasury department.  
 
Connect with experts from C2FO and Microsoft as they review applications for treasury management leaders looking to take AI and big data to the next level – smartly, efficiently and safely.
 
AI Eats Big Data for Breakfast
June 27, 12 p.m. ET 
 
During this live event, you will:
 
• Understand how to simplify AI to create a compelling repository of information that can be used across your entire business
• Learn how to incorporate AI into existing processes to increase efficiency and complement your workforce; not replace it with a machine
• Discover what you should be focused on NOW to prepare for the wave of big data and AI
 
MEET THE EXPERTS 
 
Jordan Novak
Managing Director 
C2FO
 
John Young
Chief Data Officer
C2FO
 
Guru Kirthigavasan
Engineering Program Manager
Microsoft
 
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, June 04, 2018
ICE says it’s not giving up on Libor; also, insurance companies’ MMF options to shrink.
 
The London interbank offered rate, or Libor, has had a rough few years. Following news that banks were manipulating the benchmark submitting dodgy, non-market-based rates, trust in its validity dropped significantly. The Fed and others have entered to offer new benchmarks, most notably the recent introduction of the Secured Overnight Financing Rate.
 
But not so fast, says the IntercontinentalExchange (ICE), which in 2014 took over management of the rate from the British Bankers Association. Since its takeover ICE has sought to “strengthen confidence in Libor by developing a more thorough approach for bank submissions,” according to contributor John Hintze. “The benchmark still relies on submissions by a limited number of global banks, but they now follow a ‘waterfall’ methodology starting with submissions based on actual transactions, then transaction-based data, followed by the banks’ expert judgment. Will it stay relevant? Time will tell. Read more here.
 
Also this week, there’s an approaching deadline after which some prime institutional money market funds will not be able to used by insurance companies. Why? The funds invest in assets that don’t have the “full faith and credit” moniker of the US government. And this is against National Association of Insurance Commissioner rules. Companies have until July 1, 2018 to switch; if they decide stay in them they will have to pay risk-based capital charge. 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, June 01, 2018
The June issue of iTreasurer offers a glimpse of the rapid digital transformation taking place in Asia and China in particular. We look at a new trend in pensions, plans to overhaul the CFTC and why banks need to make their cash management system more user-friendly. Also discussed are the new Libor replacement, SOFR, and how one company is augmenting ACH payments with technology and regional regulatory knowledge.
 
Transformation in Asia arguably is happening at a pace that few other places experience. Thus, it is a great place for companies seeking to keep pace with change globally to witness how and how fast things can move. "The digitalization of day-today human experiences taking place in China shows how the pace is advancing faster than most large corporates are used to and up their games to stay in business in China and, soon, almost anywhere," writes Joseph Neu in "Asia Transformation Drivers and Five Ideas for Regional Finance Leadership," on page 1.
 
Finance and treasury teams operating in the region need to help the businesses they support make this transition, which is often called a digital transformation. What many are doing is proactively asking to take the lead on global initiatives and make Asia the proof of concept for them.
 
In “Anticipated Exposures,” iTreasurer takes a brief look at the latest trend in pensions, a targeted approach known as defined ambition. These plans promise to be more sustainable than DB plans and offer better returns than 401(k)s. Also, money market fund investors are still waiting to hear what will become of reverse distribution for European MMFs, and we take a quick look at Ernst & Young’s view of the new tax reform.
 
On page 6, iTreasurer discusses recent comments from Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, who is looking to bring more order to his agency. Gone are the days when the commission operated in calamity mode, popping out regulations like donut holes. Now he wants rule-making to get back to exploring rules’ impact and making rules easier to follow.
 
In this month’s peer group summary, we take a peek at what was discussed at NeuGroup Treasurers’ Group of Thirty (T30) meeting in March. On the agenda were a look at how tax reform’s lower rates, while attractive, add new complexities; a discussion of how blockchain is here to stay; and the unfolding possibilities of robotic process automation.
 
On page 11, iTreasurer discusses a new report from consultancy Aite that suggests banks need to upgrade to more user-friendly cash management systems. One reason is that cash management systems have been so overly customized by banks that they cannot be easily upgraded and thus haven’t been able to keep up with the tech advances.
 
In "Switch from Libor to SOFR Will Be Challenging" on page 12-13, we discuss the implications of moving from Libor to the new SOFR, or Secured Overnight Financing Rate. The switch should provide major benefits to corporates’ cash-management and funding efforts. But with the transition now taking its first steps, they should carefully monitor its progress.
 
Finally on page 14-15, we take a look at how payments firm Earthport uses ACH and a wide assortment of tools to make global payments move faster and more efficiently.
 
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
GDPR, iTreasurer
By thoward, May 29, 2018
GDPR is a new law that has companies around the world redoing their privacy policies among other data-related things.
 
Friday, May 25 was the first day of Europe’s General Data Protection Regulation. As many of you know, GDPR is the new patron saint of personal data in Europe and, as it turns out, the world. Have you noticed the umpteen “Updates to Our Privacy Policy” emails pouring into your inbox? About the only company not updating its privacy policy is Wikileaks (though ironically they do have a policy of sorts).
 
GDPR, agreed upon by the European Parliament and Council in April 2016, replaces an older version of the regs (Data Protection Directive 95/46/ec). It went live at midnight in Europe and so far it has lived up to expectations that it would become the “primary law regulating how companies protect EU citizens’ personal data.” However, like a contagion, it has spread all over the world. 
 
And companies are taking it very seriously. Several US media companies blocked EU users from their sites rather than run the risk of fines. And the rules will have massive implications for social media companies like Facebook and Google. 
 
One member of NeuGroup’s Internal Auditors’ Peer Group said last fall that his company – a tech giant with lots of data amassed over several decades – was dedicating as much money to GDPR as it was to innovation. In fact, if it seemed to the company’s CEO the effort was lacking, he would shut down innovation initiatives and dedicate all resources to GDPR. This company and others are serious about the new rules because the fines for noncompliance are serious. A company may be fined up to 20 million euros (US$23 million) or 4% of its revenue from the prior year, whichever is greater. 
 
Compliance might also prove pricey. Global US companies could struggle to find cost-effective and efficient ways to meet the new requirements; this would have big impact on how they do business in Europe, particularly as it relates to separating Europeans’ personal data from the rest of the world. According to Sinan Aral, management professor at MIT, it might even be impossible to comply. “What I’m hearing from inside … companies is that it is not efficient and in fact potentially not even possible to segregate consumers that are in Europe or sometimes in Europe, and then consumers that are outside of Europe,” he said in an interview with Knowledge@Wharton.
 
And so if you have questions as to whether GDPR applies to your company, the answer is likely yes. Therefore, "never send to know for whom the (GDPR) bell tolls; it tolls for thee."
 
In other news, it’s been a couple weeks since the new Libor replacement has been in place. At the end of their second week of trading, the CME Group’s new SOFR futures contracts had attracted an impressive array of market makers to support the derivatives. However, so far market participants’ interest in the contracts has been light. Read more here.
 
Also, tax experts are slowly getting their heads around the tax rules signed into law at the end of last year. The upshot? It ain’t pretty and warrants caution. That was Ernst & Young’s assessment of the the US tax overhaul. In a rundown of the reform given to members of NeuGroup’s Global Cash and Banking Group, E&Y said that the speed of the rules writing resulted in numerous errors and murky language. Republicans have tried to put together a technical corrections bill to deal with some of those errors, but Democrats—remembering how Republicans ignored a similar effort to tighten up the Affordable Care Act—have been uncooperative so far. 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 jneu, May 25, 2018
“Big A” analysts in treasury are hoping to free up resources from stress testing for regulatory purposes to focus also on banking business challenges like modelling depositor behavior. Modelling deposits and more will now go beyond betas – or the sensitivity to Fed rate changes—to look at myriad factors. It’s time for new playbooks!   
 
Members of the Bank Treasurers’ Peer Group met on May 9-11 in New York to discuss how bank regulatory reform is progressing, share experience with the latest rounds of stress testing and consider how reg reform will change them. They also considered the rate outlook and how to position themselves in terms of asset sensitivity and, most importantly, how to model deposits—looking beyond betas, or the sensitivity to Fed rate moves, to myriad factors. This represents the current focal point of shifting “big A” analytical resources, typically found in treasury, from focusing solely on stress testing, expected to become less onerous with new legislation and Trump prudential regulator appointments, to also look at banking business challenges like deposit acquisition and runoff mitigation.
 
Among the key takeaways: 
 
• Crapo bill expected to pass before Memorial Day. The Crapo bill, among other things, will move the line for SIFIs from $50B in total assets to $250B with an 18-month phaseout for banks between $100B and $250B. According to our opening dinner speaker, the legislation could have gone further, but the significance of moving the line is important, which was corroborated in our session the next day. 
 
This takeaway proved true, with Congress passing the bill Tuesday. Per the New York Times: (Congress Approves First Big Dodd-Frank Rollback): 
 
“A decade after the global financial crisis tipped the United States into a recession, Congress agreed on Tuesday to free thousands of small and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to prevent another meltdown.
 
In a rare demonstration of bipartisanship, the House voted 258-159 to approve a regulatory rollback that passed the Senate earlier this year, handing a significant victory to President Trump, who has promised to “do a big number on Dodd-Frank.”
 
Still, the end of stress testing is not at hand… 
 
• Don’t plan on shelving CCAR or DFAST next year. While some members below the $50B or $100B thresholds would love to shelve full stress-testing submissions as soon as next year, it is probably still wishful thinking to expect requirements to fall off so fast—but it is still possible. Stress testing will continue without regulatory fiat—this remains the consensus—but members want to be able to scale back documentation, model validation requirements and governance overkill. For example, what if models could be validated on a multiyear staggered basis? Also, could stress tests keep to the Fed variables or be even further refined to focus on the most useful in consideration of the expense and effectiveness of the others?

What will banks do as a result of less onerous stress testing?
 
• Opportunity to deploy analytical resources honed by stress testing. New deposit and other banking playbooks will be written using “big A” analytical capabilities typically found in treasury that have been honed by stress testing and the resources built up for them. Deposit modelling is just one element of this. What factors are driving deposit retention and acquisition apart from rate sensitivity, including marketing spend and customer persona?  Also, what might banks offer depositors to reduce runoff as rates rise? This is all a part of a deployment of predictive analytics to drive better decisions. 
 
• Deal with new competition. It is also timely to help community and regional banks better compete with larger banks, direct/internet banks and fintechs looking to home in on their business. Like everyone, banks need to make more time for digital transformation.
 
It’s the beginning of a new era for banks. 

Following are NeuGroup Founder Joseph Neu's key takeaways from the meeting:
 
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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