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

Blog entry
By amichels, September 21, 2018
 
Trade War Politics, to Hedge or Not, the Forwards vs Options Conundrum, and FASB’s Commodity Hedge Accounting Shortfalls
 
Thank you to the members and guests who attended the Foreign Exchange Managers’ Peer Group meeting this month hosted by Medtronic in Minneapolis and sponsored by Standard Chartered. Here’s a brief rundown of some of the meeting’s key takeaways. 
 
China Trade War: Just Politics? The Trump Administration’s trade war rhetoric appears to be heating up, but Standard Chartered assured attendees that much of it is politics. The bank’s expert on China’s renminbi (RMB) said that optimism for a near term solution is low, given China wants to become a technology powerhouse while US hawks balk at that prospect and decry the US’s China trade deficit.
 
Takeaway: Common sense should prevail. After midterm elections the cost of imposing tariffs will become clearer and the political calculation should change. In addition, corporate America is lobbying against tariffs behind closed doors. 
 
Takeaway: Too much to lose. China has signaled its intent to stabilize the RMB and make it an international currency, in part by increasing liquidity in more sophisticated financial instruments. China has no interest seeing the RMB weaken further in the near-term. 
 
To Hedge or Not to Hedge. A Standard Chartered banker explained how analyzing hedging needs on a portfolio basis can provide a bigger bang for the buck. 
 
Takeaway: More risk reduction for less. Considering all exposures holistically gives a more realistic understanding of risk. By calculating value-at-risk (VaR) this way, overall risk is 40% lower than calculating it for each currency (and a lighter load for treasury). Adding a small number of additional currencies can reduce risk by an additional 40% without increasing cost. 
 
Forwards vs Options: The Ongoing Conundrum. In a roundtable discussion, members presented a strong argument for focusing on forwards, given options’ premium cost and the operational challenges. Others, however, noted that technology can reduce the operational hurdles, and zero-cost collars eliminate premiums. 
 
• Takeaway: Options, with a view. Participants concluded that on the relatively rare occasions they’ve used options rather than forwards, it was with a view to the currency moving in a certain direction. 
 
•Takeaway: Mixing options lowers vol. A Standard Chartered banker said recent research found that layering forwards and options further reduces volatility than using just forwards. 
 
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Blog entry
By mkmoore, September 21, 2018

Chris Riordan joins the NeuGroup to lead ongoing and new partnership development.

Joining NeuGroup this summer, Mr. Riordan heads all sales efforts for the company. NeuGroup has a long history of partnerships with banks, technology and consulting firms that underwrite the 38+ face-to-face peer meetings the NeuGroup hosts annually. Mr. Riordan will insure that every partnership meets our sponsors’ strategic and operational goals for live and digital events, custom content and research.
 
Mr. Riordan will also lead member development for the 20 peer groups in the NeuGroup Network, where he will actively seek recommendations from current members and seek out new members who are ready to connect and exchange with their new group.
“During my 25-year career, I have worked with a wide range of companies to design and develop integrated event, content and research partnerships. I look forward to building on the NeuGroup’s current partnerships and developing new ones,” said Mr. Riordan. 
 
Mr. Riordan spent seven years with Association of Financial Professionals, where he developed and implemented a global sales strategy, building enduring partnerships with North American, European and Asian financial institutions, asset managers and technology companies. His work experience spans both established and emerging brands, including Forbes, The Economist Group and Smart Brief.
 
Mr. Riordan has a BA in history from Washington and Jefferson College and lives in the Washington DC area with his wife and two college-aged children.
 
 
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Blog entry
By amichels, September 19, 2018
NOTE: On September 26, 2018, at NeuGroup’s Global Cash and Banking Group’s 2018 H2 meeting at Bloomberg headquarters in New York, Jim Aschmeyer, Coca-Cola’s director of international treasury, will speak about the KYC transformation project he’s leading. He’ll be joined by representatives of Bloomberg and Citibank, co-sponsors of the meeting. They’ll explain their vision for reducing KYC pain for corporates and banks by using Bloomberg Entity Exchange, a platform for sharing data. 
 
Coca-Cola’s director of international treasury, Jim Aschmeyer, is on a mission. He wants to transform the long-standing and increasingly painful approach to complying with anti-money laundering (AML) and know your customer (KYC) regulations. “AML/KYC is a process that clearly has no winners,” said Mr. Aschmeyer. “It’s as painful and inefficient for the banks as it is for the corporates—the classic death by a thousand paper cuts for all involved.”
 
For corporates, the pain includes repeated, often redundant, requests by banks for information and documentation, as well as difficulty coordinating across regions and time zones. Banks, meanwhile, have difficulty extracting data from emails or hard copy documents. And all parties suffer from the lack of standardization across banks and the huge investment of time KYC takes, with little or no value added. 
 
Today, though, Mr. Aschmeyer has guarded optimism about solving these problems, thanks to a demo the Bloomberg Entity Exchange team did for him and some other corporates in Atlanta in late 2017.  “As the demo proceeded, I kept thinking to myself that this could be the spark for change we’ve been looking for,” he said.
 
Entity Exchange is a web-based, globally-scaled, centralized, secure platform that enables trading counterparties to manage and share client data and documents. “It’s also bank agnostic and has some very useful bells and whistles,” according to Mr. Aschmeyer. He said Entity Exchange allows banks to easily locate required AML/KYC information, since all of the documents and data uploaded by corporates is classified, stored and digitized by the Bloomberg team using a tightly managed globally-standardized taxonomy.  
“Entity Exchange provides a foundation for simplification of long-standing practices that are simply unsustainable—we can start to move away from the concept of required documents to one of required data,” Mr. Aschmeyer said. “If we can do this, I believe it really opens the door of possibilities even further.” What’s more, he said, “As a global company, we don’t do a very good job of managing our KYC information internally. So this core capability alone provides us with real value.”  
 
To make his KYC vision become reality, Mr. Aschmeyer spent the past six months looking for what he calls “partners in crime.” The result is a team consisting of Citibank, Bloomberg, Coke and four other large Citi customers—Merck, UPS, Cargill and Procter & Gamble. He said the initial roundtable meeting hosted at Citi’s headquarters in New York in late August allowed the team to meet in person for the first time, to ensure full alignment and understanding around the many AML/KYC pain points, and to agree on the next steps for what is being called the KYC Transformation Project.
 
“This team includes the largest global corporate bank with Citi, a leading global information technology provider with Bloomberg and five highly energized MNCs ready to make a difference,” Mr. Aschmeyer said. “It’s a lean, highly focused team.”
For the project to truly succeed, Mr. Aschmeyer thinks all of Coke’s depository banks—not just Citi—would need to be on Entity Exchange. He’s confident that this will happen.  “The transformation snowball is already starting to roll.  I’ve had discussions with most of our other key banking partners and without exception they have all been pushing to join the project.” Bloomberg says eight of the top 10 global banks are on Entity Exchange. 
 
As for banks that may prefer to push their own solutions for KYC, Mr. Aschmeyer says any solution that will bring about true change must be globally scalable on day one and be bank agnostic. “We already have enough issues around managing bank portals. There has to be a single global point of entry for information.  A bank-specific solution simply does not get me to where I need to be.”   
Mr. Aschmeyer, who has been at Coke since 1995, says his passion and effort for the KYC project is driven by his own company’s changing culture, which is now driven by a focus on what matters most. “To do this,” says Mr. Aschmeyer, “we need to leverage technology and our critical partners when we see opportunities for meaningful, positive transformation.”
 
For more on KYC, visit iTreasurer.com
 
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Blog entry
By thoward, September 18, 2018
 
 
NeuGroup’s Corporate ERM Group will come together October 10-11, 2018 to discuss board interaction and linking operational risk management processes to an ERM process.
 
One of the things that helps boost ERM’s position as the arbiter of the company’s risk is the involvement and support of the company’s board of directors. But how can they garner that support? At NeuGroup’s Corporate ERM Group, which will meet at St. John’s University’s Tobin School of business in Manhattan on October 10-11, 2018, members will mull the answers to these questions. They will also deliberate over the best way to apply ERM tools to strategic decision-making, as well as how to measure the ERM program’s effectiveness. 
 
More and more boards of directors are taking an active role in ERM oversight. This has been particularly true lately as the number of risks that companies face has increased dramatically. Corporations are more global today, and they are also part of culture that often puts them in a precarious position of serving customers while keeping an eye on environmental and social footprints, as well as competition from disrupters. The problem is that these risks can often be abstract concepts, so effectively articulating them to management and others in the organization can be challenging. Meeting attendees will discuss trends and strategies they’re seeing as they go about creating the best risk plan.
 
Another question that will be analyzed is how ERM links detailed operational risk management processes to an ERM process. Members will discuss how they identify and manage operational risks, using workshops, surveys, and risk registers. 
 
Members will also get a chance to participate in Center for Excellence in ERM Summit at St. John's University on Oct 11. The summit will cover such topics as machine learning and ERM, country financial risk scorecards and business model innovation and risk.
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 20 invitation-only peer groups, NeuGroup facilitates over 38 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 450 members from across treasury and finance functions, covering multiple industries and global regions. Visit Neugroup.com for more information about peer groups and iTreasurer.com for content and news.
 
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Blog entry
By mkmoore, September 17, 2018

Members of NeuGroup’s Global Cash and Banking Group to focus on Know Your Customer initiatives at their next meeting on September 26 at Bloomberg in New York City.

Ongoing KYC requirements are causing some pain for those treasury professionals responsible for bank account management, so GCBG members decided to tackle the issue with a full day of presentations and discussions. Members will be the first to hear about an initiative started by Citibank and Bloomberg Entity Exchange, who teamed up with five large MNCs to eliminate KYC friction using technology and digitization. This session will be led by a GCBG member who is also part of the initiative.

Other sessions include a demo of the Bloomberg Entity Exchange, which supports data digitalization to process corporate documents and smooth out the KYC process. Citibank will then take the stage to showcase its digital onboarding for KYC requirements and how it is on-boarding customers faster.

Members will wrap things up with a discussion of the remaining roadblocks on the developer side, what hurdles they see in making their KYC processes more digital and how to avoid falling into the eBam black hole.

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Blog entry
By thoward, September 14, 2018
In the latest issue of iTreasurer we discuss several trends that have been percolating throughout the year so far, and which also promise to continue to be top of mind heading into the end of the year.
 
On page 1 we take a look at the perennial treasury challenge of managing and, more importantly, keeping talent. A 2018 first-half NeuGroup cross-peer group poll shows the topic has moved up to No. 5 in the Treasurer Top Projects & Priorities, bumping FX management/hedging to No. 6. Indeed, talent remains more important to treasurers than a variety of important issues, including M&A and divestitures, supply chain, strategic planning and cybersecurity, among many other topics. Accordingly, managing this key resource is critical, particularly as the unemployment rate creeps lower.
 
In our “Anticipated Exposures” section on pages 4-5, we discuss companies’ concerns about being ready when new lease-accounting standards go live at the start of 2019. Also, corporate debt rose to a record 45.5% of US gross domestic product in Q1 of 2018. Finally, will US tax reform’s new corporate rate reduce the likelihood that US companies choose inversions to countries with lower rates? And should companies reconsider their cross-border configurations—especially with countries like Canada?
 
On page 6, in “Piloting Pension Moves as Tax Rates Fall, Interest Rates Rise,” we examine Raytheon’s recent announcement on tax-deductible contributions to defined benefit plans. The defense contractor said it would make a $1.25 billion pension contribution by Sept. 15. Companies like Raytheon on calendar fiscal years have until that date to make the contributions before the deduction on the contribution falls to 21%, the new corporate tax rate.
 
This month’s peer group meeting summary features NeuGroup’s Bank Treasurers’ Peer Group. At its first-half meeting, members discussed bank regulatory reform, shared their experiences with the latest rounds of stress testing and considered how regulatory reform will affect them. Members also mulled the rate outlook and how to adjust asset sensitivity and, perhaps most importantly, how to model deposits—looking beyond betas, or the sensitivity to Fed rate moves, to myriad other factors. This all relates to shifting analytical resources from focusing solely on stress testing to looking at banking business challenges like deposit acquisition and runoffs.
 
On pages 11-14, we talk to HSBC about its new global strategy, which has seen heavy investment in technology and an engagement to open architecture, or open banking, to help its clients with digital transformation. Treasurers at multinational corporations face immense pressure to make better use of emerging digital technologies—both to increase efficiency in treasury’s key areas of responsibility and to help the larger company meet its strategic objectives. And this overarching pressure to automate and embrace transformation has put additional focus on what is perhaps the single most important relationship treasury has outside the company—with its banks.
 
Finally on page 15, we discuss how prenegotiated bankruptcies make filing easier, which may explain the rise in Chapter 11 filings.
 
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Blog entry
By afriberg, September 13, 2018
 
Anne Friberg, Senior Director of Knowledge Exchange at NeuGroup, leads panels featuring several peer group members.
 
I’m delighted that I will again be chairing part of “The Treasurer: Agent of Change” stream (stream 4) at the upcoming EuroFinance in Geneva, International Treasury Management conference at the end of September.
 
On the afternoon of September 26, when conference goers have just fueled up in the refreshment break, we’ll tackle “Working capital and cash optimization across the business.” This session is designed to look at ways to unlock working capital from supply chains – to the tune of some $6 trillion in US and European companies alone, according to The Hackett Group! By leveraging data and analytics to understand how cash is deployed in an organization, treasury can work to release it to improve balance sheets, reduce cost of goods sold and enhance business agility. 
 
After that, I’ll moderate a panel that includes two fellow Swedes, including esteemed NeuGroup member, Johan Nystedt, Treasurer of Conagra Brands, and Ericsson’s Magnus Attoff, Head of Financial Risk Management & Internal Bank. Rounding out the panel is Dr. Michael Reuter, Head of Corporate Treasury, Henkel AG. The topic of this panel is “Total risk management” or enterprise risk management (ERM) and will focus on how treasurers can contribute to the management of risks that go beyond their traditional remit of financial risks. We’ll discuss the top risks facing these three companies, their nature and velocity as well as their potential impact and of course how they are mitigated. Do you know what your greatest risks are and how fast they are coming toward you?
 
Join me in Geneva on September 26 at 4pm! I hope to see you there.
For more information on the conference, including a discount code, click here
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Blog entry
By mkmoore, September 11, 2018
HSBC has a new global strategy, is investing heavily in technology and is embracing open architecture to help its clients with digital transformation.
 
It is hard out there in treasury land. Treasurers are facing loads of pressure to jump into new digital technologies. There is no denying the mandate to increase efficiency in treasury’s key areas of responsibility and to help the company as a whole meet its strategic objectives. This overarching pressure to automate and embrace transformation has put a spotlight on what is arguably the single most important relationship treasury has outside the company—with its banks.
 
HSBC is stepping up to be the bank of the future by investing heavily in technology and partnering with fintechs that can aid its effort to make banking faster and easier. To put weight behind that claim, HSBC CEO John Flint announced the bank plans to invest $15 billion–$17 billion in technology as part of its growth.
 
What to know how they are doing it? iTreasurer sat down with key players at HSBC to outline how the bank is creating efficiencies with its open-architecture banking system, including a client-centric approach that promises frictionless banking in a digital world.
 
 
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Blog entry
By amichels, September 10, 2018

NOTE: James Walters, Managing Director, Life Sciences & Chemical Group, Aon Risk Solutions will lead a session called “Thinking Strategically About Insurance, Risk Retention and Alternative Risk Finance with Universal and Sector-Specific Risk Types,” at the Life Sciences Treasurers’ Peer Group meeting hosted by Gilead Sciences and sponsored by Wells Fargo on September 25th in Foster City, Calif.

A growing number of US-based multinational corporations are trying to restructure their insurance coverage so that it better reflects the risks they face—and to lower costs. One part of this push for more strategic insurance has corporates and their insurance brokers pushing insurers to offer multiyear coverage for multiple risks under one very large policy, with one deductible.

Here’s how the treasurer of a mega-cap consumer goods company that has a captive insurer explained what he’s looking for: “Rather than buy individual lines of coverage, I’m just saying give me a portfolio of coverage. Rather than feel like I need to have $500 million of excess coverage in property, give me $500 million of excess coverage, but it covers all my risks. It’s just a more efficient structure.”

It’s more efficient than paying premiums on, say, four $100 million policies for property, cyber risk, D&O and ERISA every year—when there’s very low probability a company will need to make claims on all of them in one year. What’s more, if the business has a loss of $300 million on just one of those risks, it’s on the hook for $200 million under a traditional insurance program buying structure. By contrast, if the company purchases a $400 million blended program, a loss of $300 million on any of the four insured risks is covered because the company has $400 million of blended total coverage for any of the individual risks.

Also, with a blended, integrated or multiline insurance policy, corporates would normally assume a higher deductible and therefore pay significantly lower premiums---a key driver of this concept. The treasurer of the consumer goods company said he would obviously prefer his captive insurance company keep any returns on its investments (when losses are less than expected) and dividend them to the parent company rather than using them to pay premiums to a third-party insurance company on policies where claims are rare.

Large, blended programs are of particular interest to companies that are unable to adequately insure specific exposures because of the size of the risks involved. For example, some big pharma companies hope a blended program that covers losses in excess of a large amount the company would cover itself might offer insurers a way to accept the risks of providing product coverage. And size matters. Because while blended programs do exist, insurers so far are unwilling to structure them at the size, scale and capacity mega-cap companies are clamoring for today.   

 “It sounds really easy to do,” said Eric Andersen, co-president of Aon, an insurance broker that is trying to help companies, including pharmaceutical manufacturers, to structure and buy blended policies from insurers. “It is not really easy to execute.”

One problem is convincing insurance carriers who are used to selling individual lines of coverage separately to break out of their silos. “All of a sudden if you start blending the coverages you’re manuscripting language and you don’t have as much history and insight into what the numbers should be: how you price it, how do you adjudicate the claim? It’s just easier to do it one product at a time as opposed to multiple products in one policy,” Mr. Andersen said.

Another problem, experts say, is the experience of insurers that have underwritten blended policies in the past and suffered large losses from product liability and other catastrophic events, including the financial crisis. Part of the challenge, therefore, is to convince insurers—using better data analysis to predict losses—that they will ultimately benefit by including in one policy bigger risks, like product liability for pharmaceuticals, along with lesser risks like property.

Despite the impediments, NeuGroup members are not giving up on what is proving to be a bigger challenge than some might have imagined. The hope is that the insurers will see the benefit for themselves in offering products the market clearly wants.

“There’s a lot of work that’s going [on] right now to get them to come around and try it again,” Mr. Andersen says. “Right now, they’re not that interested.”

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Blog entry
By mkmoore, September 10, 2018

NeuGroup and Bank of the West collaborate on inaugural meeting of the Tech20 Treasurers’ Peer Group High-Growth Edition. 

Attendees at the first meeting of the Tech20 HG—a new peer group for treasurers at fast-growing tech companies meeting at ServiceNow in Silicon Valley on October 11—will discuss the unique financial challenges and opportunities facing the tech sector. To open the meeting, sponsor Bank of the West will look at what’s driving the bank’s interaction with treasurers in high-growth tech as well as key trends among its clients. 

 
While on the topic of banking, the group will get a lesson in relationship management. The banking relationships that sustain a startup may not suffice as the company expands into a large multinational. How should you manage the migration, and how do banks view the relationship as you mature and reach milestones? Learn how to set up banking infrastructure to scale and take advantage of open banking and fintech opportunities. 
 
Also on tap is a session about keeping pace with the business while solidifying treasury’s strategic say. Today’s treasurers should practice pulling out of their comfort zones in the tactical treasury domain and positioning themselves as strategic partners. Three members will consider how to set up a cash and risk culture incenting forecasting by the business and proper exposure identification, plus ways to supplement the human element with automation, smart systems, data extraction and reporting.  
 
Also on the agenda: a briefing on the FX environment and an update on US tax reform. 
 
For more than two decades, NeuGroup has led 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 where members connect, exchange knowledge and review distilled insights. 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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