NeuGroup thanks all the attendees of the T30 LC 2017 H2 Meeting in New York and the team from Société Générale for hosting and sponsoring.
Here are some highlights from the event, held September 27-28:
Cyber Insurance, Anyone? Everyone?
Attendees had a lively discussion about buying insurance to cover losses from cyber attacks like the one that slashed hundreds of millions of dollars from quarterly profit at one member company. Exploring the cyber insurance market is one of this business’s top priorities, and several members favor making this an agenda item at the next meeting. Part of that session may include bringing in someone from Marsh & McLennan, which provides cyber security insurance to several members. One participant discussed the resistance of his IT department to providing information to a potential carrier. Another said the initial application for cyber coverage was easy but that in the second year the insurer asked a lot of specific questions.
Inside a Treasury Makeover.
One member at a beauty products company tackled the topic of treasury transformation by describing how his company addressed a fragmented and outdated treasury system infrastructure. Goals included increasing the reliability and accuracy of cashflow forecasting, boosting the percentage of cash under control and achieving further optimization of working capital. Notably, treasury chose to use third parties to oversee the transformation and help navigate the vendors and do an RFP, starting with Hanse Orga and then moving to e5 when the IT department wanted a say in the SaaS system.
The biggest challenge involved resistance put up by business units to the changes treasury wanted to implement. Treasury ended up having to use “force” by establishing metrics to get affiliates on board. Another pain point involved finding that SAP is more fragile than treasury thought, leading to the conclusion the company should have done more testing before it went live with the new system.
Supply Chain Financing: Bank or Bank Agnostic?
The projects and priorities of one packaged foods company include rolling out supply chain management across markets. That sparked an interesting discussion about the pros and cons of using banks versus bank-agnostic providers when companies want to extend the terms of their accounts payable. While this department only uses bank-agnostic vendors, another member uses a bank for the service because it offers the best pricing and outreach for the company; the bank in question has particularly good reach with most if not all of the company’s suppliers. Another member said, “making the bank work for us” is another incentive. Members also discussed whether making financing for vendors mandatory is worth the cost in ill will. “Your suppliers will hate you,” one said.
Tax Reform: The ‘Unified Framework.’
Société Générale updated the group on the “Unified Framework” for tax reform unveiled the day before by the Trump administration and key congressional committees. Highlights include a reduction in the corporate rate to 20%, a one-time repatriation of foreign profits held offshore at rates that were not specified and limitations on net interest expense deductions (again, no details). Asked about the potential use of repatriated cash, one member said it all depends on the interest expense deductibility dilemma. Many obstacles stand in the way of passage of a bill, including how tax cuts will be funded given limitations on deficit growth as Republicans seek reform under a budget process called reconciliation that requires deficit neutrality outside of a 10-year window. As one member observed, “There’s a lot of event risk; it’s going to be a little scary to watch.” That’s especially true for companies who will face pressure over the use of excess cash from activist investors. One member said, “We will have a tough time justifying not giving shareholders money because we are paying down debt.”
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