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

Blog entry
By aorwick, December 07, 2017
Many thanks to all the members and guest attendees of NeuGroup’s T30 2017 H2 Meeting in Toronto on November 29-30. Here are some key highlights from the meeting:
 
Banking Structure Leads Transformation Priorities. Nearly two-thirds of T30 survey respondents said they had recently completed a treasury transformation project (13%) or have one currently underway (47%), and 100% of those cited banking infrastructure and cash management as a focus, with treasury systems infrastructure close behind (78%). One member’s initiative—a recent winner of Treasury Today’s Adam Smith award—has already shrunk by half its 122 banks and more than 400 accounts.
 
Key Takeaways
• Consolidate access via the TMS instead of several portals. The member also implemented Kyriba software as its user interface, “so rather than having everyone from AR, AP, and payroll go to the bank portals to make payments or get statements, they can now go to one place to log in and do everything,” said a project manager.
• Big savings in time and money convinces the skeptics. AP embraced the project and saw the time to make payments cut in half; however, other departments, such as payroll, saw little reason to change a system that wasn’t broken and were harder to bring on board.
 
Tech Impact on Treasury: More Boon than Bust, For Now. Bob Stark, a Kyriba vice president who focuses on strategy, discussed several areas still in their infancy that will likely alter corporate treasury in a major way.  Application programming interfaces (APIs), for example, provide a framework on top of which to build applications more easily, and they’re starting to infiltrate corporate treasury, Stark said. He noted Europe’s unfolding PSD2 regulations that aim to give nonbank service providers better access to bank payment systems, providing corporates with more and speedier choices. 
 
Key Takeaways
• Prepare for disruption in US domestic payments. Faster-payment solutions ranging from Ripple’s distributed ledger solution for presumably cheaper cross-border payments to The Clearing House’s domestically focused Real-Time Payments (RTP) are on the horizon. Stark said SWIFT’s well-functioning global network may forestall its demise, while the reams of remittance information that can be attached to RTP payments—unlike what’s possible via ACH today—could significantly disrupt the US domestic payment infrastructure. 
• Robotics and AI will directly impact treasury more than cryptocurrencies. Stark dismissed bitcoin but said other crypto currencies will likely endure, facilitating payments and other financial services, perhaps behind the scene, unbeknownst to users. The big impact on treasury from robotics, already in early-stage use by companies to tackle repetitive treasury duties, will come when machine-learning software applications can adjust on their own to changing circumstances.
• Be thankful treasury groups are highly specialized. Treasury may be spared from the robotics and automation onslaught longer than departments whose functions are more repetitive, such as AP, AR and payroll. 
 
Communicate Treasury’s Relevance, or Else. One member detailed its quarterly presentation to the board’s audit committee. 
 
Key Takeaways
• Awareness at the board level is key to getting a seat at the table. The first key metric in the presentation is the company’s cash position, then its debt position, followed by FX trends and developments and FX risk mitigation actions.  A few other participants said they report quarterly to audit or finance committees, and one said he reports every quarter to the full board, often tackling strategic issues.
• But if nothing ever happens, treasury needs to remind: we’re relevant. This member’s quarterly presentation creates a rhythm and an important expectation by board members. Members somberly acknowledged that companies are doing without a traditional treasurer, and board members may downplay treasury’s importance until a crisis occurs. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By aorwick, December 06, 2017
Time is running out to prepare for MiFID II. Get the quick direction you need to modify your trading activities before the regulation takes effect on January 3, 2018. 
 
As a follow-up to our webinar on MiFID II, iTreasurer and Thomson Reuters reviewed the steps you should be taking to ensure timely compliance. Read our guide to getting ahead of the regulation, which is included in the December issue of iTreasurer
 
 
MiFID II directly impacts EU registered Investment Firms, however, it also impacts organizations outside the EU who deal with EU clients, counterparties or branches that may be EU based. Access to the right information, data and solutions will determine who gets ahead.
 
• Gain a clearer understanding of MiFID II pre- and post-trading requirements.
• Find out how your organization will be impacted by the new MiFID II rules and what changes you need to make now to your trading activities.  
• Learn how to protect your trade flows, document trade life cycles and push senior management to drive change. 
 
In Case You Missed It ...
 
Geri Westphal, NeuGroup Senior Director, sat down with the experts from Thomson Reuters to discuss how MiFID II will impact the treasury department and non-financial institutions. Watch the webinar replay to enhance your knowledge of MiFID II and begin taking proactive steps toward compliance.
 
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, November 30, 2017
People fear robots will take over the world, but in some areas, humans should gladly let them take over. For instance, take the back office, please! Since back-office processes are often dreary, repetitive and routine, ’bots are welcome to them. Unfortunately, while it’s a good idea, the promise of robotic process automation or RPA hasn’t been realized quite yet and the return on investment isn’t there yet, either.
 
And on page 1 of the December issue of iTreasurer, we delve into some of the reasons why. “RPA is so hot that people want to implement it without thinking it through,” said a member of NeuGroup’s Internal Auditors’ Peer Group at a recent meeting of the group. This member suggested that had RPA been introduced a few years ago, he could see it “really catching on.” But right now, companies have solved for the cost issue by outsourcing to lower-cost countries. “Highly educated, low-cost workers in some countries can still get these mundane financial tasks done quickly and more cheaply.”
 
In iTreasurer’s Anticipated Exposures section are discussions of talent management and the challenge of keeping star workers as well as a look at how nearly 10 years after the financial crisis, bank stress tests are still evolving. For talent, many treasuries grapple with rotations—they’re loved for the new blood they can bring, but sometimes those rotating find a more attractive stop than treasury in their rotation. One idea was to make treasury the last stop. In terms of stress tests, the Fed’s testing has weighed heavily on bank resources; for NeuGroup’s Bank Treasurers’ Peer Group (BankTPG), these tests have been onerous and as such, have been a regular topic of many BankTPG meetings since 2008.
 
Also in the December issue we take a look at one of the takeaways from NeuGroup founder Joseph Neu’s recent trip to Asia, where he helped facilitate NeuGroup’s two Asia peer groups. One takeaway was that there is a need for a more robust shared service center. This was underscored by a NeuGroup AsiaCFO member presentation that detailed a project to insource its SSC activities, including the business process outsourcing of a recent acquisition. “They found that bringing SSC activities in-house facilitated better end-to-end coordination of processes from the business end as well as finance,” Mr. Neu writes.
 
Coming MiFID II regulations is the topic of a story starting on page 7. The Markets in Financial Instruments Directive (MiFID) has been the cornerstone of the European Union financial services law since 2007. But in response to the global crisis of 2008 and a variety of G20 initiatives, MiFID now becomes MiFID II and will be applied to cover non-equity instruments to extend transparency by the introduction of new pre- and post-trade reporting requirements on trading venues.
 
Beginning on page 15, Bloomberg users describe the ways in which they employ various <GO> commands to view pricing simultaneously from a variety of banks and identify the best offers, examine the current and historical performance of investment portfolios or look up data on specific loans.
 
Finally on page 19, iTreasurer looks at how the move away from the London Interbank Offered Rate, or Libor, could create a fractured market with no consensus reference rate.
 
Enjoy.
 
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 bshegog, November 28, 2017
Thanks to all the members and guests who attended NeuGroup’s “mega cash investment summit”— the combined meeting of the Treasury Investment Mangers’ Peer Group and Treasury Investment Managers’ Peer Group 2 on November 15-16, 2017. And special thanks to J.P. Morgan Asset Management for sponsoring the meeting and hosting us on the 50th floor of the bank’s Park Avenue headquarters in New York. The views, and the discussions among members with more than half a trillion dollars in cash and investments, were eye-opening.
 
Here are some of the key themes and highlights that emerged from the meeting you missed:
 
Shorten that duration! Many members said they are shortening the duration of their fixed-income portfolio for reasons that include preparing for more Federal Reserve interest rate hikes and to build flexibility as they plan for possible tax reform. 
 
The data dilemma. During one session on dashboards, metrics and reporting, one member said, “there’s no easy solution” to getting all the data he needs into one system or data integration layer for analysis. He’s trying to build one himself. 
 
JPM’s view from the 50th floor. In addition to exchanging views with each other on topics including possible uses of repatriated cash, evaluating investment managers and credit risk, members heard professionals from J.P. Morgan Asset Management and some outside commentators discuss a range of economic, market, tax and political issues that are shaping the investment landscape as 2017 ends. 
 
Mary Callahan Erdoes, CEO of J.P. Morgan Asset and Wealth Management, told the group that all sorts of “chaos and opportunity” lies ahead for cash managers following a period where central banks around the world have made an unprecedented 700 rate cuts since the end of the financial crisis. “It’s going to be a really exciting time,” she said, as people start to pay more attention to cash management. 
 
To help navigate the next year, J.P. Morgan Asset Management Chief Global Strategist Dr. David Kelly offered his analysis, including the observations that the US economy looks like a “healthy tortoise” enjoying an “Indian summer” and that tax reform, which looks likely, will improve growth. But he noted that the GOP plan will add about $1.5 trillion to the deficit and said, “it can’t be good economics to pay for stimulus we don’t need.” Dr. Kelly recently wrote that “some fiscal stimulus could sustain strong growth for the first half of 2018 before a second-half slowdown.” 
 
General thoughts. The meeting’s first day concluded with dinner and a lively conversation about world affairs, terror threats and cybersecurity with retired US Army General Raymond Odierno, who is now a senior advisor to J.P. Morgan Chase & Co. His long list of accomplishments during a distinguished military career include overseeing the capture of Saddam Hussein while the General was commander of the 4th Infantry Division in 2003. 
 
Day two and beyond. Highlights from the meeting’s second day included sessions on credit and global fixed income opportunities as well as J.P. Morgan’s approach to customized, strategic and tactical asset allocation, stress-testing and efficient frontier analysis. The approach to constructing cash portfolios takes into account broader balance sheet constraints and puts strategic asset allocation first, bucketing second.
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By bshegog, November 28, 2017
Thanks to all the members and guests who attended NeuGroup’s 2017 H2 Corporate ERM Group meeting on November 9-10 in Cleveland, Ohio, and to Parker Hannifin for hosting as it celebrates 100 years in business. Among the takeaways: Other companies that want to last for a century need to embrace a risk-based strategy. 
 
In broad terms, this meeting further cemented the belief that full integration of strategy and risk management should be the objective for members, a point that came through in almost every discussion.  You could argue that even having two names is not helpful because it helps enforce the separation. Achieving full integration will be a journey—one that needs to have a sense of urgency.  One analogy: think of integration as a smooth waltz rather than some clunky dance. Learning the steps won’t be easy, but it will help you avoid stumbling into value-killing risk. 
 
Here are some of the key takeaways from the meeting that you missed.
 
Seize the moment. The chief risk officer from a large regional bank presented to the group. He noted his journey to chief risk officer, providing a great example of being ready to seize the moment in a crisis.  He had built a lot of skills and was able to use them when called on, helping him play a crucial role in “righting” the bank in the aftermath of the mortgaged-backed securities meltdown.  Every risk manager will run into urgent, crisis-type situations.  You need to be ready to step in.  
 
“Beware of the middle.” He noted the importance, in creating a culture that takes risk management seriously, of addressing and attacking the “middle,” or the middle management level. This serves several purposes, including influencing lower levels of the company because of a trickle-down effect. He found if he did not get the middle on board would he would lose the bottom, as the middle promoted the bottom. This involves making clear that all employees have some risk they need to manage and to confront questions like “what does this mean to me; how do I change my behavior?” 
 
View blockchain as a risk management tool instead of an emerging risk. Caitlin Long, Chairman and President of Symbiont walked members through a primer on blockchain and why it should be seen as a risk-mitigation tool and not a risk. Blockchain, she argues, has the potential to reduce certain risks through better data, better audit trails, and better security. 
 
Companies do not recover from strategic losses. Dr. Paul Walker from St. John’s University, one of the newer ERM members, walked attendees through the importance of aligning strategy and risk.  He noted that in ten years, more than 40% of companies in business today will no longer exist. Anticipating, interpreting, and reacting to signals and noise is vital, he said. The discussion was filled with examples, ideas, and tools that could be used to have a conversation with your strategy team. Members shared risk tools they’re using; these tools are important as most strategic plans fail because risk has been underestimated. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By afriberg, November 27, 2017
Thank you to the members who attended and led sessions at the EuroTPG 2017 H2 meeting in Bratislava on November 15-16. Following the roundup of projects and priorities, discussions ranged from an update on IFRS 9 hedge accounting and managing FX in M&A scenarios, both led by our sponsor Chatham Financial, to member demonstrations of dashboards and cash forecasting.
 
We also had lively interaction on the importance of investment in systems, what the optimal treasury organization should look like and dealing with sanctioned countries. Here are a few of the key takeaways from the meeting that you missed:
 
The earlier treasury gets involved in M&A transactions, the better. Cross-border M&A deals bring a whole host of risks that need to be managed by treasury through the entire process from announcement (or before) to closing and beyond, as the entity becomes fully integrated. Particular pain points for treasury include: timing; conditions for payment; guarantees; expectations for transitional services and associated agreements (TSAs and SLAs); and integration of cash management operations. Also, beware that disconnecting a business unit from its infrastructure to sell it may jeopardize its value and therefore the deal itself. 
 
The pros and cons of ways to cover sign-to-close risk. When the certainty of close is lower than senior managements’ rosy scenarios (almost always), a risk that rises further when a large player vies to take over another large player and anti-competition approval is required, it is not possible to hedge the deal without some disadvantages and added cost. FX forwards can become very large assets or liabilities over the course of their life and result in undesirable realized gain or loss if the deal does not go though, as can options, which otherwise may work better but come at a premium cost. 
 
Dashboards create visual alerts of required action. As more and more information becomes available in real- or near-real time, for example through daily bank reporting straight into ERPs, why should you stick to old-style spreadsheet-based reporting to make it actionable? Power BI, Tableau and other solutions offer opportunities to visualize the data in very customizable ways depending on who will use it and what they need for mission-critical decision making. Our presenting member demonstrated a QlikView- based “global cockpit” dashboard showing cash balances, bills to be paid, loans and credits (drawn and undrawn), and short-term investments to satisfy senior management’s queries on an overview level. 
 
Accurate cash forecasting requires discipline throughout the organization. After a large and highly levered acquisition, one member needs to keep very close tabs on cash forecasting to mobilize as much cash as possible to repay the debt over time (low or negative deposit rates emphasize this imperative further). Post-merger, there are very strong SLAs in place governing how money is to be spent and how subs request funds so as not to upset the short-term cash forecast. Same-day funding requests are not allowed, for example. Treasury closes the loop with forecasters to compare actuals with the forecast to ensure accuracy improvement over time. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By aorwick, November 17, 2017
Thank you to the members and guest attendees of NeuGroup’s ATLG 2017 H2 Meeting at Adobe Systems in San Jose, California, on November 8-9. 
 
Here are some highlights from the meeting:
 
Capital structure and the vagaries of tax reform. A member of the group quickly reviewed the key components of Republican tax reform now being mulled on Capitol Hill. It should be a net positive for his company and most other corporates, he said. However, its passage and the form it will ultimately take remain uncertain, and his technology company’s more immediate cash needs have created a quandary: should it pay today’s 35% repatriation tax, or wait for reform’s promised 12%, or take another route? The company is exploring financing alternatives with flexible repayment terms, so if reform happens that debt can be quickly paid off. Banks are now pitching bonds that are callable after one year, at a price of about five basis points on the call, and the company is also considering issuing commercial paper (CP) that could be backed up by its recently increased revolving credit facility.
 
Takeaway: Tax reform gets real. Between their meetings in the spring and November, more ATLG members—now at 53%—say they’ve quantified after-tax proceeds under scenarios with their tax departments. The biggest jump in focus was prepping various scenarios for senior management and/or the board—47% reported taking that step before the November meeting compared to 27% in the spring. 
 
Treasury’s career advancement conundrum. Corporate treasury departments today are increasingly lean and mean, staffed with highly specialized professionals. But how do their careers advance when the hierarchy within treasury is limited, and especially if HR fails to understand the necessary skills and competencies required of treasury executives? The assistant treasurer of a manufacturing group member addressed the issues of treasury organization and talent, after describing in detail the organizational tree and responsibilities of her own company’s treasury.
 
In one instance, she wanted to elevate an executive with the title of “lead” to manager. The person had been targeted as a potential treasurer at the company one day, and he wanted not only increased pay but the higher title to reflect the work he was doing and advance his career. However, HR only agreed to a 35% salary increase, arguing that he would have insufficient direct reports to justify the title, and the executive left the company. 
 
Another participant noted that HR must decide whether it wants to retain and develop talent within the organization, or expect churn in treasury staff as talent seeks opportunity elsewhere. 
 
Takeaway: Treasury is not for everybody. Providing opportunity for treasury staff to move to other parts of finance or even the business units can be a major plus. The AT said she had worked in controller, M&A and FP&A departments, arriving in treasury with broad experience. “I’m very open to moving people back and forth, and it creates advocates for treasury around the company,” she said. Another member of the group noted that Amex moved people around every few years and had record retention.
 
What are you protecting? Another member from a technology company walked the group through changes his office is making to the company’s FX hedging practices. He said the goal is to shift focus away from the management reporting impact, that is, the FX impact vs. quarterly or annual plan forecasts; since in that case the FX rate is chosen simply because it coincides with the plan forecasts. “The real issue is what is my underlying margin impact based on that yen business; not the impact relative to the forecast rate,” he said.
 
The company doesn’t want to stray too far from the quarterly earnings forecasts it gave Wall Street, so treasury has sought to coordinate the hedging program more closely with the business unit. By understanding better the timing and volatility of that unit’s currency exposure, treasury anticipates the hedging program resulting in a better economic outcome. 
 
Takeaway: Just the reporting, please. A participant said his company’s previous CFO toyed with the notion of allocating the hedge results to the business units to create more accountability. However, the business units balked at the additional burden, and treasury agreed. The new CFO isn’t seeking any changes, at least for now, so “we’re trying to improve reporting around the economic impact” of the hedges, he said. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By wchan, November 10, 2017
The Asia Treasury Peer Group met in Hong Kong for the first time on October 24-25, hosted by Emerson Electric. Members discussed their projects and priorities and local bank partner challenges, heard from a guest speaker on setting up a treasury vision and values to align with the business and about online third-party payment providers.
 
We also heard from a visiting US NeuGroup Network member on transforming treasury for the digital future and received an update
on Hong Kong’s corporate treasury centre incentives from the Hong Kong Monetary Authority (HKMA). Here are some highlights: 
 
Who’s Your Customer? Our special guest from a China-based MNC led a session on how treasury partners with business units to help drive growth that turned into an existential exploration of treasury’s broader mission and the related need for treasurers to answer the question who is treasury’s real customer. Identifying one’s core customer is an extension of determining what role treasury plays in the broader corporate organization and whether the tack it takes in managing cash and financing is largely geared toward promoting sales and supporting business units, or driving a more controlling strategy focused on compliance, policy and governance.
 
Solving the “M&A Integration” Equation. This is a case where one size doesn’t fit all and where priorities including growth and the pace of acquisitions must be weighed against what treasury’s control and compliance policies may dictate. Nonetheless, treasury needs to develop a systematic approach to integrating newly acquired companies into its finance orbit and to communicate with the new unit quickly and clearly. The plan needs to reflect the realities of how long it takes to integrate policies and data and whether the pain of changing bank accounts and other systems is worth the cost right away. Many companies will find selective integration is the best path forward, giving business units flexibility (not autonomy) and maintaining treasury’s supervisory role to ensure compliance and control over acquired companies.
 
Technology Disruptions - Digitalization and Online Third-Party Payment Systems. The group watched a demo on how easily machine learning and chatbots can be incorporated into the treasury toolkit and what this means for team skill development and treasury roles going forward. Whether it’s developing apps to improve cash flow forecasting and FX exposure analysis or using online third-party payment systems, treasury needs to drive the process of embracing the innovations that are coming fast and furious in the digital age. Treasury can burnish its strategic role within the organization by keeping abreast of fintech developments, assessing which ones make sense to discuss with senior management and by making a strong case for using internal resources or utilizing external sources to tap into advancements that are transforming business models and how treasury does business.
 
Outlook
The viability of regional treasurers in Asia depends on companies ensuring treasury contributes strategic value to business units in a region that contains both challenging frontier markets and the world’s largest population. The key to creating compelling treasury career paths within western multinationals is better integration with business units in Asia. Focus should be put on developing the skills required for evolving treasury roles, as departments face increasing pressure to centralize traditional activities and to use technology to do transaction processing. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By afriberg, November 09, 2017
The Tech20 Treasurers’ Peer Group met November 1-3 at Cavallo Point near San Francisco for its 2017 Annual Meeting. Returning sponsor BNP Paribas shared the latest on the bank’s strategy, telling members that the Americas and the tech sector remain priorities.
 
Following are some key takeaways:
 
• Solve my problem: help with formulating an FX risk policy. A member from China at a company without a full risk policy asked the group to help him with formalizing a policy for FX risk management. He noted that benchmarking revealed how tech firms varied between one without an FX hedging program and those with high-level sophistication in this area. Members advised him to consider carefully the FX risk management objective when setting policy. For revenue or earnings hedging, for example, he should consider to what extent analysts were focused on the FX impact and if a pro forma ex-currency reporting strategy could allow a lighter hedging touch. Over the long run, the currency impact on revenue or EPS can tend to even out and hedging is more a matter of appetite to ride out a cycle or not. New hedge accounting is also making it difficult to keep hedge gains and losses below the line and instead will hit the hedged item line. The final recommendation: try not to lock down all the details in the first go, since the policy needs will get further clarified as the FX program develops.
 
• Transforming treasury to follow the sun. A major tech company shared its dramatic overhaul of the treasury organization that aims to scale support for the business to super mega-cap size, including follow-the-sun coverage with new treasury centers in London and Singapore. This represents a departure from a tech treasury mindset that has tended to be entirely HQ centralized. Treasury leadership is also being divided into four functional ATs to develop centers of excellence for treasury operations, trading and investments, risk and strategy, and corporate finance. “Yet, we don’t want treasury to be carved up into silos so people will regularly migrate across,” said the AT presenting. 
 
• Banks pulling out more stops to fund acquisitions. In a session spotlighting recent examples of acquisition finance, we learned of the advantageous terms members are negotiating. In one instance, a member got their then-M&A advisor to fund a bridge facility without draw or duration fees. In another, a member was able to hold the deal underwriters to their agreed fees despite changes to the financing mix as the deal evolved. The takeaway is that competition for new, highly desired customers, additional wallet from current, valued clients and bank balance sheets that have been finessed to function under today’s regulatory environment are changing the constrained nature of acquisition finance. It’s a sign of bank financing terms getting even friendlier in a credit cycle that’s long in the tooth.  Capital markets are a positive contributor, too, as the money and demand is still there to take out any deals members might contemplate.
 
A Christmas tax reform miracle, zombies and wizards. The group discussed the details of the House tax reform bill that arrived during the meeting, with the consensus being positive surprise at the level of detail. The motto “time kills all deals” applies here as more time will allow special interests to mobilize opposition to specific details in what is a generally favorable reform plan. A signing ceremony with Trump in front of the White House Christmas tree would take a miracle but that’s what may be needed to get a meaningful tax reform bill passed. Finally, you also missed a lively discussion of tax zombies that won’t die (the border adjustment tax); and why treasury needs to abandon any notions that tax departments are staffed by wizards who wield some sort of magic. 
 
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 over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 

 

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Blog entry
By thoward, November 07, 2017
The Internal Auditors’ Peer Group wrapped up its 2017 calendar with a solid day-and-a-half meeting in San Jose, California. 
 
Members of the IAPG discussed a wide range of topics at the 2017 second-half meeting, among them a look at annual and quarterly risk assessments, acquisition integration, post-systems implementation audits, data protection and fraud risk assessments. Some of the key takeaways from these sessions included discussions on robotic process automation; complying with new realities and rules (in Europe and possibly on the way in the US) about data, particularly personal data; and how sidebar conversations about “what’s really going on” make auditors trusted confidantes to business leaders.
 
Is the ROI in RPA really there? Robotic process automation (RPA) is a hot topic in many treasuries and other departments across companies. The promise is that companies can eliminate human error risk on tasks that are repetitive and rules-based. But is this a case of fools rushing in? This was the view of one presenter at the meeting, who questioned the return one could get from implementing RPA. “If this was just coming into being perhaps five years ago, I could see this really catching on,” he said. But right now, companies have solved for the cost issue by outsourcing to lower-cost countries. “RPA is so hot that people want to implement it without thinking it through.” But the truth of the matter is, right now, highly educated, low cost workers in some countries can still get these mundane financial tasks done, i.e., basic back office transactions, far more cheaply. And another view: “We always have manual intervention in RPA software,” said one member. So it could be a while before RPA is truly an option.
 
Audit whispers. In presentations to the audit committee, several members said they often put, in addition to the main points of their audit reports, a sidebar of issues they’ve “heard” unofficially. In at least one instance, this has become more popular than the audit report itself. So IA can often find itself in the position of the company “truth tellers.” The ones with the sober view of certain projects or endeavors of the company that a CEO can appreciate. For instance, for very high sales goals in a tough environment, the head of sales will just say “we can do it!” But an auditor might say, “Yes, they might be able to; but it will be tough and perhaps IA will be looking closely at results to make sure there was no fraud.” The drawback to these side conversations is that they can be dangerous or misconstrued; people may use this format as a political device they can manipulate in their favor. They may have an axe to grind against a team or individual or even the company. Therefore, auditors who find themselves in this position must clarify the context of the information being given (this wasn’t an audit, etc.) and the receiver must be clear that this isn’t actionable intelligence; just information that bears watching.
 
Data scrubbing. Data in the cloud is growing exponentially, and so are the threats. And in Europe, new regulations are coming online in a couple years that will make data management that much more onerous. 
 
While the cloud has made life easier for just about everyone and every business, it has had it downsides. For business, the cloud intensifies the third-party risk management to crisis levels. One cloud server can have thousands of connections to external entities, thereby increasing the risk. The problem is at this early stage of the technology, there are a lot of ambiguities: from minimal transparency to vague regulatory expectations. On top of this, the speed of change in technology has exceeded the capacity for companies to change. “Point-in-time assessments expire before re-evaluation,” noted one slide in the session presentation. This presenter’s recommendation was to “optimize levels of risk assessment effort by choosing your vendor-risk-management battles.”
 
Meanwhile, regulations are coming. In Europe, it’s the General Data Protection Regulation (GDPR) agreed upon by the European Parliament and Council in April 2016, which will replace an older version of the regs (Data Protection Directive 95/46/ec) in spring 2018. This will be the “primary law regulating how companies protect EU citizens' personal data.” While still not taken up in such a singular form in the US, a similar law in the US is expected; and many in the group are preparing, dedicating teams to address the somewhat burdensome privacy and data protection requirements. These include: 
 
• Requiring the consent of subjects for data processing
• Anonymizing collected data to protect privacy
• Providing data breach notifications
• Safely handling the transfer of data across borders
• Requiring certain companies to appoint a data protection officer to oversee GDPR compliance
• The GDPR mandates a baseline set of standards for companies that handle EU citizens’ data to better safeguard the processing and movement of citizens’ personal data.
 
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