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

Blog entry
By mkmoore, October 26, 2018
“Solve My Problem Speed Dating” is one of the most popular sessions at the Tech20 Treasurers’ Peer Group, which is meeting this year at the Bernardus Lodge in Carmel Valley, CA. The annual meeting held on November 9-7 is sponsored by MUFG.
 
In speed dating, members including Amazon, eBay, Facebook and Google, engage in rapid-fire conversations, one-on-one for a few minutes, similar to actual speed dating. The aim is to name a troublesome issue they are grappling with, ask a question, or share a takeaway. When the moderator rings the bell, “ping,” we "turn the dial" and you go to the next person. It is fast and furious, but the members love being able to share quickly, get answers, and challenge each other.
 
Of course, between golf outings, cordials around a fireplace and games of bocce, members concentrate on serious issues that they have selected via pre-meeting surveys and agenda development. MUFG is presenting on the daunting topics of the interest rate environment along with the transition from Libor to SOFR.
 
High on the lists of topics chosen by the members is repatriation structures, how to use their cash, and post-tax reform capital structure optimization. US tax reform has prompted many multinational corporations to revisit how to bring back cash, what to do with it, capital allocation, buyback optimization, and how to reshape the balance sheet, both onshore and offshore. MUFG will contribute to this session with thoughts and data on capital allocation decision-making processes, criteria and metrics, along with an overview of the lay of the land in a post-tax reform world.
 
Members will also discuss jumping into the concept of “tomorrow’s treasurer today” with a look at how members companies are changing with technology advances. No small matter for tech companies. But how does it fit with treasury? Consultants and vendors urging treasury to jump on the bandwagon are quick to promise their solutions will improve efficiency. Treasurers must decide whether it’s worth the effort to advocate a move from what actually works to something that may possibly work better. Member volunteers with share their real-use cases of data visualization tools, artificial intelligence and robotic process automation.
 
Rounding out the meeting, members will take a look at reevaluating treasury roles and responsibilities and how they fit within organizational structures. This member roundtable has the goal of helping members better scale teams and maximize efficiencies and effectiveness.
 
 
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Blog entry
By jneu, October 25, 2018
 
The NeuGroup Process is being put to work in Asia in partnership with HSBC.
 
NeuGroup is looking forward to our first HSBC NeuGroup Industry Treasurers’ Roundtable next week in Singapore. This is part of our initiative to bring the NeuGroup Process for peer knowledge exchange to partner clients and clients we have in common. 
 
Focusing on the Technology, Media and Telecomm sector, it is also part of a vision to connect leading innovation companies from the US with their globalizing peers in Asia. Our aim is to further treasury and finance solutions, best practices and standards supporting business innovations to spread quality-of-life changing products and services faster.
 
On the agenda for next week is a look at the political risks altering the outlook and business ecosystem considerations in the region, starting with those stemming US-China trade tensions.
 
Next up we will set up connections to exchange insight to help participants help each other succeed with their top treasury projects and priorities.
 
HSBC will then help participants understand how to harness digital technology innovation to transform their own business by describing some of the ways they have been transforming the bank. Microsoft’s CTO for the region will shed further light on how digital transformation initiatives are being worked on by corporates.
 
A further highlight will be one of our mutual China corporate client’s spotlighting their regional expansion strategy via acquisition and the lessons learned from a treasury perspective.
 
We will share some of the post-meeting takeaways in the coming weeks.
 
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Announcement
By jneu, October 24, 2018
 
The NeuGroup Process is being put to work in Asia in partnership with HSBC.
 
NeuGroup is looking forward to our first HSBC NeuGroup Industry Treasurers’ Roundtable next week in Singapore. This is part of our initiative to bring the NeuGroup Process for peer knowledge exchange to partner clients and clients we have in common. 
 
Focusing on the Technology, Media and Telecomm sector, it is also part of a vision to connect leading innovation companies from the US with their globalizing peers in Asia. Our aim is to further treasury and finance solutions, best practices and standards supporting business innovations to spread quality-of-life changing products and services faster.
 
On the agenda for next week is a look at the political risks altering the outlook and business ecosystem considerations in the region, starting with those stemming US-China trade tensions.
 
Next up we will set up connections to exchange insight to help participants help each other succeed with their top treasury projects and priorities.
 
HSBC will then help participants understand how to harness digital technology innovation to transform their own business by describing some of the ways they have been transforming the bank. Microsoft’s CTO for the region will shed further light on how digital transformation initiatives are being worked on by corporates.
 
A further highlight will be one of our mutual China corporate client’s spotlighting their regional expansion strategy via acquisition and the lessons learned from a treasury perspective.
 
We will share some of the post-meeting takeaways in the coming weeks.
 
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Blog entry
By mkmoore, October 22, 2018
The Asia Treasury Peer Group (AsiaTPG) meets on October 29 and 30 where members have selected a decidedly tech-focused agenda. Members set the agenda via polls to determine the issues that are most pressing to the group. This meeting is hosted by member GE at their Singapore offices and sponsored by HSBC.
 
Members will hear from sponsor HSBC on the concept of a digital treasury. HSBC will share its digital transformation journey as well as how its Innovation Lab has worked with clients to explore various initiatives to build a digital treasury.
 
Members will also tackle technology developments currently transforming today’s treasury for tomorrow’s challenges. Currently bewildered by a host of buzz words, acronyms and phrases, i.e., bots, RPA, AI, data visualization and blockchain, treasury teams are forced to keep pace with a host of technological advances. However, given resource constraints (both time and effort) they must decide what tech to choose and whether it’s worth the effort to advocate a move from what works today to something that may possibly work better tomorrow. The session will focus on real use-cases showcasing new treasury technology as well as treasury tech for broader-use applications. This includes everything from digitalization possibilities for dashboards to transformation efforts that pave the way for growth by driving efficiencies and adding value through automation, straight-through processing, plus bank rationalization.
 
In addition, the group will examine the regional treasury function of three companies, namely Alibaba, GE and UPS, with the discussion covering team organization, strategy, roles and responsibilities. We will also compare-and-contrast on regional treasury set-ups, comparing how US and European MNCs approach a problem versus how Asia-based firms address a similar problem. The discussion will extend to how Asia-based firms manage the region from a banking and business support perspective. 
 
The “tech buzz” theme of this peer group meeting will continues with open forum topics like cybersecurity, the fintech landscape, trends and their impact to corporate treasury. 
 
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Blog entry
By amichels, October 18, 2018
 
The pilot meeting of the Life Sciences Treasury Peer Group sponsored by Wells Fargo  and hosted by Gilead Sciences in Foster City, CA, provided a setting where finance professionals discussed issues specifically affecting the pharma, medical technology and equipment industry, as well as challenges and opportunities faced by all treasurers and their teams.
 
“Nobody in the World Wants to Pay.” That frank assessment was among comments made during a dinner discussion about the cost of health care and what it means for patients, health care companies, insurers and governments. One member said the expense of developing a drug is often “forgotten,” while another participant said political answers to the problem are “super hard” and made more so by controversies over high-priced drugs. He talked about the value of having payors “with skin in the game,” saying, “the more subsidized something is, the more it costs.” 
 
New Ways to Pay? One of the most interesting ideas to surface about financing customer drug costs is matching the time a patient has to pay with the duration of the therapy, say, 18 to 24 months. Less clear is whether the patient would pay a financing rate and, if so, whether a third-party like a bank or fintech would hold the risk or the drug company itself would do so. The discussion also touched on so-called outcome-based pricing that’s pegged to a drug’s effectiveness.
 
“M&A is Not a Democracy.” That statement from a Wells Fargo banker points to the reality that deals are getting done, despite valuations in life sciences that he described as being at “astronomical levels” with “very high multiples—people are struggling to pay them.” He said companies that used to use hurdle rates are “moving to something else” and that pressure to do transactions is driving a more “aggressive financial posture in terms as what qualifies as a good deal.” Often, behind that posture lies a view that by bolting on an acquisition a company positions itself for future synergies and other deals that will accrue to its benefit and growth. 
 
Insurance Conundrums. A presentation about innovation in insurance coverage addressed the difficulty of many life sciences companies to get affordable product liability coverage and other issues, including the desire of some companies for integrated programs that would better match coverage with risks. A presenter from Aon said the insurance broker would “love to come to each of you with a parametric solution that will be indexed,” but that the industry also needs to come up with other approaches. But in the end, many participants remained skeptical about the outlook and unhappy with the lack of transparency in pricing insurance, with one saying, “it’s so opaque.”
 
 
 
 
 
 
 
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Blog entry
By amichels, October 17, 2018

Members of TIMPG contemplate cash levels, external investment managers and artificial intelligence at recent meeting.

The TIMPG 2018 fall meeting sponsored and hosted by Franklin Templeton Investments in San Mateo, CA, was chock-full of valuable insights on the outlook for interest rates and the economy, portfolio optimization and other topics of interest to investment managers confronting new decisions about cash levels and deployment post tax-reform. Here are a few of the meeting’s key takeaways.

Find your spot on the spectrum. As members look to define the steady state of their cash levels, they must ask anew where they will position themselves on an investment spectrum ranging from conservative—traditional short-duration investments and few external managers—to sophisticated, meaning those with more expansive mandates and more extensive use of external managers. Several members noted that they will be looking to invest more in traditional money-market funds and in-house managed SMAs going forward and most said that they are looking to consolidate their list of external managers.
 

Define the steady state of your cash balances. A big question for most member companies is what their steady-state cash levels will be once they have allocated their excess cash that is no longer trapped offshore and rejiggered their capital structure. This question will get answered over the next several months for most companies and there is wide variance of opinion, even within some companies: “Our debt guy talking hundreds of millions and I’m thinking billions.” What framework will be used, what level of risk appetite and how much weight will be given to R&D, tangible vs. intangible assets and rating agency concerns?

External managers: How to keep score. Many members will be consolidating managers due to expected lower, steady-state cash levels and all seem to want to scrutinize them more. So there was keen interest in one member’s discussion of external manager scorecards and how they’re used to communicate performance to external managers—and even justify firing them. What goes into such scorecards: “credit, credit, credit,” which emphasizes the importance of using external managers’ credit research capabilities to supplement a firm’s own. Beyond credit, the scorecards note the number of good ideas the manager comes up with vs. your own and how many winning picks in the portfolio are yours vs. theirs, plus how many losers are theirs and how many they insisted on keeping after you questioned holding them.

Prepare for the new asset management ecosystem with machine learning and AI. Roger Bayston, director of investment grade bonds at Franklin Templeton, urged members to look out for the new asset management ecosystem, including a bond market built on tech platforms. One area tech-based ecosystems are showing promise is in the bank loan market, where marketplace lending is taking off. As much as $1 trillion in loans may be originated by marketplace lending (non-banks like Lending Club, Prosper, OnDeck, Marcus ad Enova) by circa 2025, Franklin Templeton predicts.
 

Click here for more about this and other NeuGroup Peer Groups

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Blog entry
By amichels, October 10, 2018
tMega, a peer group of treasurers from the word's largest companies met at host Gilead Sciences to discuss their most pressing topics. Members set their own agenda, so these are they key takeaways that are top of mind for these treasurers as we start to close out 2018.
 
Rethinking the Share Buyback Framework. The treasurer of a large tech company captivated the group with a description of how the company is approaching its stock buyback plan in the wake of tax reform and repatriating large amounts of cash. Here are some takeaways:
 
  • Less Prescriptive, More Flexible. The member described the new framework as less prescriptive than the previous approach that had a specific cadence but had given up some flexibility. Now, the company is not announcing when it will execute buybacks. The company’s goal is to “embed flexibility” in timeline parameters, measuring in years, not months or quarters. 
  • No KPI Magic Bullet. In response to a question, the treasurer said, “I don’t think there’s a magic bullet for KPI” when evaluating the success of a share repurchase program. No matter what the size of the program, a “broader framework” is necessary to measure the program.
  • Designing the Framework. The member suggested a three-point framework that included: 1. Achieving stated capital structural goals; 2. Updating the valuation thesis regularly, validating repurchase decisions through retrospective analysis and adjusting for market conditions or changing business conditions or other; and 3. Execution: taking advantage of multiple buyback tools to manage through open markets, and blackouts, while considering volatility, ADTV, VWAP and other factors to measure program success, bank execution and other factors. 
Treasury’s Chance to Shine in Strategic Acquisitions. Another treasurer gave the group a fascinating look at treasury’s role in a large, complicated acquisition of a media company that was bidding for a stake in a third company. He called the M&A activity “a massive undertaking” that’s made 2018 “a dramatic year with lots of twists and turns.” Treasury served as a key partner to the M&A team in preparing the bid and in subsequent negotiation stages. Here are some insights distilled from the presentation:
 
  • Leverage Questions Give Treasury a Bigger Seat at the M&A Table. The wide spectrum of leverage involved in the various scenarios meant treasury played a much bigger role than in most deals and was heavily involved in the negotiations. Under one scenario, the company’s leverage ratio could have reached over 4x leverage, considerably more than its target of 2. This brought “a lot of credit implications and financing possibilities,” the treasurer explained. 
  • Multiple Scenarios Mean Lots of Work. The huge size of the deal and the subsequent bidding for the stake in the third company meant treasury had to detail the leverage implications of three different scenarios each time it met with the board. All the work done gave the company the confidence to proceed without running scenarios by the rating agencies before bids were structured. “We thought we had a good handle on it,” the treasurer said, noting that the company always talked to the rating agencies shortly before any announcement.
 
 
tMega is the NeuGroup for treasurers at mega-cap corporations. NeuGroup has groups for all company sizes, so click here to get more information on the group that is right for you.
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Blog entry
By afriberg, October 04, 2018
I’m very excited to have been asked to deliver the keynote on October 24 at the SAP Conference for Treasury Management in Chicago. It is my pleasure to share key takeaways generated from the treasurers who are members of the NeuGroup Network of peer groups. As part of regular benchmarking, members share their top projects and priorities in a survey and then discuss them at their meetings. I’ll share with you what these top priorities are, plus fill you in on why they are important. You’ll also hear what these top treasurers are planning to do about these challenges.
 
 
Here are a few of the top issues on their lists so far:
  • Tax reform and its implications for treasury
  • What investors and activists are demanding and how global treasury and shared service centers are beginning to change in response to tax reform
  • How new technologies like robotic process automation and artificial intelligence are deployed
  • Leveraging blockchain technology and what to do about cryptocurrencies.
 
This keynote will allow me to showcase some of the research and conclusions that NeuGroup has distilled from surveys across more than 450 members.  
 
I hope to connect with you on October 23-24 at the Westin Chicago North Shore!
 
 
To see Anne Friberg at the SAP Conference for Treasury Management in Chicago, click here to register
 
 
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Blog entry
By amichels, October 03, 2018
The Assistant Treasurers’ Group of Thirty meeting hosted by Amazon and sponsored by UniCredit in Seattle were treated to tours of the "Spheres" before settling down to talk about these key issues. 
 
Europe vs US rate outlook.  UniCredit’s European economist told members that: 1) the ECB will be lucky to get to zero percent rates before the next recession in 2020; 2) European governments will need to lean on expansionary fiscal policy as a result; and 3) the ECB will need to be prepared to support this fiscal policy with the resumption of debt purchases. Accordingly, liability management for MNCs should factor this in, as well as the small chance that this support mechanism does not succeed in preventing a currency shift, resulting in the breakup of the euro.
 
IHBs as a platform. Take an open-ended definition of in-house banks to take advantage of most people’s understanding outside the treasury world of what banks do, which will help them understand what a centralized treasury does. There is also an advantage of viewing the IHB as a centralized platform to manage and control a wide variety of treasury and other financial services to the business and even broader stakeholders. These should be the drivers of your IHB definitions and the business case to build them. 
 
Digitalization of treasury favors human generalists. One member discussed both how structural logic can be a challenge in organizing treasury optimally but also how bots will reduce the time sucks from mundane tasks. Those pursuing RPA at the lower end of the value chain will help everyone by sharing what’s working, but the risk is that there may be some disruptive technologies that sneak in unnoticed at the higher-value end. Data fed into machines will learn to analyze and suggest or perform actions with increasing intelligence, for example, and could start to outperform treasury specialists. Thus, the consensus shared by the group that becoming more of a high-performing generalist sounds smart. For instance, the strategic finance rotations bringing in treasurers without deep treasury experience may become supported by machines with “artificial” treasury intelligence. They should also be smart enough to surround themselves and maintain people in key treasury roles, with good general treasury judgment honed by experience in a variety of treasury and finance disciplines, to provide environmental, social and governance checks on the machines while also ensuring they understand how to support all stakeholders.
 
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Blog entry
BREXIT
By jneu, October 01, 2018

Are you missing something important as treasurers when it comes to Brexit?

At recent peer group meetings, members have been asking each other about Brexit. The gist of the question is: Has anyone discovered something to be concerned about regarding Brexit? From a treasury standpoint, few have heard anything meaningful in response.  

Given that Brexit is scheduled to go down on March 29, 2019, whether the UK has an exit deal with the EU finalized or not, we thought it would be good to get some added expertise in the mix.

Enter BNP Paribas’ UK Economist Paul Hollingsworth, who joined them this summer from Capital Economics, where he also opined on Brexit. Paul will be addressing our Treasurers’ Group of Thirty Large-Cap Edition meeting in New York, via video link, which BNP Paribas is hosting on October 11.

We hope that with Paul’s perspective and his responses to the questions from T30 LC members, we will help shed light on this question and see if there is something that MNC treasurers should be worried about. He may also help members assess if it’s true that Paris is set to become the new center of trading for Europe.

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