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

Blog entry
By thoward, April 02, 2018
Fintech is growing part of the tech sector that’s changing how treasury gets done.
 
Search Merriam-Webster online for "fintech" and you're told the word isn't in the dictionary. But a Google search for the word will yield about 35 million results in less than a second. Between those two outcomes lies a technology field that may be hard for some observers to define, but one that is reshaping the worlds of treasury, finance and banking in the new digital age.
 
This month iTreasurer takes a look at how banks, despite assumptions to the contrary, are on the cutting edge of today’s digital revolution and more importantly, don't view fintech innovators as competitors but as clients and partners. Indeed, banks are seeing great opportunity aiding and servicing fintechs as well as helping corporate clients connect with them. "Besides the collaboration and investment opportunities, we also see increased demand from fintech providers for specific payment capabilities—which make fintech companies an increasingly important client segment for us," says, David Watson, head of cash management Americas and global head of digital cash products at Deutsche Bank. Read more here. 
 
iTreasurer also takes a deeper dive into how blockchain is increasingly being offered as a hedging tool with the latest entrant into the derivative platform space, trueEX. While corporates are reviewing blockchain for its wide variety of uses and benefits, it could take a while. But they shouldn’t wait too long. "Corporate treasurers should be watching blockchain closely, because within a couple of years it will be on everyone's agenda," said Caitlin Long, a blockchain expert who jumped to the sector from a senior Morgan Stanley position working with corporate treasurers. "A few corporates have quietly been using bitcoin since 2014, but mostly in small markets where banking systems are not well developed." Read more here.
 
Meanwhile, on the accounting front, FASB may have a nasty surprise in store for corporate treasuries. That is, a new accounting rule update that affects banks’ loan-loss reserves that takes effect  in about two years. The Current Expected Credit Losses (CECL) accounting standard introduces a new model for the recognition and measurement of credit losses for loans and debt securities. While a ways off, now’s the time to bone up, because both investment-grade and non-investment-grade corporate borrowers may feel the impact, especially if the economy swoons. Read more here.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
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Blog entry
By bshegog, March 29, 2018
The Treasury Investment Mangers’ Peer Group (TIMPG) meets April 17-18 in New York City at the offices of host and sponsor BlackRock. It’s appropriate that on day one individuals have to file tax returns, since much of this meeting will focus on the impact on investment managers of US tax reform, which has created a complicated reality after months of waiting. Another key topic this year: rising interest rates.
 
Macro: Setting the stage will be Jeffrey Rosenberg, chief fixed income strategist at BlackRock. He will outline the effects of fiscal and monetary policy developments on rates and markets as well as the impact of repatriation on bond issuance, spreads and credit. With this building block, members will have the opportunity to share with each other their plans around capital structure in the wake tax reform. Read more on repatriation here
 
Micro: Shifting focus to the investment portfolio, members are especially interested to learn from BlackRock specialists how funds should be allocated, especially since many participants are the recipients of new cash flow from repatriated funds.  Members will also review some portfolio benchmarking data from the annual member survey. It is always helpful to see what other corporations allow under their investment policy and which sectors they are choosing to invest in. Closing out the day will be the member open forum, an excellent chance to address questions not on the formal agenda. 
 
Data Pains: A large frustration for investment managers is finding a mechanism to bring data together from multiple systems. Microsoft will provide a demonstration of Power BI, which may go a long way toward solving this perennial problem. More than ever, members will be called on by senior management to present and explain the investment portfolio. Members will gather in working groups to share with each other what they have found to be the best mechanism to engage senior leadership. 
 
We’re looking forward to a busy day and a half. With tax reform passed and on the table as well as interest rates poised to move, it’s time for members to get off the sidelines and put their plans into action. After this meeting they will be more equipped to do just that. 
 
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, March 28, 2018
With US tax reform at the top of everyone’s priorities, members of NeuGroup’s Treasurers’ Group of Thirty Large Cap Edition (T30LC) are getting ready for their first-half meeting on April 18th hosted by Starbucks in Seattle and sponsored by US Bank. Topping the agenda:
 
Update on New Tax Rules and Impact on Liquidity and Capital Structures. The first session kicks off with the key elements of US tax law changes and the implications for corporate treasury. That includes fully understanding the mechanics of repatriation, and the timing of paying the tax on deemed repatriation. This session will also cover what changes may come about due to tax reform. These will include potential changes to liquidity structures as well as what to do with the repatriated funds and how that will affect the capital structure.
 
The Current Interest Rate Environment. With both short and long-term interest rates on the rise, the question is what treasurers are doing to mitigate rising rates. Many companies have issued fixed-rate debt over the past several years to take advantage of historically low interest rates; but now that rates are finally on the move upwards, what are treasurers doing today? Attendees will share their strategies with the group, whether it’s continuing to issue fixed-rate debt or use interest rate swaps to alter their fixed-to-floating ratios.  
 
New Technologies and Impact on Treasury. With the advent of RPA, AI and machine learning, this session will explore the various ways treasury teams are implementing these new technologies. And just as important, what does that mean for roles and responsibilities across the team, and what new skills are needed? The most important question everyone should be asking themselves is what will be the value added that treasury brings to the organization?
 
Cyber Insurance. At the meeting last September everyone agreed that they wanted to explore the current market for cyber insurance, so it is on the agenda! With the continuing increase of cyberattacks, almost every company has to do more to not only protect against them, but then also be prepared to react in the event of an attack, which seems almost inevitable. Several members will discuss what they have been doing in this arena. Then we will be educated by the head of cyber insurance from Marsh about the current state of the market. No doubt he will be peppered with many questions. Read more about cyber insurance here
 
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, March 27, 2018
This week is all about blockchain uses and NeuGroup peer group meetings completed and those to come.
 
On the blockchain front, there is good news (of sorts) about Iran and cryptocurrencies like Bitcoin and Ether: they make payment transactions with Iran easier at a time when US banks can’t do business in the country and big European banks won’t. That’s the view of Dr. Amir-Said Ghassabeh, attorney and principal associate of global transactions at Freshfields Bruckhaus Deringer LLP. He expects to see more, mostly small European and Asian companies with an appetite for risk taking advantage. Read more here.
 
Also, Delaware, which has been mulling the possibility of applying blockchain technology to stock ledger and Uniform Commercial Code (UCC) processes, has decided to move forward. The challenging work required to make it all a reality appears set to begin in April. Read more here.
 
Finally, below are several blogs about NeuGroup peer group meetings that have just wrapped up and also several concerning meetings that will happen in the next few months. This includes first-time sponsor Bloomberg, which will showcase the many uses of the Bloomberg terminal at the Assistant Treasurers’ Leadership Group.
 
 
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 amichels, March 26, 2018
The Treasurers’ Group of Thirty (T30) had its 2018 H1 meeting in in Teaneck, N.J., on March 14. Here’s a look at some of what you missed at the gathering hosted by Cognizant and sponsored by Societe Generale. 
 
The Age of Robotic Process Automation Has Arrived. In the last eight months, said Sundara Sukavanam, practice leader North America at Cognizant, companies have shifted from testing and evaluating robotic process automation (RPA)—when “bot” software captures and interprets existing applications for processing transactions, manipulates data, triggers responses and communicates with other digital systems—to “industrializing” its use across the enterprise. The 12-week implementation time frame touted by platform providers is a best-case scenario, and the 80% efficiency gain they promote doesn’t include the implementation investment.
 
Takeaway: Robots aren’t the whole automation solution. System modernization, process transformation, and the use of machine learning are also key.
 
What Ever Happened to Simplifying the Tax Code? Robert Shapiro, SocGen’s head of tax, Americas, reassured T30 participants that their uncertainty regarding tax reform is widespread, and they will likely have to contend with it for much of 2018. The law’s most fundamental shift was slashing the corporate tax rate to 21% from 35%; then the complications begin. A true territorial tax system taxes only domestic earnings, but instead US companies will face a complicated hybrid system. 
 
Takeaway: Guidance still to come. A “blue book” describing Congress’ intent behind the law’s major legislative sections, and rulings by the Treasury Department on the GILTI and base erosion provisions should arrive over 2018. 
 
It’s a New Blockchain World. Cognizant provided attendees with its assessment of blockchain technology: Lots of hype today but benefits are coming, and early adopters may have an edge. Lata Varghese and Gagan Jain, specialists in blockchain and distributed ledger technology (DLT) at Cognizant, explained concisely how the technology works and its strengths and weaknesses. The concept of a digital ledger shared by users is sound, they said, and the risk lies with the safekeeping of users’ keys to access the ledger. Scalability remains a challenge. 
 
Takeaway: It’s not just a fad. Cognizant surveyed 3,000 customers about the technology, more than half of them financial institutions, and 85% of respondents agreed blockchain technology would impact them.
 
SocGen’s New Tool to Optimize Debt Duration. SocGen bankers described their year-old model that discounts rates on a range of bond tenors, while keeping credit spreads, and underwriting and counsel fees unchanged. It compares a 10-year bond vs two five-year bonds, three 10-years vs. a 30-year, and multiple other combinations, finding that multiple short-term bonds indeed win over longer-term bond equivalents in terms of aggregate duration. More importantly, the model provides a benchmark against which to measure whether a company is optimizing duration in its bond portfolio. Read more here. 
 
Takeaway: Capital structure’s heightened relevance today. The new tax law, rising rates and other factors heighten the need analyze and optimize a company’s capital structure.  
 
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, March 22, 2018
NeuGroup’s Assistant Treasurers Group of Thirty (AT30) meets in New York City on April 18 at the offices of sponsor and host Deutsche Bank. Tom Joyce, the bank’s capital markets strategist, will kick the day off with an update on the outlook for global markets in 2018 as well as analysis of economics, tax changes and central bank policy. 
 
Tax Talk: Later, members will have the opportunity to discuss the impact of US tax reform on corporate capital structures. The discussion will include how companies will make use of untrapped cash and what reactions their decisions might spark from shareholder activists and credit rating agencies. 
 
Tackling Tech: Members will also talk about using technology to streamline and improve the treasury function as digital disruption shakes up the world of finance. Deutsche Bank and a member will lead an introductory session on blockchain. We’ll look closely at distributed ledger technology and how treasurers are starting to use it, or at least likely scenarios where they might soon. Read more about blockchain here.  
 
Dashboards That Dazzle: One of the last sessions will be a panel discussion where members talk about their most effective tools to communicate with senior management, including dashboards. We’ll get details on effective reporting practices as well as the systems used to produce reports. Members may also share reporting needs that are currently not being met to see if others have ideas to improve and streamline what can be a tedious process. 
 
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 jneu, March 21, 2018
Treasurers’ Group of Mega-Caps (tMega) members met on March 14 at Google’s New York offices to exchange knowledge on topics including their planned use of proceeds from US tax reform, market reaction to those plans, consequences of other new tax rules, current trends in blockchain technology and cyber coins, debt issuance frameworks and other projects and priorities. Here are some highlights:
 
A Goldilocks approach to use of proceeds. In the opening session, one member noted his project to determine the proper use of proceeds so the company’s credit rating does not change (wanting especially to avoid an upgrade) and so that activists don’t pounce. The panel on the market reaction to tax-reform-driven use of proceeds seemed to validate this. As someone from Goldman’s activist defense team noted, activists are expecting “blah,” but will react to something that is too “blah.” [Blah meaning a little bit of debt tender, share repurchase, dividend increase and M&A, perhaps with a small bit of capex increase]. Rating agencies, meanwhile, also expect a detailed explanation of how US tax reform proceeds may alter financial policy and capital plans. Where these are deemed lacking, they will fill in the blanks with overly conservative estimates and haircuts to incent greater disclosure to them. They view their role as representing bondholders who already know that they are going to be left out of the party being enjoyed by shareholders.
 
Tie use of proceeds to your long-term purpose. BlackRock Chairman and CEO Larry Fink urged members to tie use of proceeds to long-term value that ultimately should be linked to their stated long-term purpose as a company. If the business generates capital well in excess of what is needed to fulfill that long-term purpose, then by all means return it to shareholders, but make that clear with a good articulation of that long-term purpose.
 
Pension funding with tax planning. Efforts to de-risk pension plans were a big topic last year and remain in focus in 2018, especially for companies on non-calendar fiscal years that enable them to generate tax deductions. With the certainty now of lower tax rates coming, these companies are being more aggressive with their looks at funding pensions to generate tax deductibility, while also improving their pension profiles. Since qualified plans provide more in this regard, these efforts now include looking at shifting elements of non-qualified plans to qualified and optimizing the risk vs. tax deductibility trade in the process.
 
Blockchain use cases to consider. Blockchain solutions could help with cyber fraud, particularly around verification of identity on calls to action, but they can do much more. One of the most compelling use cases for blockchain offered by our external expert was putting share and bond issuances onto a blockchain to restore control of who owns digital certificates to the corporation. Today, the DTCC, has separated beneficiary from holder via digitalization of securities. In the process, there is significant uncertainty as to how many shares the corporate has outstanding and who has them, making proxy voting essentially an estimation exercise. 

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

 
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, March 20, 2018
The implications of US tax reform for regional treasurers is among the timely topics members will grapple with at the Asia Treasury Peer Group meeting on April 16-17, 2018, hosted by Johnson & Johnson in Singapore. We’ll look at how global corporations are approaching a range of tax-related issues affecting regional treasury centers, including the impact to FX hedging activities, cross-border funding transactions, dividend policies and repatriation considerations, as well as potential effects on business trading and legal entity structures. 
 
Members will also discuss cash forecasting and the management of trapped cash in the region. Trapped cash – money stuck in restrictive markets for reasons such as regulatory constraints, capital requirements, currency convertibility and transferability, and tax issues – is a real challenge to efficient global cash deployment for MNCs that operate in Asia. Members will share their tactical approaches to this problem using specific country examples.
 
Another hot topic we’ll explore involves technology solutions to aid KYC compliance. Financial institutions face increasingly stringent national and global initiatives, laws and regulations around anti-money laundering (AML). That’s making banks understandably more cautious around KYC due diligence. As a result, they’re making KYC compliance more complex, more onerous and more expensive for corporate clients. These KYC compliance requirements are becoming a real and significant burden for corporations; so members have new motivation to explore technology solutions that may lighten this burden. A guest speaker from IBM will give an update of its blockchain initiative related to KYC compliance. And Thomson Reuters and IHS Markit will showcase their KYC solutions as well. 
 
NeuGroup extends an open invitation to any of our members across the broader peer group network considering a regional expansion of treasury into Asia to join us for this upcoming meeting in Singapore. 
 
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, March 19, 2018
The seventh NeuGroup FX Summit, hosted by sponsor Chatham Financial in Littleton, CO, brought together both Foreign Exchange Mangers’ Peer Groups and featured members offering up the No. 1 question they wanted answered during the Summit. Here’s just some of what you missed, along with incredible peer-to-peer sharing both in the sessions and in between.
 
Adopting new hedge accounting—who has done so already and what are the lessons, plus what are those who have not adopted planning to do? About a quarter of the combined group had early adopted; and the takeaway was to get someone else to do it, either in accounting or the treasury controllers group. Adopting at the beginning of a fiscal year makes transitioning much easier, so others will likely early adopt if they are on off-calendar FYs. Companies that hedge centrally will also find when they early adopt that hedge gains or losses will show up in the business hedge beneficiaries’ operations margin, post adoption, which they may not appreciate.
 
What are the FX management implications of US tax reform—including changes to net investment hedging (coinciding with hedge accounting)—and will tax reform trigger another wave of USD strengthening? First, the excess capital held by overseas entities will no longer be trapped and prompt hedging considerations for some companies. Independent of that, the pricing on non-USD debt issuance swapped to dollars has been favorable; plus, more leveraged firms will benefit from the tax shield in higher tax jurisdictions or where the leverage ratio restrictions on deductibility don’t yet exist to the extent they do in the US. A recent tax rule change by the US also accelerates recognition of gains or losses on cross currency swaps that can be advantageous for companies. Second, the consensus on the dollar FX rate impact from tax reform was not significant in favor of strengthening. The amount of offshore cash held in non-dollar denominated assets was not substantial, according to what was shared in discussion.
 
The FX Summit also featured these two “solve my problem” sessions:
 
Solve My Problem 1: Resist accounting purists pushing for daily FX accounting rates. With a majority of members in the pre-meeting survey saying they use a monthly rate (usually the prior month-end spot), there is nevertheless a steady trickle of firms adopting daily FX rates for accounting purposes. Auditors insist this is the most “theoretically pure” rate to use, and ERPs increasingly are able to support them. However, from the risk management side of things, this adds complexity and considerably more work for balance sheet hedgers, not to mention transaction costs for the much more frequent hedge adjustments that daily rates drive. Remember, once you go daily you will not be able to go back, and most who use daily rates now wish they didn’t.
 
Solve My Problem 2: It’s not impossible to change functional currency (but accounting and IT might disagree). In light of tax reform and to facilitate future repatriations, as well as manage FX risk more efficiently, a member asked his peers how hard it is to change from local currency to USD functional subs. Quite a few member companies are USD functional and shared ways of meeting the six FAS 52 criteria, focusing for example on the majority of funds flows, or the dependency of subs on the parent (which arguably they all are). At the end of the day, however, the accounting considerations and systems adjustments required for a functional currency switch may make this an uphill battle.

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

 
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
CFTC, iTreasurer
By thoward, March 19, 2018
CFTC Chairman J. Christopher Giancarlo looks to point his agency toward smarter rulemaking.
 
Commodity Futures Trading Commission Chairman J. Christopher Giancarlo has always been a stickler on regulation and a champion of the end-user, namely treasurers. In his years as a commissioner, he took the position of fly in the ointment when it came to Dodd-Frank rules implementations, arguing that many rules were, in his words, “overly complex, unduly narrow and operationally impractical.”
 
Back in 2015 he argued against a proposal for initial margin for dealer affiliates. The then-Commissioner Giancarlo wanted those dealer affiliates exempted from the margin rules, arguing that the “added cost of initial margin on that dealer’s internal risk transfer trades [would] likely make that transaction cost prohibitive for the US end user, who will instead turn to a domestic dealer without access to the global market.” He also railed against the failure of the CFTC, which at that point couldn’t convince the European Commission to recognize US central counterparties (CCPs) as equivalent under the European Market Infrastructure Regulation (EMIR), as it had for CCPs in Japan, Hong Kong, Australia and Singapore.
 
Today Mr. Giancarlo is still fighting. This week, speaking at the Futures Industry Association’s Annual Meeting in Boca Raton, Florida, he said he was “right-sizing the CFTC’s regulatory footprint following years of expansive Dodd-Frank rule writing.” This means he was getting the agency back to “normalized operations and practices, including greater care and precision in rule drafting, more thorough econometric analysis, less contracted time-frames for public comment and a reduced docket of new rules and regulations to be absorbed by market participants.”
 
Mr. Giancarlo also said that he was going to clean up swap execution facility (SEF) rules so they will “fully allow US swap intermediaries to fairly compete in world markets and begin to reverse the tide of global market fragmentation.” Read more here.
 
Meantime, at least one swap execution facility is branching out. SEF trueEX this week announced that it plans to launch a regulated “derivatives marketplace for digital assets” aimed at bringing “confidence and transparency” to a market that institutional investors have mostly sidestepped. 
 
While the sidestepping is partly because the concept of blockchain and cryptocurrencies is overwhelmingly large and complex, it’s also because there are other, more mundane tasks for corporate finance to do. For instance, according to PwC’s 2017 Global FinTech Survey, as a priority, blockchain ranked well behind corporate functions like data analytics, mobile, artificial intelligence, cybersecurity, and robotic process automation. Despite their focus being elsewhere for the time being, corporates will have to deal with a digital asset world. Read more here.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
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