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

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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Blog entry
By amichels, October 01, 2018
The FXMPG2 September meeting at the offices of host and sponsor Societe Generale produced a terrific day-and-a-half of in-depth discussions. Here’s a look at a few of the key takeaways that emerged as members connected with each other and with our hosts. 
 
The Ins and Outs of Algo Trading. One member impressed and enlightened members with a comprehensive update of his company’s use of algos for hedging FX exposure. 
 
  • Key Takeaway: Bigger Savings with Bigger Trades. The presentation demonstrated that the savings gained by using algos vs a risk-transfer trade on $200 million notional far outpaced savings on a $50 million trade. The presenting company therefore has a $100 million minimum for EUR trades. 
 
  • Key Takeaway: Algos Take More Work. The difference in savings matters in part because the passive algos favored by the member can take up to 30 minutes to execute a $200 million trade (meaning the user is exposed to market risk) and require monitoring. One member said, “It sounds like a lot of work to me,” and asked if the extra time spent on algos negated the benefits. The presenter said the choice whether to spend 5-10 minutes of your time on an algo versus 1 minute for risk transfer comes down to how much you value the savings. He said $2-$3 million in savings is worth it to him.
 
Dynamic Hedging: The Case for Options—Literally and Figuratively. Supported by rigorous analysis, presenters from the bank laid out the case for ditching a completely static hedge program and having a hedge toolkit that includes options. 
 
  • Key Takeaway: Price maker or price taker? Market position, price elasticity and margins matter in risk management. Premium brands like Cartier (to take a French example) have an ability to pass through significant FX moves to consumers and they have the higher margins to unlock budget for options premiums. Lower margin brands operate in a much more competitive landscape; they often prefer the certainty of outcome that comes with a forwards-based strategy. 
 
  • Key Takeaway: More dynamic, please! Benefits of not being totally static. In a hedge program, the hedge ratio, tenor and instrument choice are the levers that allow flexibility (or not). In their presentation, the presenters noted that they refer mainly to instrument choice when they talk about static vs. dynamic hedging. A static hedge program is consistently applied regardless of market conditions. A dynamic systematic program is a rules-based framework using mainly forwards and collars and where the hedge ratio is determined by market-based triggers like volatility and forward premiums. This kind of program can result in considerable savings in hedge cost (or more risk reduction for the same cost) over time, while still having the guardrails of a well-defined framework. A dynamic opportunistic program allows decision making on a case-by-case basis based on currency, exposure, timing and market levels and can include options and option combinations. 
 
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Blog entry
By thoward, September 28, 2018
 
Meeting sponsor Bank of the West to discuss banking best practices for fast growing techs.
 
Fast-growing tech companies present a unique challenge for both treasurers of those firms and the banks that service them. That’s because by their very name, “fast growth,” they are veritable fast-moving targets when it comes to services. And what works today may likely not work tomorrow. 
 
It’s therefore incumbent upon treasurers to think hard about what banks they partner with so that a year into that relationship, they haven’t outgrown it. So treasurers of fast-growth, middle-market companies have perhaps greater challenges than usual when it comes to banking relationships.
 
Members of NeuGroup’s Tech20 High Growth peer group will meet to delve into this topic and more at the group’s October 11, 2018 meeting in Santa Clara, CA.
 
Andreas Bubenzer-Paim, Managing Director & Head of Technology Banking, Bank of the West/BNP Paribas, who will present in several sessions, says treasurers need to have a good banking strategy and choose a partner that can provide comprehensive services.  
 
“If you’re in a fast-growing sector, you really need to take a minute, step back and think about what you are doing,” says Mr. Bubenzer-Paim. This means they should consider “which markets am I going into? At which rate am I going into these markets, and whatever I decide to do now, am I willing and happy to live with that structure and set up for the next 5-10 years?”
 
Mr. Bubenzer-Paim gives the example of a company quickly expanding globally into several different markets at once. “You might be entering several countries in a single quarter or maybe even a single month,” he says. “Yes, you want to open accounts quickly, because without the accounts you can't operate in those countries; you need to be able to pay payroll, you need to be able to pay your vendors, and you need to accept customer payment.”
 
But in the rush to get things up and running in 20 countries, “you really don't want to end up … working with 20 to 30 banks” and their respective onboarding processes and online banking systems. This is the point where those treasurers need to step back and think about their banking strategy. “Shouldn't I pick a bank that has a global platform” that would cover at the very least 80% of the countries the company wants to enter. “As a treasurer, my life is going to be so much easier.”
 
For its clients, Bank of the West/BNP Paribas, which has been advising technology companies for more than 30 years, offers a local/global approach where a local advisor dedicated to the technology industry helps the company dealing with the complexities of going global, offering access to the bank’s full global services.
 
At the coming meeting, members of the group will get an update on US tax reform from E&Y and members who have been making adjustments already, as well as a look at post-reform global structures that work. They will also delve into creating a treasury vision and mission statement that aligns with the business, as well as the importance of articulating treasury’s value-add in the context of the corporate vision and mission statement. 
 
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Blog entry
By thoward, September 25, 2018
 
Treasurers at the world’s largest companies kick off their meeting tonight with dinner and then dive into capital structure and allocation decisions tomorrow at host Gilead Sciences in Foster City, CA.
 
US tax reform has prompted US multinational corporations to revisit capital allocation and investment decision-making. How are capital allocation decisions made at corporates and how has this been influenced by tax reform and market conditions? Are there any potential unintended consequences of different evaluation frameworks? Members will delve into whether beyond the initial decision-making process, they will have to test their capital allocation decisions to see if they are effective or ineffective after an outlay of funds.
 
Some of the questions members will look to answer include:
  • How do companies prioritize capital allocation between growth investment, return of capital, and improving balance sheet, and what are the strategic and capital market implications?
  • On what basis are internal and external investment decisions made (e.g., variants of NPV, IRR, ROIC, etc.) and how are appropriate hurdle rates for different jurisdictions set and managed over time? 
  • How should these change with tax reform and market conditions, and how can the choice of evaluation framework and/or hurdle rate impact strategic decision-making?
 
Members will also get an update on US rules and IRS regulations. They’ll hear expert commentary on the key elements of US tax law changes and related changes in IRS regulation that treasurers need to understand. They hope to clarify what new regs and interpretations have emerged since the group last met in the spring and how they may affect US-based multinational companies reviewing their available cash, capital structures, and general tax planning. They will also seek to know what companies are doing now and what they should be thinking about in the next six to 12 months.
 
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Blog entry
By mkmoore, September 24, 2018
 
BNP Paribas hosts the T30 LC peer group at their New York offices overlooking Times Square on October 11.
 
With so much cash planned for repatriation, treasurers at multinational corporations are finding it challenging to determine an optimal capital deployment strategy. As the members of Treasurers’ Group of Thirty Large-Cap Edition peer group get set to meet in October one of the biggest topics on their agenda is to touch base with each other on how to address cash.
 
Vocal investors may call for stock buybacks, but executives may wonder if the company would be better off using the cash for capital improvements, R&D or other investments that will help the business in the long term. The problem is deciding how buybacks and investments can be compared and whether the company should instead strengthen the balance sheet by holding excess cash or reducing debt.
 
The members will also tackle technology advances. Armed with a host of buzz words, acronyms and phrases, i.e., bots, RPA, AI, data visualization and blockchain, etc., vendors have been making their cases and pitching new products. But it is up to treasury to decide what to choose. This session will focus on real use-cases showcasing new treasury technology or treasury applications for broader-use technologies.
 
The other topic high on the agenda is Brexit and LIBOR replacement to help members separate the signals from the noise.
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 20 invitation-only peer groups, NeuGroup facilitates over 38 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 450 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By amichels, September 21, 2018
 
Trade War Politics, to Hedge or Not, the Forwards vs Options Conundrum, and FASB’s Commodity Hedge Accounting Shortfalls
 
Thank you to the members and guests who attended the Foreign Exchange Managers’ Peer Group meeting this month hosted by Medtronic in Minneapolis and sponsored by Standard Chartered. Here’s a brief rundown of some of the meeting’s key takeaways. 
 
China Trade War: Just Politics? The Trump Administration’s trade war rhetoric appears to be heating up, but Standard Chartered assured attendees that much of it is politics. The bank’s expert on China’s renminbi (RMB) said that optimism for a near term solution is low, given China wants to become a technology powerhouse while US hawks balk at that prospect and decry the US’s China trade deficit.
 
Takeaway: Common sense should prevail. After midterm elections the cost of imposing tariffs will become clearer and the political calculation should change. In addition, corporate America is lobbying against tariffs behind closed doors. 
 
Takeaway: Too much to lose. China has signaled its intent to stabilize the RMB and make it an international currency, in part by increasing liquidity in more sophisticated financial instruments. China has no interest seeing the RMB weaken further in the near-term. 
 
To Hedge or Not to Hedge. A Standard Chartered banker explained how analyzing hedging needs on a portfolio basis can provide a bigger bang for the buck. 
 
Takeaway: More risk reduction for less. Considering all exposures holistically gives a more realistic understanding of risk. By calculating value-at-risk (VaR) this way, overall risk is 40% lower than calculating it for each currency (and a lighter load for treasury). Adding a small number of additional currencies can reduce risk by an additional 40% without increasing cost. 
 
Forwards vs Options: The Ongoing Conundrum. In a roundtable discussion, members presented a strong argument for focusing on forwards, given options’ premium cost and the operational challenges. Others, however, noted that technology can reduce the operational hurdles, and zero-cost collars eliminate premiums. 
 
• Takeaway: Options, with a view. Participants concluded that on the relatively rare occasions they’ve used options rather than forwards, it was with a view to the currency moving in a certain direction. 
 
•Takeaway: Mixing options lowers vol. A Standard Chartered banker said recent research found that layering forwards and options further reduces volatility than using just forwards. 
 
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Blog entry
By mkmoore, September 21, 2018

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

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

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

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

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

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

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