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

Blog entry
By thoward, May 07, 2018
The Fed has introduced a more reliable benchmark to replace the scandalized Libor.
 
There’s a new benchmark in town ready to take down the tainted Libor. It’s called the Secured Overnight Financing Rate or SOFR. The Federal Reserve describes it as a “broad measure of the cost of borrowing cash overnight collateralized by Treasury securities” and is compiled using a volume-weighted median of transaction-level tri-party repo data from the Bank of New York Mellon, GCF Repo transaction data and bilateral Treasury repo transactions data from Fixed Income Clearing Corporation’s Delivery-versus-Payment service. That’s quite a mouthful. But to learn more about it and why corporations might face a challenge switching to SOFR, click here.
 
Also this week, we delve into what may happen to Europe’s low-volatility net asset value funds (LVNAV) if European regulators end up nixing so-called “reverse distribution mechanisms” (RDMs) in money market funds (MMFs). The issue is critical because RDMs allow euro-denominated MMFs to operate in a negative yield environment but maintain a stable NAV and pay dividends. To do this, the funds cancel some shares held by investors. Investors may hear something from European regulators in the next week, according to some sources. 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.
0
Blog entry
By bshegog, May 04, 2018
The TIMPG spring meeting in New York, hosted and sponsored by BlackRock, gave members the chance to discuss where they stand, post-tax reform, on repatriating (and spending) overseas cash, hear presentations on the markets and investing cash, connect during breaks on topics including setting up CP programs and European money market reform, and hear how one investment manager is making his company’s defined contribution plan more like its defined benefit plan. Here are some of the highlights from the day-and-a-half:
 
Repatriation uncertainty enjoys company. Tax reform and its various implications for cash managers took center stage, as pre-meeting survey results ranked tax reform planning and analysis the top project and priority for members. One manager said, “My world changes dramatically with tax reform,” while another commented, “everything revolves around tax reform.” But when all was said and done, many members left the meeting feeling comforted that not everyone has mapped out precisely how much cash is going to be repatriated, when it’s going to be moved back to the US, what that cash will be used for exactly, or has figured out the accounting details of transferring assets from one country to another. One member said she liked hearing that repatriation for many companies is “a work in progress” while another found it interesting that almost everyone is “still in thinking mode.” Read more about tax reform here. 
 
Negative rates and European money market reform. New rules eliminating constant-value prime money market funds in Europe go into effect in January 2019. As an alternative, many MNCs have been considering the benefits of low-volatility NAV funds (LNAV) that will price to two decimal places if the full mark-to-market price doesn’t deviate from $1 by more than 20 basis points, making the funds similar to constant value NAV funds. But they will resemble variable NAV funds if things go south. And here’s the question one member brought to BlackRock: What will be the effect of negative interest rates be under the new rules? In the past, so-called reverse distribution or share erosion (cutting the number of shares) kept the funds paying dividends. But that may not be allowed under the new rules. BlackRock said the issue is being fought over in Brussels, with a meeting planned for early May. Stay tuned. 
 
Here are two more subjects that provoked interesting observations and discussions:
 
• ESG investing: In response to a member question about using environmental, social and governance (ESG) criteria, another said, “we have sectors that we won’t buy,” and talked about owning the “right things” while avoiding “the wrong things.”  Another said credit managers “should have this sensibility in their models.” Figuring out what’s right and wrong is another matter. One member half-jokingly reminded us that sin taxes on alcohol, tobacco and gaming can raise money that helps society, complicating the process of deciding on an ESG criteria.
 
• Reporting rhythm: Discussing the frequency and detail of reporting to executives, the consensus seemed to be that less is more. As one manager put what he’d learned at the end of the discussion, “sharing too much information is bad for our health.” Another said his department keeps monthly reports to the treasurer “pretty basic…We don’t get into a lot of underlying data. We communicate as little as possible.” A third said reports to the CFO and the board are kept “at a high level” and feature a lot of PowerPoint charts with colors. “They love it,” he said to laughter. 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
0
Blog entry
By afriberg, May 03, 2018
Members of the NeuGroup for MNC regional treasury in Europe (EuroTPG) are gearing up for their 2018 first-half meeting hosted by Lantmännen in Stockholm, Sweden, on May 23. Here are some highlights from the agenda:
 
Cash Management Trends and Innovations in Treasury. Technology has become a critical part of treasury. Banks, vendors and infrastructure providers have been pushing the boundaries, now offering tools designed to ease processes, integrate workflows and deliver real-time and accurate data for decision-making. Meanwhile, artificial intelligence (AI) and robotic process automation (RPA) are gaining acceptance. This is transforming cash management activities and vastly improving operational efficiency. We will hear from an expert speaker on this topic, which ranks as a top priority for members. Read more about RPA here.
 
Cybersecurity – Threats, Mitigation and Insurance. Facing an increase in the frequency and complexity of threats as automation and digitalization become the norm, members will discuss cybersecurity, evolving threats and preventive measures they have used. The session will feature a roundtable on what protective strategies members have explored, responses to breaches and their experiences with cyber insurance in Europe.
 
Also on the agenda:
 
“Solve My Problem.” The group will try to collectively address and offer solutions to specific challenges members are facing. These may include, for example: KYC compliance and privacy concerns in the context of the General Data Protection Regulation (GDPR); collections and trapped cash in sanctioned countries; and building a treasury dashboard.
 
US Tax Reform and Implications for EMEA Regional Treasury. Regional treasurers are currently confronting a host of implications stemming from US tax reform. For member discussion, NeuGroup will share a summary of takeaways from our peer group meetings thus far, covering how corporations are best managing issues like dividend and repatriation considerations; cross-border funding implications; onshore and offshore cash going forward; and business-trading and legal-entity structures.
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
0
Blog entry
By afriberg, May 02, 2018
Members of the NeuGroup for assistant treasurer leaders (ATLG) will gather in Summit, N.J., on May 23-24 for their 2018 H1 Meeting hosted by Celgene and sponsored by Bloomberg. Here are some of the highlights from the meeting agenda:
 
Developing Talent for Treasury and Your Own Advancement. How do you develop treasury talent and keep employees passionate about their work? And how do you successfully move up and into the treasurer’s office yourself? What is the necessary skill set and how do you get it? Led by meeting moderator and former treasurer of Caterpillar, Ed Scott—who will describe his own career journey—members will discuss their challenges, best ideas and successes. Read more about talent management here. 
 
Pension Management Case Study. A member will share her company’s approach to pension asset management in the context of bankruptcy proceedings and life after reorganization, including strategies to de-risk pension liabilities; how pension liabilities affect company valuation; and de-risking in the prioritization hierarchy of capital structure initiatives.
 
Technology and Systems to Future-Proof Treasury. Beyond TMSs, what are the emerging technologies that will transform treasury and deliver on efficiency and automation mandates, as well as enable treasury to make smarter decisions using data that is increasingly available in real time? What part do blockchain, robotic process automation (RPA) and artificial intelligence (AI) play in the future of treasury? Members will weigh in with their opinions and approaches. 
 
Tax Reform, Repatriation and What Comes Next? Members will discuss questions arising from the new US tax regime, including: What are all the implications affecting capital structure, investments, and cash management? What actions are MNCs taking in the short term and what are some longer-term changes they’re making, and why? Will there be wholesale changes on the balance sheets of corporate America?
 
Also on the agenda:
• Best practices in debt capital markets with experts from Bloomberg
• Transition from LIBOR to SOFR
• Hedging FX, rates and commodities
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
0
Blog entry
By gwestphal, May 01, 2018
Fintech is no longer a disrupter, but a partner to help strengthen new solutions with more integrated propositions.
 
Virtual account structures can add significant value and efficiency in the processing of real-time payments because of the need for instant clearing, availability of funds and account reconciliation. Treasurers will have greater flexibility to design and maintain complex account hierarchies, while maintaining full control of the structure.
 
This spotlight feature explores what you should be focused on NOW to best utilize these new technologies and incorporate them into your overall treasury optimization strategy.
 
 
Read this free report to:
• Learn how to create a virtual account structure for your organization that will allow for real-time processing, increased visibility and greater optimization of your working capital.
• Understand how the rapid increase in the use of APIs will enable both corporate and consumer bank customers to use third-party providers to manage their finances including bill pay, P2P transfers and spending analysis.
 
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.
 
0
Blog entry
By thoward, May 01, 2018
The May issue of iTreasurer explores the effort that will be needed to decode the recent tax law changes, as well as how financial companies are racing to embrace technology to help in areas like payments and just about all lines of business. In between we take a look at SWIFT’s partnership with SAP and summarize two panel discussions led by NeuGroup’s Anne Friberg that took place at a recent EuroFinance conference in San Francisco.
 
Starting on page 1, iTreasurer delves into some of the tax provisions that went into effect at the end of last year. While it’s a boon for corporates in the long run, realizing that boon will involve a high degree of brain-racking. That’s because the law isn’t fully formed, and many, many questions remain. As members of NeuGroup’s Treasurers’ Group of Thirty have been told, “only limited guidance [has] been released as of mid-March, mainly concerning MNCs’ repatriation tax” and “regulations to clarify other key provisions probably will not start arriving until summer or fall, at the earliest.” So there is a ways to go before details get ironed out.
 
In “Anticipated Exposures” on pages 4-5, iTreasurer looks at how borrower-friendly covenant-lite loans will help some companies in a downturn; how separately managed accounts are still gaining fans despite new short-term products and a smallish return on money market funds; and why companies need capital-allocation frameworks.
 
On page 6, we look at global financial messaging service SWIFT’s recent announcement that it has reached an agreement with SAP to allow corporate clients of the business-software giant’s S/4HANA ERP offering to directly access the global messaging service’s vast network of banks, without intermediaries or the operational challenges of an in-house solution.
 
May’s peer group meeting summary gives insight into NeuGroup’s FX Managers’ Peer Group “summit” which brought together both the FXMPG and FXMPG2 peer groups. This year’s summit topics included an in-depth look at dashboards, the headaches of trading restricted currencies, the implications of new hedge accounting rules and the effects of US tax reform.
 
On page 11, iTreasurer looks at the continuing détente that is occurring between banks and their up-and-coming friends, fintechs. This is becoming increasingly evident in the payments space as well as in areas such as data, artificial intelligence, open banking, client networks, security, crime prevention and identity protection.
 
“Fintech is really exciting for us,” said Joanne Towers, head of payments product for Europe, global liquidity and cash management at HSBC. “At HSBC, we partner with fintech to allow us to strengthen our solutions with more integrated propositions.”
 
Finally, on page 15, contributor Anne Friberg gives an update on EuroFinance’s recent “Managing International Growth” conference in San Francisco, the target audience for which was fast-growing companies on the West Coast. Ms. Friberg moderated two panels on topics that are important to those fast-growing firms: FX risk management and M&A.
 
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.
0
Blog entry
iTreasurer, MMFs
By thoward, April 30, 2018
Gearing up for distribution to shareholders and paying down debt, MNCs keep cash in MMFs.
 
Although US dollar institutional assets in money-market funds have leveled off and decreased somewhat after rising over the past 12 or so months, the erosion of assets under management has slowed. This suggests larger companies are parking cash for use in the future, according to JP Morgan Chase.
 
“Relative to the average over 2013-2017 period cumulative net outflows from USD MMF are running about $50bn less, suggesting more money is staying in MMF, either because yields are higher or because corporates are using the MMF as a half-way house between the fixed income market and future payments to shareholders,” JPM said in a recent note to clients. This could all change by the end of the year, with outflows from prime MMFs picking up as companies get a better handle on the tax implications of bringing home the cash. Read more here.
 
Also this week, Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo is looking to make his agency more deliberative. Gone are the days when the CFTC operated in calamity mode, popping out regulations like donut holes. In releasing his so called “Reg Reform 2.0 Agenda” at the International Swaps and Derivatives Association (ISDA) annual meeting, Chairman Giancarlo said now was the time for a more thoughtful process to devising and implementing new swap rules.
 
“I'm committed to a deliberative process and getting back to regular order at the agency,” Mr. Giancarlo said in an interview at the meeting with former CFTC Commissioner and current ISDA Chairman Scott O’Malia. “We're not in the wake of a crisis right now – we need to take the time to get this right.” Read more here.
 
Finally this week, iTreasurer looks at how the relationship between companies and activists has entered détente. Whereas in the old days activists would make outlandish (and often self-serving) demands of companies and their boards, it’s now become more about collaboration. 
 
This was one takeaway from a recent meeting of NeuGroup’s Assistant Treasurers’ Group of Thirty (AT30). One banker at the meeting who leads his firm’s activist defense team said companies and activists are working together more than ever. Activists have modulated their campaigns, offering advice that companies can more easily agree to. Also, many companies have activist playbooks at the ready or are now just managing their cash better. Companies are also getting help from banks, which now have activist-defense advisories to guide companies in dealing with outspoken shareholders. All of this has mellowed the exchange between company and activist. 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.
0
Blog entry
By bshegog, April 30, 2018
The Assistant Treasurers’ Group of Thirty (AT30) April meeting in New York hosted and sponsored by Deutsche Bank featured valuable exchanges on the consequences of US tax reform, including planned uses of repatriated cash as well as capital structure, current trends in blockchain technology and plenty of details on member projects and priorities. Here’s some of what you missed.
 
This time is different. A Deutsche Bank strategist noted that 2018 is different from any post-recession year so far, with a more hawkish Federal Reserve under Powell and the return of volatility. She said that continuing, synchronized global growth (with tax reform providing a big US boost) might be one of the most underappreciated themes driving markets and earnings, while monetary tightening and the Fed’s liquidity unwind are the most prominent factors. And be prepared: even though Deutsche is still revising global growth forecasts higher, it says fundamentals are past peak, meaning there will be more volatility. 
 
Blockchain and digital technology: hype and hope. A Deutsche Bank expert provided a timely tutuorial on blockchain (more than half of members said in the pre-meeting survey they don’t understand blockchain well). She provided useful insights, saying we are currently in a “hype cycle,” that blockchain is “not a panacea” and cited a study showing that 92% of blockchain projects started in the last three years have flopped. But blockchain is a force treasury must follow because of use cases including improved bond issuance, KYC compliance, supply chain management and trading functions. She expects a central bank to test a blockchain pilot program in the “next couple years.” Read more about the future of fintech here. 
 
Activist campaign activity levels expected to remain elevated in 2018. Deutsche Bank explained to members that activists are going after more companies outside the US, and their campaigns are becoming quieter and more collaborative. They’re also more focused on operations than balance sheet-focused. The presenter noted that capital return activist campaigns have achieved a high level of success. Activists have not yet been knocking on doors to demand return of repatriated cash.  One member noted that, "We're likely to get more questions every quarter on this." Members agreed that the best defense is strong performance and good messaging. 
 
Odds and ends: bank fees and hurdle rates. On fees, the consensus seemed to be that the more M&A your company does, the more leverage treasury has to press banks to lower fees on say, revolvers. One went so far as to say, “I find banks, they’re weak,” and wondered why institutions that always tout relationships with clients “don’t’ act like it’s a relationship” adding “they really need you more than you think.” 
 
On hurdle rates, one members aid using CAPM to calculate WAAC is “broken” but is still used because there are no great alternatives, and that some companies use Ibbotson because it generated higher WAAC levels, not because it’s right. Another said there is no hiding the fact in her company that treasury is using a hurdle rate different than indicated by WAAC. The goal of raising the cost of capital is to discourage deals that aren’t likely to meet the overly-optimistic cash flow assumptions of business units. But one member said rather than using an “artificial premium” to calculate WAAC, his company presses business units to justify or lower their cash-flow projections.    
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
0
Blog entry
By thoward, April 27, 2018
The Internal Auditors’ Peer Group is gearing up for its first meeting of 2018. Members will delve into a wide range of topics, some somewhat new, like agile audits, and some recurring, like the ongoing of challenge of talent management. 
 
Here is a brief synopsis of some of what will be discussed and questions that will be addressed. 
 
Metrics for Measuring Management and Staff Performance. Auditors sometimes struggle to discern between performance results for directors and managers. How do others measure performance at the director and manager level? How have others created accountability on department-wide objectives?
 
The Talent Conundrum. Employers continue to struggle with attracting and retaining critical-skill and top-performing employees.  According to a range of studies, about of half of companies report challenges attracting critical-skill workers, and even more have problems hiring top-performing employees. Talent management always presents a challenge to internal audit departments, too. What are some successful retention programs? What are some best employee evaluation practices? Read more about talent management here. 
 
Agile Audits. Agile auditing is becoming a popular way for IAs to add value. Using predictive data analytics to focus scope, then using iterative testing and sprints in the field, auditors can respond quickly to any recent changes at the company.
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
0
Blog entry
By afriberg, April 27, 2018
Treasurers of large-cap companies meeting in mid-April at Starbucks headquarters discussed topics ranging from the top priority of planning for the effects of tax reform to cyber insurance, interest rate risk management and the effects of new technologies on corporate treasury. Perhaps most interesting was the number of treasurers who mentioned treasury training, not only for their staffs but even at the more senior level, including themselves. While there are training courses out there and the CTP and CertICM, there seemed to be a feeling that there are not enough options and that they’re not accessible enough. NeuGroup will help members connect and exchange knowledge on this topic.
 
Here are some of the takeaways from the meeting:
 
Tax Timing. Sponsor US bank covered the timing of paying tax on deemed repatriation, the potential effects on liquidity structures globally, as well as the aspects of other foreign tax regulations such as BEAT, GILTI and FDII. 
 
• The tax on repatriated cash is spread over 8 years and rises over the last 3 years. Years one through five the tax is 8%, year six 15%, year seven 20% and year eight 25%! 
 
• The ultimate effect of tax reform will be a significant deleveraging as debt matures or is even bought down. 
 
• Overall, tax reform is significantly beneficial to US corporations, and will most likely result in benefits longer lasting than people are factoring in today.
 
Cyber Reality. The cyber insurance practice head for Marsh laid out the big picture on cyber risks and then delved into the cyber insurance market. Before that, the treasurer of a large shipping/transportation company described how its European subsidiary was attacked by malicious Russian cyberware. Unfortunately, the business had no cyber insurance.
 
• Most, if not all, companies will be constantly under cyberattacks and cybersecurity can only do so much. Therefore: 
 
• Cyber insurance should be part of your arsenal to address this ever-growing risk.
 
• Why? In 1975 83% of the S&P market value was tangible assets and in 1985 it flipped completely with 84% being in intangible assets.
 
• Also think about the secondary and tertiary effects of a cyberattack. While computer systems might get resume running in 24 to 72 hours, the lingering effects on the underlying integrity of data could be months or longer.
 
• In today’s cyber insurance market, it is possible to get up to $1 billion of coverage with the average policies being written in the $300-$500 million range.

Read more about cyber insurance here. 

 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
0