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

Blog entry
By jneu, June 02, 2017
At a time when treasurers have a lot to process, judgement may get lost in the need to get things done during the next-wave transition to digitalization.   
 
Treasurers’ Group of Mega-Caps members met for their (rescheduled) 2017 H1 meeting on May 17. Planning for tax changes, particularly the potential use of repatriated cash, remains a key priority for members. However, highlights of the day also included a presentation on planning for the digitalization of treasury and the resulting need to recruit staff members skilled in data visualization and software languages, including R and Python. Right on cue, one member discussed how the company’s machine-learning tool helped forecast accounts receivable with 15%-20% less volatility. This prompted some members to voice concern that overreliance on data may leave some treasury departments with staff lacking the judgment and real-world experience required to react appropriately to change.
 
Surfing the digitalization wave. Rapid advances in automation and digitalization present both immense opportunities and challenges for treasurers unsure if their staffs and platforms are well positioned for what one treasurer calls the “digitization storm” that’s creating “non-specific anxiety about the future.” To ride the wave and prevent what this member has labeled the “tsunami effect,” treasurers must look within and beyond their departments to find staff skilled in data visualization tools to aid in forecasting, including programming languages R and Python, and encourage learning of required skills. But as one presenter half-joked, “Excel is really hard to kill,” suggesting this transformation will take time as treasury moves outside its comfort zone and embraces new tools. 
 
Redefining treasury. The uptick in technology change is also impacting treasury transformation projects. One member described “immense change” as he pushes to move his treasury department “into the 21st century,” improve risk management and complete a 10-year “journey” to get SAP implemented across all businesses. He and others described ongoing efforts to define what duties fit into core treasury, what can be relegated to service centers and what doesn’t belong in treasury. Most members agreed that while centralization is key for control, a model based on “following the sun” that shifts responsibility and oversight to regional treasury centers as the sun moves from Asia to Europe to North America is optimal. Also deemed ideal but not common is what one member has achieved: having M&A valuation report to treasury, avoiding what another treasurer described as having 10 groups come up with 10 different costs of capital when evaluating a deal or relying on a corporate finance team that, as another member said, “will make any deal look right.” This valuation role is consistent with the increasing need for treasury to support broader business goals as some functions like cash management are automated.
 
Finally, as members confront the reality of digitalization forcing change on the treasury of the future, some found common ground in warning that overreliance on data will leave departments ill-equipped to deal with real-life scenarios requiring hands-on experience. “I get a little worried about judgment versus data. We’ve seen this movie before,” said one member, also mentioning the issue of pushing too much responsibility to shared service centers. That said, there is widespread recognition that treasury needs to make use of new cloud-based tools and find staff well versed in the tools and programming languages that will allow more senior treasury members to make better decisions and focus on supporting broader business goals.
 
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 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/brochure/about-peer-groups for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By aorwick, June 02, 2017
The Assistant Treasurers’ Group of Thirty discusses tax reform, the political economy, superforecasting and blockchain in meeting sponsored by Credit Suisse. 
 
Tax reform: Preparing for the unknown. Most AT30 members pointed to tax reform as their companies’ top priority, despite its uncertain outcome, and a majority said they’ve prepared various scenarios for senior management. On the topic, Credit Suisse’s Sal Seguna compared the Trump Administration’s and Congress’ proposals, laying out and contrasting their components. The controversial border adjustment tax (BAT) will likely be reined in significantly, he said, and limiting debt-related deductions will face major hurdles. Since the legislation will probably utilize the reconciliation process to skirt a Democratic filibuster, it must be revenue neutral — unlikely — or it will have to sunset in 10 years. If the healthcare repeal and its tax cuts die in the Senate, the corporate rate is unlikely to drop beneath 25%, Mr. Seguna said. Lowering individual tax rates will likely be a political necessity, flowing retail money into fixed-income and tightening spreads. If corporates spend too much repatriated cash on buybacks and dividends, Credit Suisse believes the rating agencies may eliminate “net debt” treatment, pressuring ratings downward.
 
The times they are a changin’. One member company recently begun shifting its massive investment portfolio to safer territory. Traditionally split into buckets for operating cash, short-term investments and a strategic return portfolio, the treasury department has improved its operational efficiency, cash forecasting and pooling structures to identify excess cash more quickly and move it into higher yielding investments. With global volatility and a diverse collection of businesses to manage, the member decided it was time to reduce investment-portfolio risk. The portfolio will have a shorter duration with maturity limits on securities, and its allocation to agency mortgage-backed securities will shrink.
 
Global outlook? Fair to middling. A trio of experts from Credit Suisse updated members on changes in the global markets and political economy. Their message: Things could be worse. Optimism will likely taper as uncertainty grows around Republicans achieving their policy goals. Two additional rate hikes are more likely than three. And the Fed is likely to change its formal investment policy and seek to shrink its balance sheet, potentially sapping economic growth if offsetting measures such as easing Basel III take too long to arrive. Finally, expiring terms at the Fed will enable the Trump administration to significantly shift monetary policy. Obamacare repeal is unlikely before summer, and tax reform is unlikely before first quarter 2018. Credit Suisse foresees inflation remaining muted. 
 
Watch out for superforecasters. Keep your eyes open for what Michael Mauboussin, head of global financial strategies at Credit Suisse, calls “superforecasters.” They are exceptionally talented at making political, economic and social forecasts, stomping control groups by double-digit percentages and even CIA analysts by 30%. Superforecasters understand clearly what they know and what they don’t, they actively seek other points of view, and they perform even better in teams. 
 
The biggest development no one understands. Last year, the announcements about blockchain initiatives arrived one after the other, but assistant treasurers were apparently too engrossed in integrating mergers and cash forecasting to learn the ins and outs. Nevertheless, numerous AT30 members expressed interest in better understanding the distributed database technology, which encrypts information into immutable blocks and may ultimately make many costly intermediaries obsolete. 
 
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 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/brochure/about-peer-groups for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By thoward, June 01, 2017
The Internal Auditors’ Peer Group kicked off its 2017 get-togethers with a very full day-and-a-half meeting at Hewlett Packard Enterprise in Palo Alto, California.
 
Members of the IAPG discussed a wide range of topics at its first-half meeting, among them driving accountability in remediation, auditing business partners, working with legal and integrated audits. There were several key takeaways from each of these sessions. Here is a sampling:
 
Audit and legal: same goal, different approach. For the most part, audit plays well with the legal department. That is, they have a good relationship. However, that doesn’t mean there isn’t tension. For instance, one member discussed how legal and audit have the same goal in protecting the company. But they go about it in different and sometimes opposite ways. For its part, the audit department strives for a certain amount of transparency of process. If there is a problem, it must be identified, and if serious enough, reported to the audit committee; the argument here is that the overseers of the company – the Board and its audit committee – should be aware of troubles brewing that could cause the company harm. But legal may say “hold on a second,” arguing that identifying or pointing out a problem and calling it out to the audit committee could open up the company to liability well beyond what it may have planned or thought of. Wouldn’t it be wiser to approach in a more cautious way? Each argument has its merits, which means both departments should work together to resolve any differences and put the company’s interest first, of course.
 
Third-party vendors: articulating what you want. In a session on auditing third parties, presenters from one member company discussed auditing a third-party data storage company. One lesson learned in these audits is that companies only get as much service as they ask for – even if they think they are paying for a certain amount of service. The presenters gave the example of a data storage area at one vendor of two different companies. One area was messy and looked very suspect in all phases, from backup to security. Meanwhile, an area next to it storing data for another company was completely buttoned up and neat, leaving no doubt that its data was being taken care of in a better way. The interesting thing is both companies were likely paying for the same level of service, but one had laid out specific parameters for its storage and checked on it more frequently. The other company perhaps assumed it was getting the same level of service, but never asked or made sure.  
 
Of course, on one hand, this doesn’t sound like the greatest vendor in the world, and one could argue that allowing such sloppy service for one client while the other, for no more money, wouldn’t get it much more business. But it does illustrate the need to for more frequent checks, i.e., audits, to make sure you’re getting the same level of service as the company next door.
 
Remediation: time is of the essence. For auditors, one thing worse than a process problem is having it linger unresolved. That’s why internal audit sometimes struggles with getting those that own the issue to fix it in a timely manner. There are priorities of the auditee that need to be considered. But even that can be adjusted with help from management. At the presenting company, after getting a mandate from the CEO to fix things ASAP, internal audit was able to compress remediation times down to 90 days from sometimes a year or more. This was a gradual process, but if it wasn’t done, the process owner would have to explain to upper management or sometimes the audit committee why it wasn’t fixed. This is something most of them try to avoid.
 
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 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/brochure/about-peer-groups for more information about peer groups and www.iTreasurer.com for content and news.
 
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Blog entry
By wchan, May 26, 2017
The Asia Treasury Peer Group (ATPG) recently met at Nike’s Singapore campus to consider the region’s complex regulatory landscape.
 
Some corporates invest a significant amount of time and effort in managing their relationship with local regulators. In China and India, for example, treasury professionals will negotiate exceptions to existing regulations or seek clarification for vague regulations. Furthermore, they have to document communications and approval from regulators to safeguard their activities. 
 
On the other hand, some corporates prefer to act more conservatively so they’re not perceived to be influencing regulators in any way. One member asked, “How do you manage your relationship with SAFE, the Chinese government agency?” Another member replied, “It’s like dealing with my in-laws. I rely on my spouse to manage that relationship, and in this case, I rely on my banks to do the same with SAFE.”
 
The group went on to discuss the balancing act of checking metrics and setting good targets to govern treasury activities and drive performance. Some members use annual (internal) customer surveys or review achievements in pre-agreed areas of influence and focus areas. Still, others compare budgeted cost against value-add to justify the team's existence or focus on compliance matters. There is no ideal set of KPIs for treasury, so perhaps the intent should be that every metric drive behavior and activity that either reduces cost, reduces risk or increases value-add. No matter the KPI, a treasury scorecard improves visibility of treasury within the company, so that the value-add that treasury brings is acknowledged. This helps significantly with senior management messaging.
 
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 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, May 22, 2017
Tech20 members came together earlier this month at PayPal in San Jose, California, for the 2017 Tech20 mid-year meeting sponsored by Bank of America Merrill Lynch. 
 
While other items were discussed, including the potential for and shape of US tax reform, the main focus was a large enterprise initiative that PayPal is rolling out in response to member feedback. At last year’s meeting, members pointed out concerns they had with account management and risk controls for PayPal accounts. Enterprise-level controls and user management on par or better than their bank account equivalents were needed to grow PayPal usage beyond nuisance payments to small vendors and customers, often inherited in an acquisition. 
 
Seeing an opportunity, PayPal’s treasurer reached out to Tech20 members for more detailed feedback on what they would like to see. This has led to a large enterprise initiative with full c-suite buy in, plus development of a new enterprise portal that will extend the PayPal use case and pay dividends to smaller company customers who desire world-class account management and risk controls.
 
This is also a great example of how NeuGroup creates value with knowledge exchange and shows how members give insight to get better solutions. Here are some further thoughts on payments innovation:

 
Piggybacking on a payments showcase demonstrating the digitalization of payments via mobile phones that PayPal is helping to lead, the group also discussed the digitalization trends impacting treasury. One clear outcome is that treasurers need to tap Millennials to help build better data analysis, reporting and visualization tools. Millennials are unafraid of learning new tools and even the code to make them work, and they should be encouraged to do so.
 
Finally, the group touched on ongoing M&A integration challenges. If tax reform instigates a new wave of strategic acquisitions by tech companies with now usable offshore cash, the need for effective M&A integration plans will only grow. In line with this need, NeuGroup had just compiled at the request of a member company's new treasury ops head a summary of recent M&A integration discussion takeaways to help treasury operations better absorb acquisitions. This was promptly distributed to the entire Tech20 following the meeting.
 
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 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 gwestphal, May 19, 2017
The Global Cash and Banking Group keeps focus on tech, tax reform and working capital management in meeting at Electronic Arts. 
 
Highlights of the meeting, sponsored by Deutsche Bank, include: 
 
Stay the Course. Innovation and project implementations continue to be top-of-mind for members. Many are embarking on significant implementation projects, including ERP upgrades, SWIFT implementations and TMS rollouts. Kyriba was the system most often mentioned as part of the member implementation plans. 
 
Alliance Lite or Service Bureau? With SWIFT implementations taking center stage, the group had a robust discussion about the benefits and challenges of two solutions: Alliance Lite and the use of Service Bureaus. Members shared pros and cons of both solutions, with no clear “winner.” Company size and complexity were key components in deciding the appropriate path. It was also suggested that Alliance Lite could be used as a primary solution, with a Service Bureau arrangement in place as part of a disaster recovery program, used only in the case of emergency. 
 
• Tax Reform and the Narrow Road Ahead. The group also discussed the uncertainty in the US & global economic environment as all await further guidance from the current administration. There are hopes that any reform will include the possibility of favorable tax treatment on foreign repatriation and the potential for a lower corporate tax rate. Hailey Orr of Deutsche Bank led the group through a variety of scenarios with an overall bias toward a more tempered “middle of the road” plan that is significantly less impactful thans what President Trump described as part of his campaign. It isn’t likely that any significant changes will be approved and/or implemented until later this year or potentially into early 2018.  Members confirmed that they have been busy preparing for a variety of scenarios if a tax repatriation program is approved, but for now, things are on hold.
 
• Is Your Cash Hiding? As part of the Open Forum, members discussed the increased attention on overall Working Capital Management. Most companies confirmed that Treasury has either taken on full responsibility, or acts as a major contributor, as they engage with other departments to define ways to improve processes and thereby better manage cash along the full working capital continuum. Dynamic discounting and traditional SCF strategies were discussed as possible solutions to bring added efficiency to working capital management. 
 
• NOT Ready for Real-time. Real-time payments are not a current focus for most members because of the system changes that would be required to accept and process on a real-time basis, but also, and maybe more importantly, they are not interested in the significant hit having to make real-time payments would have on their overall working capital cash flow. The float is still very important on outbound transactions. 
 
The group will gather again on Sept. 27-28, 2017 at the Microsoft headquarters in Redmond, Washington, in a meeting sponsored by Bank of America Merrill Lynch. 
 
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 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, May 16, 2017
The Asia CFOs’ Peer Group addresses China’s new cybersecurity law, supply chain digitalization, organizational restructuring, women in leadership and more in meeting at Coca-Cola. 
 
Here are some highlights from the meeting, sponsored for the first time by Deloitte: 
 
How should CFOs react to digital disruption? Scope of responsibility in the digital age will be impacted by digital media for reporting, advanced analytics from big data, and automation from various technology enablers. One example of automation is Robotic Process Automation (RPA), where repeatable tasks with human interactions in various user interfaces can be automated using robots.
 
Robotic Process Automation (RPA) will bring improved quality. Jez Heath from Deloitte suggests implementing RPA on a small scale to start. The first step is to standardize tasks and processes. Then you can use initial savings to fund further implementation of robots, one by one, and batch by batch. Each robot can do several processes or tasks, enabling success through an operational budget, rather than CAPEX investment. Tangible benefits include reduced error in end-to-end workflows and scalability. Therefore, clearly defined tasks and processes that are stable with a high level of predictability of the exception transactions and a sizable volume of transactions will be good candidate cases for RPA. At the current cost (each robot costs between US$10,000 to US$12,000 per year to operate), the payback period could be as short as one year. 
 
Currency controls and tax issues remain key concerns in China. Foreign exchange fluctuations may cause problems in implementing global transfer pricing policy for multi-national corporations. China’s government authority, SAFE, is friendly toward “inward management adjustment” payments related to tax matters to maintain one’s global transfer pricing policy. However, SAFE will not likely approve “outward management adjustment” payments. 
 
Accelerated royalty payment (lump sum covering a few years), e.g., 10-year royalty payment, seems to be an outflow payment allowed by SAFE, as it is perceived as a trade related item. For share capital reduction, SAFE has delegated the monitoring and “approving” of such transactions to banks. With regards to interpretation of regulations related to payment outflow, Chinese banks are more forthcoming than foreign banks. China’s tax authority claims that businesses should pay more taxes in China because of (1) location savings; and (2) market premium. 
 
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 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, May 13, 2017

Would bank treasurers give up stress-testing if they could?


One of the key takeaways from the Bank Treasurers' Peer Group 13th Annual Meeting in New York this week was the enduring value of stress testing. After an opening dinner address by Morgan Stanley Managing Director and former US Congressman Harold Ford, Jr., who spoke to a political environment that will not be conducive to legislative change, a panel of government affairs experts from the banking world gave hope for regulatory softening with a changing tone from the top at the federal prudential bank regulators. This led to the hypothetical question: Would bank treasurers discontinue DFAST/CCAR stress testing if they were allowed to do so?

 
The overwhelming consensus was that treasurers would not discontinue using the elaborate stress testing processes, models and governance infrastructure they have helped build in response to regulatory requirements if those requirements went away. Stress testing resources give treasurers at banks valuable resources to better analyze risks, allocate capital, as well as liquidity, and improve earnings quality. This infrastructure provides them better quantitative information with which to guide bank strategy and work with and optimize the lines of business to support the most effective plan, given the bank's balance sheet position and a dynamic view of capital and liquidity going forward.  
 
See also, my Founder's takeaways here:
 
 
 
While bank treasurers would continue with stress-testing, they would like to see some tweaking of the regulatory requirements and easing of the compliance burden, including:
 
1) More transparency on the test model. Treasurers would like more transparency from the Fed on the model they are being tested against. No model is perfect and they would be better able to understand the comparative variances in the outcomes from their own models and achieve more certainty about the capital they have in excess if they knew more about it.
 
2) Documentation requirements are too severe. There is overwhelming agreement that too much time is spent on documentation of every model and related process guiding decisions, along with every judgment made. It is time to stop wasting everyone's time and effort on work that creates no value and that write-ups that no one would otherwise read.  
 
3) Limit the severely adverse scenarios. The severely adverse scenarios that the Fed comes up with each year to test banks tend to deviate from realities that banks would face in a crisis, which is what they should focus on to ensure adequate capital and liquidity in the event of one. The goal should be to provide banks with useful information that they can act upon, not useless information that shows they passed an arbitrary test.
 
4) Standardize the requirements. If they could have a fourth wish, treasurers would like to see greater consistency in requirements across federal and state regulators, so they don't have to have separate processes, reporting and documentation to satisfy the Fed and the OCC, for example, and then deal with further idiosyncracies from state regulators.    
 
Finally, a note about the role of bank treasurers. Like their peers on the non-bank side, their role is becoming more strategic and broad. Bank treasurers, however, have more strategic juice thanks to the above-mentioned stress testing apparatus and their more direct influence on pricing and policy for the financial products and services that banks sell.
 
Thanks to all the treasurers who participated and to Morgan Stanley for their sponsorship of the 13th Annual BTPG meeting. For more information about the Bank Treasurers' Peer Group (BTPG), click here
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Blog entry
By bshegog, May 10, 2017
The Assistant Treasurers’ Leadership Group will meet at Chatham Financial to discuss tax reform’s potential impact on the liquidity portfolio. 
 
Is tax reform finally coming? That’s the question that’s been on the minds of ATLG members since the new US administration took over earlier this year. The group will get a full overview of the tax reform proposal and discuss the likelihood of cash repatriation as well as BAT and interest deductibility in its meeting May 24-25 in Kennett Square, Pennsylvania. 
 
Members will also consider capital structure and internal lending as they relate to tax reform. How will global trading, capital allocation and flow-of-funds models and processes change in the event of a tax break? And what opportunities are there to review and restructure the balance sheet in the case of a sudden shift in cash/assets from foreign to US books?
 
Finally, the group will review a recent FASB exposure draft on hedge accounting. In September 2016, the FASB released the draft with the aim of making “targeted improvements to the hedge accounting model based on the feedback received from preparers, auditors, users and other stakeholders.” The Board will consider opportunities to align with IFRS 9 Financial Instruments, with the goal of making hedge accounting easier to achieve and account for and reducing the risk of restatement. Experts in the field will provide a full analysis of the draft and recent developments from the FASB. 
 
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 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, May 09, 2017
In the May issue of iTreasurer we take a peek at tax policy and the ongoing challenges of doing business in Latin America. In between we discuss the dangers that the repo market poses, M&A, a new swap product and more on LatAm counterparty risk.
 
But first, tax reform. Whether it will ever happen and in what form obviously remains to be seen. So while all wait with breaths abated, it seems the markets are content to calmly tread water, move sideways and otherwise mosey nowhere -- with maybe an upward bias in stocks and a downward bias in interest rates. This quasi-ennui is reflected on page 1 in, “Uncertainties of Tax Reform and Rates Keeps Treasurers Short.” Here we discuss what corporates are up to with their cash as they wait for whatever transpires and (they hope) rates to rise. Generally speaking, whatever they're doing, they are keeping durations short and staying flexible in case rates eventually do rise as the Federal Reserve wants them to. But unfortunately the market doesn’t believe them. “You’re seeing a Fed that has begun to raise rates and has told us they intend to raise rates further this year,” says Jerry Klein. “But the market doesn’t appear to believe it when you see the 1-year Treasury at 1% and the 2-year at around 1.25%.” Thus, investment managers are taking a wait-and-see approach to see what happens with rates and just as importantly, tax policy.
 
In “Anticipated Exposures” on pages 4 and 5, we discuss how communication is critical to M&A success, assessing counterparty risk in Latin America and also a new swap curve product from Eris Exchange.
 
On page 6 in “Will Repo’s Smaller Profile Create Problems?” we discuss how the lack of bank intermediation has shrunk the size of the repurchase agreement or repo market. “[B]anks have stepped away from the market or largely curtailed their role in the markets mainly due to new rules,” according to a report from the Bank for International Settlements. “These rules include stricter standards like the leverage ratio and the G-SIB capital surcharge” that for many banks requires holding capital in proportion to the size of their balance sheets. Since repo is more a service than a money-maker, banks are reluctant to use up balance sheet space with it.
 
This month’s NeuGroup Peer Group summary, on page 7, is from the LatAm Treasury Peer Group, which met earlier in 2017 in Miami. At the meeting members discussed what impact US policy under the Trump administration will have on the region. The verdict: “Fortunately, it appears that the impact will not substantially affect a return to economic growth for at least two of the three major economies.” This led to a more substantive discussion on bank offerings in the region.
 
On page 11, contributor Geri Westphal interviews Deutsche Bank’s Roger Heine who offers thoughts on the possibility of tax reform and the impact it could have on tax deductibility. Many have speculated that elimination of this deductibility of corporate interest could have a negative effect on companies with a lot of debt. But Mr. Heine says getting rid of tax deductibility on debt “may only have a limited long-term impact on how most companies use debt in their capital structures, and by implication limited impact on the structure of capital markets and financial institutions.”
 
Finally on page 15, contributor John Hintze discusses bond issuance and how companies are keeping their issuance on the short side and finding floating-rate notes attractive to issue. Like their counterparts in cash management, treasurers are keeping things short as they await more direction from Washington.
 
Enjoy.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
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