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

Blog entry
Cargill, China, HSBC
By jneu, May 23, 2013

Supporting MNC business in China takes a dedicated group.

We want to thank HSBC for sponsoring our Asia Treasurers’ Peer Group China Edition pilot meeting last week in Shanghai. Hosted by Cargill, the pilot meeting helped further refine The NeuGroup’s offerings to treasurers in Asia by bringing together MNCs’ China country treasurers along with regional treasurers focused on China. Among the highlights of last week’s meeting:

  • China set to recover growth momentum. QU Hongbin, HSBC’s Co-Head of Asian Economics and Chief Economist for Greater China, presented his positive outlook for Asia and, in particular, China’s transition to consumption-led growth coupled with productive infrastructure spending. “There are plenty of useful bridges to be built before China needs to build a bridge to nowhere,” according to Mr. Qu.  Slowing growth in the working-age population will also keep wage inflation in check. With all this, HSBC is calling for 8 to 8.5 percent GDP growth for the second half of the year (after slipping below 8% at the end of last year). The continuation of China’s economic dynamism will continue to make it a focal point for MNCs.
  • SCF works in China and Cross-Border. The group also discussed supply-chain finance (SCF) and its application in China. Interest in supply chain finance is growing with the shift from L/Cs to open account purchases. The meeting discussion also revealed that there is more flexibility to deploy SCF in China than many corporates realize. While corporates remain wary of getting sales classified as bank debt, HSBC’s Head of Receivables Finance for China Iris Liang said that the Big Four have signed off on these structures as producing trade payables. HSBC won praise for its accounting expertise and will get on the phone with your auditors to help walk through your program and its accounting implications. What’s more, SCF can work both in China and cross-border with Chinese suppliers.
  • Talent retention with new generation. Retaining top talent in China’s competitive employment market remains a key MNC challenge, and treasury is no exception. One regional treasurer participating presented on her company’s efforts to counter changing dynamics in China’s labor markets, which feature a new generation with a mindset that there is more to life than their job. Recently, MNCs have seen talent leaving to state-owned enterprises, because younger workers perceive them to be more conducive to work-life balance. MNCs need to respond to these mindset changes by rethinking their incentives and benefits to retain top prospects.

The meeting also featured a discussion of optimal treasury organizational structures and their application to China, including the latest thinking on where to locate a regional treasury center for Asia. Finally, there was a presentation on the latest developments with the RMB offshore pooling and netting pilot programs as well as cross-border RMB intercompany lending.  The tax and transfer pricing implications of these schemes were a major focus of the discussion. We thank all of the pilot participants who contributed actively to the knowledge exchange last week.

The Asia Treasurers’ Peer Group – China Pilot represents our second exploratory effort to complement the current Singapore-based Asia Treasurers’ Peer Group (formed in October 2011, for MNC regional treasurers) with one possessing a greater China focus.

Blog entry
By jneu, May 17, 2013

PayPal pilots Deutsche Bank Accounts Receivable Manager for SEPA.

NeuGroup-member company PayPal was a pilot customer for Deutsche Bank’s Accounts Receivable Manager (ARM) for SEPA product. As highlighted in a special supplement for International Treasurer, ARM for SEPA is a great example of how banks can go much further to help improve centralized payment processing efficiency if their customers will take the tactical first steps like convert their bank accounts to the new IBAN.

“What IBANs do is provide a structure for the bank account number that is validated across all banks within SEPA in exactly the same way,” says Arthur Brieske, Global Head of Commercialization, Global Transaction Banking, Deutsche Bank. Thus, IBANs are ready-made to serve as unique identifiers for routing of payments. Deutsche Bank used this identifying feature in its ARM for SEPA product so that companies can link customers’ payments to their required remittance information via an IBAN.

The further advantage of this approach is that it makes customers’ collection platforms more bank agnostic,” notes Mr. Brieske, “since any SEPA-compliant bank’s systems will be set up to work with IBANs.”

Deutsche Bank also took this IBAN benefit and applied it to virtual accounts. Corporates with a centralized collection platform using ARM for SEPA can set-up virtual accounts with IBANs for all of their business units and ask customers to remit to these accounts. Since these virtual accounts are mapped to the physical collection accounts, corporates gain flexibility to both consolidate the number of physical collection accounts now and in the future without having to go out to their sales channel again. Often the customer has no idea they are remitting to anything other than a local bank account.

Meanwhile, the required payment reference information sent with the payment directly to the virtual collection account of the recipient is much more likely to remain intact and be auto-reconciled. Deutsche Bank says that many firms using this platform have a real chance of obtaining 100 percent auto-reconciliation.

In the case of PayPal, the structure makes use of millions of IBANs for its customers, allowing fully-automated payer identification. Until it helped develop ARM, PayPal had to contend with an unacceptable amount of returned payments on a daily basis. Additionally, the company had to battle payments with missing or inconsistent information, which then had to be processed manually. This was an unacceptable user experience, according to Katja Lehr, Senior Manager for Global Core Payments at PayPal. And as a global organization, it was important for PayPal to have a single solution which works throughout Europe, “while also providing the look and feel of a local solution to our users,” she said.

Do other member companies have similar SEPA-related projects to report (please comment below)?

For more about how to add value via SEPA, see the International Treasurer special supplement sponsored by Deutsche Bank.

Blog entry
By jneu, May 15, 2013

The Annual Meeting of the Bank Treasurers' Peer Group highlights need for a strategic commetingment to stress-testing.

We want to thank UBS for their support of our Bank Treasurers’ Peer Group’s Annual Meeting for its 9th year. US regional banks face unique challenges in trying to apply rules meant for large, global banks that will either trickle down or rain down upon them in a torrent. By sharing experiences gearing up for liquidity regulations, for starters, BTPG members are in a better place to develop frameworks to produce a Basel-like LCR, even if it will not yet be fully-calibrated to proposed US implementation guidance. They are also primed to progress further toward both Basel regulatory- and stress test-driven capital allocation and planning.

Two meeting takeaways on stress testing stand out:

  • There’s no hiding from the stress-test impact. While the impact of liquidity and capital rules are likely to be calibrated somewhat—according to bank size, complexity and type—the impact of stress-testing will hit all but the smallest regional banks like a torrent.  The resources required to submit to the supervisory process may overwhelm many of their relevant staffs.
  • A strategic commitment is needed.  The reality of the resources required to submit to supervisory stress testing forces banks to make a strategic commitment to staff up, implement the requisite risk governance and control frameworks and invest in the necessary systems. Banks that do not make a strategic commitment to stress testing may well see their ability to execute on their business growth or sustainability strategies impaired.  Put another way, many banks will have to grow to justify the necessary stress-testing resources and those that make the strategic commitment to invest in them will be in a much better position to acquire business from banks that don’t.

These and other takeaways from the meeting would not have been possible without the active participation of the BTPG members. We very much appreciate your contributions to last week’s peer exchange.

The Bank Treasurers’ Peer Group was formed in 2005 to provide US regional bank treasurers with a forum to share common experiences and approaches to current challenges. It is unique among NeuGroups in its focus on member treasurers outside the multinational and non-financial corporate space.  

Blog entry
By admin, May 08, 2013

A key theme of last week’s Corporate ERM meeting was the importance of communication.

We thank Walmart for hosting the Corporate ERM group in Bentonville, AR, this past week, where we were privileged to welcome four new members to the group and have a day and a half of very lively discussion. We appreciate, as well, the academic perspective Laurel Grassin-Drake of MIT’s Sloan School shared, including insight from her research on biases senior executives bring to discussions of risk at the board and risk committee levels.

  • Dialogue is key. One of the recurring themes of this meeting, as with many of our recent NeuGroup meetings, was the importance of communication. One of our members even said of her strategy that she is “more interested in getting the dialogue going” on risk than in focusing on any specific risk itself. Especially in ERM, you need to be able assess risk across different business units in the organization, and the best way to do this is to open communication channels. Then you can not only discover where common and possibly hidden risks lie, but also create mitigation strategies that draw on strengths of multiple BUs.

    Learn to love the numbers. Data = Romance: Establishing a baseline of ownership, size and impact of each risk is a large data-mining effort. But not all of the data need to be or even can be quantitative. Members jokingly referred to the “romance” of assigning a number to every part of risk management, but direction, outlook and a host of other qualitative factors have no less value.

Thanks again to all of the members who participated. We look forward to renewing our risk dialogue and learning more about what comes from your efforts to get more such dialogue going across your companies.

The Corporate ERM Group was formed in May 2008 to help leading risk managers at non-financial corporations, with established ERM programs, share experience and best practice in a discipline where that of financial institutions’ has dominated.

Blog entry
By jneu, May 02, 2013

We would like to thank Bank of America Merrill Lynch for returning to Tech20 as sponsor of our insightful meeting last week at HP.  Their panel on the current shareholder activist environment was the first time this topic has had a standalone session at a NeuGroup meeting and brought new context to the cash distribution discussions that have been a focal point for Tech20, as well as our other treasurer-level groups.

Speaking of cash distribution, prominent among the member priorities introduced was how best to support current cash distribution policy, especially with regard to dividends, in the wake of Apple’s announcement earlier in that week. The ante has been raised for many members as a result. The same might be said for issuing debt to help fund distributions, too, in the wake of this week’s Apple bond issue.

Other meeting highlights included:

  • Advice on the treasurer to CFO path. HP CFO and former Tech20 member Cathie Lesjak offered her insight.
  • FX management program adjustments. A case-study of a member program highlighted recent changes and focal points to prepare for a world of cleared derivatives and greater OTC market transparency.  
  • APB 23 rep practices and latest tax reform views. The increasing focus on off-shore cash makes this an important recurring topic.

Thanks to all the Tech20 members who participated in the discussions last week. Your shared insights and experiences are what continue to make the Tech20 meetings enlightening.

The Tech20 was founded in November 2001 for MNC treasurers in the technology sector. As the first NeuGroup, it is the catalyst for our unrivaled network of now more than 15 membership groups. The Tech20 remains the leading forum for treasurer-level peer knowledge exchange in tech. 

Blog entry
BNP Paribas, T30
By jneu, May 01, 2013

We want to thank BNP Paribas for hosting and sponsoring the Treasurers’ Group of Thirty (T30) meeting last week in New York. BNP Paribas is a recurring NeuGroup sponsor and we appreciate their insightful contributions to another successful meeting.

One of the major themes of this meeting was form fitting function—with your banks, with your cash and with your employees, so that your resources fit your needs.

Here are some additional meeting highlights:

  • Dodd-Frank Board approval is not so bad. For all of the hand-wringing and wondering what exactly to tell your Board ahead of end-user exemption deadlines, several members who have already taken exemption language to their boards used comments including “It was a rubber stamp,” “30 seconds of air time,” “got broad mandate,” and “do what we have to do and wait” to describe their experience. Boards seem to understand that the regulations are still unclear and are not looking for extensive explanations at this time. 
  • Systematic treasury wallet allocation. While most banks can do most things, some are better in some areas, both technically and geographically, than others. One member outlined a very systematic approach for establishing the best bank panel that works for his company: 1. Understand bank expectations; 2. Have a clear view of bank strengths; and 3. Match them to your business needs. Inviting best-in-class providers for each need will ensure healthy competition and limit overcrowding. Also, with new regulations set to alter bank relationships and drive up banking costs, it pays to be proactive in establishing and renewing credit facilities.
  • Find a rotation program that works for you. Beyond the standard junior rotation and education programs many companies offer, one member company has rotation programs for young, midcareer and senior top talent that are very popular. The programs include global postings for younger employees, longer rotations for mid-career employees, and shadowing and inter-company opportunities for executives. Treasury participates in all of these, and our member concluded that if you put in the right people, they can operate at a high level after a short time.

As with every NeuGroup meeting, success depends on the active participation of our members. With thank all the T30 members who contributed to the discussions and took the time to share their insight with their peers.

The Treasurers' Group of Thirty (T30) was formed in February 2005 to serve treasurers of large corporates from across sectors. The first of our cross-industry treasurer groups,  the T30, along with the T30-2, serves as a cornerstone for the functional and regional treasury groups that make up the 15+ groups in the NeuGroup Network.

Blog entry
By jneu, April 30, 2013

We want to thank Payden & Rygel for their sponsorship of our Treasury Investment Managers’ Peer Group (TIMPG) meeting last week at Qualcomm. As members move into a post-crisis mindset, a key meeting discussion topic was which new asset classes to consider adding as their cash portfolios grow and to counter the extended lower interest rate environment. But keeping with post-crisis lessons, another topic was how corporates should best monitor portfolio characteristics and the new risk introduced with these new asset classes.

  • Emerging market debt by comparison. Among the asset classes offered for close consideration was emerging market debt (EMD), on which Payden & Rygel had bullish views, citing increasing numbers of investment grade issues. For most investors, EMD’s appeal will be impacted by the performance of the US economy. Payden’s Senior Economist Jeffrey Cleveland, and several members of its portfolio management team walked members through how government policies will affect the US as well as impact economies globally, with a particular focus on rates and key bond market segments.
  • New asset classes stress portfolio analytics. TIMPG members also discussed the different solutions available to solve the increased need for portfolio analytics and risk management. Fortunately, more solutions are becoming available that fit corporate treasury budgets. One member cited their use of Bloomberg PORT product, as an example.

We thank our TIMPG members for their active participation. And with them, we would like to thank Payden & Rygel for their ongoing support of the TIMPG!

The Treasury Investment Managers’ Peer Group (TIMPG) was launched in September 2004. This NeuGroup for investment managers at cash-rich MNCs has since become the leading group for peer exchange on corporate cash investment practices.

Blog entry
By brichardson, April 19, 2013

The AT30 met for the second time this week. We want to thank Cargill for hosting the meeting and for Citi’s sponsorship and ongoing support of this newest peer group. The conversations were lively and intensely honed in on two major themes, regulatory reforms and treasury technologies.  Here are some highlights:

Regulatory Reforms-A Remarkable Interest Level Surge-  Led by Citi’s Elyse Weiner, the session focused heavily on Dodd-Frank and Basel III. Movement on Basel III is very fractured and progressing slowly with ongoing work by Basel Committee Banking Supervision on liquidity monitoring, operational risk, and capital requirements.  Important topics discussed included the difference in risk between bank subsidiaries and branches which is relevant for practitioners who are keeping abreast of the financial positions of their banking partners, in the extreme case of insolvency.  

Impact of SAP Treasury Technology-A session on treasury technology focused on SAP Treasury, often a TMS by decree from IT or executive management,  and system traditionally known for its shortcomings. Members engaged in an in-depth conversation relating to SAP benefits and drawbacks notwithstanding reasons for needing to implement the SAP Treasury system in-house.  Many companies have elected SAP as their global ERP system , and pressure from IT departments has forced seasoned treasury professionals to seriously consider the functions and capabilities of SAP Treasury.  But new features and capabilities are making this once distasteful options easier to swallow.

Treasury Organizations Continues to Be a Topic of Interest-The members discussed the differences of global organization structures highlighting how they have evolved and the changes companies have made to keep up with their international expansion.  The topics of centralization and regionalization were reviewed and the once-popular notion of global centralization is being moved to the sidelines in favor of a more regionalized model, made more efficient by new technology..

The AT30 met for the first time in September, 2012. With 31 high-caliber Fortune 500 members, the group is poised for many robust meetings in the future. Google will host the next meeting in September and FedEx will host the first meeting of 2014.

Along with our AT30 members, we would like to thank Citi for their ongoing support!

Blog entry
By gwestphal, April 17, 2013

After successful stints with our FX Managers' Peer Groups 1 and 2, Chatham Financial sponsored our Treasurers' Group of Thirty 2 (T30-2) meeting last week at Sysco in Houston.

One of the major themes of this meeting was communication—with your banks and with your employees, to increase productivity and head off tension. Here are some of the meeting highlights:

  • Regulatory impacts still unfolding for treasury. The group heard from Chatham Financial on the topic of regulatory updates including the ongoing monitoring of Dodd-Frank and Basel III, and what important steps are necessary to ensure compliance.  “The CFTC is very concerned about when you’re being burdened by regulation.” This is not a joke, according to Chatham Financial’s Luke Zubrod in a discussion of Dodd-Frank. If your in-house bank is a separate legal entity, it is likely a financial entity and thus subject to clearing for market-facing swaps. However, it is also likely that the CFTC will make an exception due to the nature of the in-house construction. This amendment is a direct result of corporate lobbying, so don’t shy away from writing to regulators.
  • Dynamic talent management is critical. We discussed the importance of having a dynamic and robust talent management program in place to keep top talent challenged and engaged, and agreed that it can be difficult to paint a clear Treasury career path for people looking at careers in finance more broadly. While rotations can ensure a steady stream of people, it cannot ensure a stream of invested, specialized top talent. One strategy for attracting such talent is to make treasury skills a requirement to move ahead in finance within the company, and to explore potential career paths with new hires and top performers.
  • Pension benefits continue to change. Pension management was an important topic to members and will be followed up with a separate webinar over the next several months to discuss specific issues and concerns identified by the group. According to at least one member, a pension in the conventional sense is “a thing of the past.” As workforces become more mobile and pension liability becomes more nerve-wracking, members are increasingly freezing their DB plans, looking at cash balance plans and strengthening 401Ks.

Along with our T30-2 members, we thank Chatham Financial for their support of this meeting.

The Treasurers' Group of Thirty 2 was formed in June 2011 to complement our first Treasurers' Group of Thirty. Both NeuGroups serve leading treasurers of large multinational corporations from a cross-section of industries. Membership in the Treasurers' Group of Thirty 2 is by invitation only. 

Blog entry
By jneu, March 26, 2013

RBS makes good first impression at GCBG spring meeting.

We want to thank first-time, NeuGroup meeting-sponsor RBS for their support and contributions to last week’s Global Cash and Banking Group (GCBG) sessions at Google. RBS’ International  Cash Management and International Banking colleagues proved to be a welcome addition to the leading global banks that have supported the GCBG. Among the key takeaways from the March 20-21 meeting:

Future-proof your treasury. A session on treasury innovation was framed by technology changes in mobile platforms (mostly tablet driven) and SEPA.

  • Being more XML-fluent. SEPA helps underscore the importance for treasury managers to become “XML fluent” to successfully migrate toward an e-everything future that includes greater connectivity via SWIFT as well as compliance with euro and eventually global payments mandates.  

Shared Services to Shared Solutions.  A session on best practices in Shared-Services Centers (SSCs) also highlighted the importance of technology and the blurring governance lines for SSCs between finance and IT functions. This is part of an emerging trend toward shared solution centers emphasizing higher-value, technology-enabled solutions and not mere centralized back-office processing.

  • Will bank regulations and Dodd-Frank erode the attractiveness of In-House Banks?  New platform descriptions might also help in other ways. The growing popularity of in-house banks as a centralizing platform for corporate treasury activities has triggered concern regarding the extent that regulations aimed at mitigating the systemic risk of the banking system are allowed to spill-over to anything modeled after a bank.

In addition, we also thank our GCBG members for your participation and contributions to last week’s meeting.

The Global Cash and Banking Group is part of the functional treasury segment of the NeuGroup Network. Formed in 2004, this NeuGroup for MNC global cash managers brings together its members biannually to discuss optimizing treasury operations in response to current challenges.