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

Blog entry
By jneu, June 03, 2014

We thank all members for their active contributions to the dicussions at the Bank Treasurers' Peer Group Annual Meeting last month at the Waldorf-Astoria in New York.

The dominate theme of this year’s10th Annual meeting was that supervisory stress-testing (and capital plan reviews) have become so all-encompassing that banks must harness them to manage the bank. This is especially true for bank treasurers, who can quickly find themselves spending the vast majority of their time both leading and back-filling the efforts of other functions assigned to the task. In response, treasurers must encourage senior management and the Board to provide them with help. Often this comes in the form of a centralized, value adding project management organization (PMO). This coordinating PMO must also ensure that the risk, credit and other functions integrate their normal responsibilities with the ever more stringent supervisory requirements.

The NeuGroup also thanks first-time BTPG sponsor Morgan Stanley for their support of the group and its Annual Meeting. Morgan Stanley Treasurer David Russo set the tone for the stress-testing "sustainabilty" theme with a presentation of his bank's approach and also stressed the need to integrate regulatory concepts and obligations into core bank treasury management. Fittingly, CCAR Sustainability was the title of EY Consultant Adam Girling's presentation in the same session.

Further dialouge with the bank treasurers chaired by Morgan Stanley Global Co-Head of FIG Capital Markets Kevin Ryan on regulatory capital vs. economic capital also confirmed that stress-tested capital is rapidly replacing economic capital models as a risk-based measure and constraining captial metric. Also, models, systems and the data that goes in them are being surrounded by common frameworks or common system platforms that must fulfill both stress-testing and bank management mandates, according to dicussion led by Charles Richard of QRM and Tom Day from Moody's Analytics. Member discussion throughout the two-day meeting reeinforced these main themes.

The Bank Treasurers' Peer Group (BTPG) was founded in 2005 for a select group of US regional banks. It meets annually and conducts periodic conference calls for members to share experiences with topical issues.   

Blog entry
By gcassone, May 20, 2014

The spring 2014 meeting of the Assistant Treasurers’ Group of Thirty (AT30) took place May 6-7 in Princeton, NJ, hosted by Bristol-Myers Squibb and sponsored by HSBC. This was the fourth meeting of the AT30, which featured a number of guest speakers including the treasurer from Honeywell, a former treasurer from GM and the Director General of China’s State Administration of Foreign Exchange (SAFE).

The Path to the Treasurer’s Office
An open dialogue with Jim Davlin, formerly of GM, and John Tus of Honeywell, two experienced treasurers, provided insight into how to land the treasurer’s role in your organization. Taking positions outside of treasury and developing company relationships were noted as the key elements to carving out a path to the coveted office. Both guests emphasized the benefits of knowing more people and understanding the underlying business in order to get on the A-list for consideration. Members were told that behavior and leadership qualities will outweigh technical skills, and that crossing over from individual contributor to leader is also critical to acquiring the experience one needs in order to be considered for the top treasury role.
In a related session, Developing Employees for the Long Haul, members continued their active discussion on treasury roles and people management. Members pointed out that providing rotational opportunities and regular development talks help to keep employees engaged and communications open. Additionally, many companies have a process in place to identify top performers in order to develop and retain high potential employees.

Currently, the AT30 has now reached its membership capacity. The NeuGroup is looking to start a second group for assistant treasurers. Click here to contact us about membership. https://neugroup.com/contact

The NeuGroup provides leading peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 16 member groups serving more than 330 treasury and finance professionals across functions, industries and global regions.

Blog entry
By brichardson, May 15, 2014

Members of the Corporate ERM Group talk about integrating ERM at their Spring meeting.

Enterprise risk management is a relatively steady discipline, without governing bodies imposing new regulation, or significant developments in technology or theory. However, one thing that does change is the growth and maturity of individual programs, which was evident at the Corporate ERM Group’s seventh annual meeting in May, hosted at Intel’s offices in Hillsboro, OR.

Members addressed the ever-evolving themes of integrating ERM with strategic planning and the related operationalization of ERM into the businesses beyond governance and reporting functions, getting to the heart of ERM culture. Given recent events, cyber security also played a prominent role in the meeting, as did the management of black swan events—cyber and otherwise.  

Below are a few highlights of the meeting:

(For a more in-depth look at the key takeaways from this and other groups in The NeuGroup Network, subscribe to iTreasurer at iTreasurer.com.)

  • ERM and strategic planningall year round. Key to one company’s successful integration of ERM into strategic planning is having a board and CEO that not only fully support the program, but also requested that it be created. The board sees ERM as a strategic priority for the company and wants the program to be world class in status. While many companies’ ERM programs are characterized by an assessment calendar with a 12-month cycle, this program has risk discussions all year long. There are certain calendared steps along the way, but ERM is not allowed to slip into the background between scheduled discussions.
  • Look at operationalization data. A new but related twist on working ERM into strategic planning is the notion of “operationalizing ERM,” the idea that ERM thinking is so ingrained in the business that it is not a separate activity but a natural component of operations. Illustrating the importance of ERM, one company has developed a proprietary in-house tool for gathering risk data from business leaders. The tool makes no assessment or judgments, but organizes the data to inform all relevant parties and ensure effective discussions.
  • Cyber security education.  An early and unsettling remark in Intel’s Chief Security and Privacy Officer’s discussion of cyber security was that “most IT security people don’t get the enterprise element of this risk.” Using the example of what could happen if a breach occurred at a national payroll processing company through just one computer, he emphasized that employees need to understand the basics of how their own cyber security measures work. This includes knowing when files are and are not encrypted, understanding that someone can use one employee’s unscrupulous clicking to hack into enterprise data, and keeping informed about new vulnerabilities.
  • Management vs. optimization. Not all risks are universally harmful. Some can be leveraged for business expansion and increased profitability, as illustrated by one member of a privately held company that views risks as opportunities for increased return on capital. Much of this balance between mitigating and accepting risk depends on risk appetites and cost-benefit analysis, but sometimes a loss from a risk is small enough in comparison to the potential gain from taking it that it’s worth the gamble…with appropriate stops in place.   

The Corporate ERM Group, the NeuGroup for MNC heads of enterprise risk management, is an invitation-only group for senior executives who have direct oversight or who are champions of ERM and alternative risk-finance initiatives. Members meet to discuss topics on their agendas, share experiences and discuss solutions to common challenges. For more about The NeuGroup Network or peer groups, go to neugroup.com. For more key topics from this meeting, subscribe to iTreasurer.com.

Blog entry
By afriberg, May 13, 2014

The spring 2014 meeting of the EUROTPG took place last Wednesday in Geneva, Switzerland, hosted by Ahold and sponsored by Reval. The event marked a ten-year presence for The NeuGroup in Europe with the EUROTPG, as well as the 20th anniversary of The NeuGroup as a company.

A round of introductions kicked off the meeting. Some of the projects noted by members included cash management and treasury systems RFPs; payments centralization, including a “lifting and shifting” local payments to a central payment utility; and a number of country-specific concerns, e.g., China, Russia and Ukraine, as well as some challenging African countries.

Global Business Strategy and Impact on Treasury
From emerging market development to mergers and acquisitions or operations expansions, many treasurers are challenged with proactively preparing for and supporting global company strategies. Reval’s Nigel Sirett led the session and gave an overview of Reval’s history and development, starting with the software-as-a-service (SaaS) approach and the risk management and hedge accounting that started it off, followed by acquisitions that add capability to the offering (rather than an acquisition rationale based on cash generation or client base), most notably ecofinance in 2010. He also noted a few trends that affect treasury processes and technology choices.

Next-Level Strategy; Talent/Technology
Many treasurers and CFOs are evolving their treasury organizations to become strategic centers of expertise in order to better support business growth in an increasingly volatile market environment. In order to do this, treasury leaders are challenged to find ways to attract new talent to their organizations while simultaneously providing development and growth opportunities to retain existing talent.

Key Takeaways:

  • The job ad and the actual job: Treasury is a hard job to recruit for and the question is, “Who are you recruiting and for what? “
  • The right tools motivate: Reval’s main point of view on the disconnect – which often results in demotivated treasury staff – is that the right technology can strip away more of the unsexy stuff and free up time for the more value-adding and rewarding aspects of the treasury job.

Bank Scorecards, Counterparty Risk, Credit Metrics
Based on a detailed member case study (available to EUROTPG members only), the group had a lengthy and in-depth discussion on key metrics on bank performance and methods for tracking and communicating the status of their bank relationships.

Key Takeaway:

  • Rationale for a structured scorecard: The company that was subject to the case study used to have a relatively informal bank relationship tracking approach, but developed a more structured one around the time of its most recent credit-facility refinancing. The key questions treasury wanted answered were: (1) Which banks do we want in our facility?; (2) What skill sets and capabilities do we need for the medium term?; and (3) Can we service the banks in the facility with enough business?  

The next meeting of The NeuGroup’s EUROTPG is scheduled to take place on November 20th (with a dinner the night before) at a convenient location in Europe. To learn more about membership in the group, contact afriberg@neugroup.com.  

For a more in-depth look at the key takeaways from this and other groups in The NeuGroup Network, subscribe to iTreasurer at iTreasurer.com.

Blog entry
By gwestphal, May 06, 2014

The Treasurers’ Group of Thirty celebrates 10 years of peer knowledge exchange.

Efficiency and innovation continue to interest members of the Treasurers’ Group of Thirty (T30) at their spring meeting sponsored and hosted by Standard Chartered at their Manhattan offices. This is the tenth year that treasurers have gathered to discuss topics on their agendas, share experiences and discuss solutions to common challenges. T30 was the first group for treasurers at large MNCs in The NeuGroup Network’s premier collection of 16 membership-only peer knowledge exchange groups.

The members took a look at effective strategies for managing FX hedge exposures and defining liquidity requirements, and received an update on China’s continued initiative to internationalize its currency with a presentation by Standard Chartered on ways treasurers can get an edge on competition by optimizing the developments shaping China.

Other key topics included:

(For a more in-depth look at the key takeaways from this and other groups in The NeuGroup Network, subscribe to iTreasurer at iTreasurer.com.)

  • Rationalization still matters. Although economic statistics show that the worst of the crisis is behind us, members are still feeling the pinch to rationalize their global treasury structures and eliminate expenses where possible.
  • APB23 – It has only just begun. Many members voiced concern over the amount of audit scrutiny they’ve received over the past audit season as it relates to the APB23 certification that requires US multinationals to assert that its foreign investment is permanently reinvested so there is no current or deferred US tax liability.
  • The trend toward less is more. When considering market trends for FX hedge strategies, Standard Chartered shared information that showed companies are focusing more on optimizing hedges of material exposures over systematic approaches that previously focused on hedging everything.  Large sophisticated corporate clients are taking time to identify and understand their company’s efficient frontier and are using simpler products to manage these risks for G10 currencies.  Layered programs are more popular than static approaches, and most members seek 133 hedge accounting on all hedges.
  • RMB breaks into top ten. Given the rapid pace of renminbi regulatory changes, and the uptick in global MNC adoption of these new measures, there has been a significant increase in the use of RMB for payments, moving the RMB into the #8 spot as a SWIFT payment currency.

The Treasurers’ Group of Thirty (T30), the first NeuGroup for treasurers’ of large MNCs is the premier group for strategically-minded treasurers at Global 2000 companies from across industries. Members meet to discuss topics on their agendas, share experiences and discuss solutions to common challenges. For more key topics from this meeting, subscribe to iTreasurer.com.

Blog entry
By bshegog, May 02, 2014

With the prospects of a significant rise in rates remote and volatility within the fixed income sectors tempered, Treasury Investment Managers' Peer Group members marked their 19th Annual Meeting, sponsored by Dimensional, by focusing on various ways to improve operationally and continued the discussion on adding yield to the investment portfolio in a low-rate environment.

Try to beat the market not outguess it. David Booth, Chairman and Co-Chief Executive of Dimensional Advisors, kicked off the conference outlining Dimensional’s investment philosophy, which is based on strong empirical support. Dimensional believes the market is a better analyst than any person, and uses the market to develop insights and calibrate risk.
Benchmarks provide the much needed measurement. A case was made that benchmarks may sway the motivations of the external managers, and not always in a positive manner. If this is the case, why do we use benchmarks?

Opinion on custodians was not pretty. The overwhelming majority of members rated their custodians as good, certainly not great. This is a surprise as the custodian is such an essential component of a successful investment program.

The fixed income big bang, TRACE. The veil of transparency has been lifted, notes Joe Kolerich from Dimensional. Trade Reporting and Compliance Engine (TRACE) is the FINRA developed vehicle that facilitates the mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities.

The Treasury Investment Managers’ Peer Group (TIMPG) is a membership group for practitioners with principal responsibility for managing the investment of excess cash at corporates with sizeable cash portfolios. Members meet to discuss topics on their agenda, share experiences and discuss solutions to common challenges.

For more key topics from this meeting, subscribe to iTreasurer.com.

Blog entry
By jneu, April 29, 2014

Activists still helping to feed fixed income investors' appetite for tech sector debt.

The Tech20 met last week at Oracle for their Mid-Year meeting. Bank America Merrill Lynch updated members on the situation in debt capital markets, which remain very receptive to tech issuers. Fed tapering and, with it, a timetable for rate hikes, has done little to change this. With activist shareholders still pressuring tech firms for a return of cash, the continued ability to issue debt to fund share repurchases and dividends is welcomed by members.

Also on the agenda was a discussion on how treasurers should best engage with their banks on the impact of bank regulation on the products and services they offer, wallet allocations and the nature of their relationships. This was followed by an update on how members are positioning or should be thinking about positioning their cash portfolios in light of rate expectations, increasing levels of cash distribution and the prospect of US tax reform within a five-year horizon.

We thank all the Tech20 members who participated last week as well as Bank America Merrill Lynch for supporting the meeting with their sponsorship.

The Tech20 Treasurers’ Peer Group was formed in 2001 and remains the premier forum for treasurers in the tech sector.  It was the first of its kind in the treasury space and helped launch a network of now 16 practitioner-focused membership peer groups for senior treasury and finance professionals facilitated by The NeuGroup.

Blog entry
By mkmoore, April 10, 2014

The Asia Treasurers' Peer Group (ATPG) is scheduled to meet on May 19-20, where members will check in with one another on how they’re dealing with the ongoing challenges in the region, plus their priorities and projects for 2014.

Agenda planning for the meeting has begun, and topics range from Shanghai Free Trade Zone and China liquidity management to capital markets in Asia with a focus on the opportunities for issuers and investors. China remains in the spotlight for Asia treasurers, given its market size and regulatory complexities. China’s policy statements and intents are one thing, but the reality of what benefits can be achieved using the FTZ status and implementation hurdles are key aspects on the minds of Asia treasurers. In addition, members will discuss the myriad economic and regulatory landscapes across Asia, and the relevant implications for the diverse member profiles within the group.

The meeting will be hosted by Hewlett-Packard. The NeuGroup is pleased to welcome first-time sponsor ANZ to be part of this event, and is excited to gain insight from this strong regional bank.

As usual, the meeting should prove to be a robust exchange of knowledge among astute treasury professionals based in Asia. The NeuGroup extends an open invitation to any of our members considering a regional expansion of treasury into Asia to join us for one of our meetings in Singapore. Click here to contact us about membership.

The Asia Treasurers' Peer Group (ATPG) was founded in October 2011 for regional treasurers of large MNCs with treasury operations in Asia. As the first NeuGroup in Asia, we expect it to be the catalyst for other Asia-based NeuGroups to serve our members in the region.

For 20 years, The NeuGroup has been a trusted thought leader and respected advocate for global finance and treasury professionals. The NeuGroup leads the way in peer knowledge exchange through the peer groups of The NeuGroup Network and in intelligence for treasurers through the publication iTreasurer.

Blog entry
By jneu, April 09, 2014

PwC's summary of its 10th annual, 2014 state of internal audit survey sounds the alarm on the perception that Internal Audit functions are failing to meet expectations on value add to their organizations. Accordingly, a blueprint for change is needed to better align stakeholder expectations and audit function skills and capabilities. Or, alternatively, which is not  the direction that PwC promotes, the evolution of audit away from traditional assurance to more advisory-oriented, "trusted advisor" activities will need to be rethought.   

The heart of the matter, as PwC puts it:

"More than half (55%) of senior management told us that they do not believe internal audit adds significant value to their organization. Nearly 30% of board members believe that internal audit adds less than significant value. On average, only 49% of senior managers and 64% of board members believe internal audit is performing well at delivering on expectations."

It is senior management (along with line managers who also are not valuing IA to the degree desired), among internal audit's stakeholders that PwC sees as the clear leading indicator. Boards/audit committees have not reset expectations to the new dual audit role. "I wonder if the audit committee has an appreciation for how the pendulum has swung for internal audit," as they quote one Chief Compliance Officer from a Fortune 50 consumer products company.

Arguably, this message from PwC will serve up more tension for CAEs and their direct reporting line to the Audit Committee/Board focused more on assurance and their more dotted-line accountability to other stakeholders on other forms of value add. It is never easy to serve two masters with differing objectives and expectations equally well. Plus, have PwC and others promoting the "trusted advisor" audit role set expectations too high? 

There are also considerations in PwCs blueprint to meet the dual role expectations for staffing, which is on the agenda for the upcoming IAPG meeting.

PwC quotes our IAPG member from Microsoft, Melvin Flowers:

"Internal audit needs to be able to be in the business conversation and show they understand the business objectives. Internal audit won't have a seat at the table if they don't understand the business and have credibility in management's eyes. Teams need to be transforming and hiring people outside the box. The skill set is totally different today. We used to hire the best accountants. Now we need someone that is as good with communication and able to listen, in addition to having good technical knowledge. If internal audit thinks their job starts with the balance sheet, they are going to be wrong. Their job starts with the business objectives and where the company is going. If they focus on the business objectives, they will be aligned to the critical risks of the organization."

Good food for thought and further discussion.  Read the whole report here.

Blog entry
By gwestphal, April 09, 2014

Manual processing and lack of visibility are two major drivers to new technology, confirming that process improvement continues to be a priority for most treasury organizations.  That was one of the conclusions of a webinar hosted by the NeuGroup and partner Treasury Strategies, Inc.

Highlighting the timeliness and urgency of TMS implementations, the webinar, introduced by Geri Westphal, Director Peer Knowledge Exchange, was based on member feedback over the past NeuGroup meeting season. The webinar also covered industry consolidation, TMS functionality and asking the right and tough questions when it comes to implementations.

Laurie McCulley, Partner at Treasury Strategies, Inc. led the group through a variety of treasury technology objectives members should consider when selecting a TMS solution. She pointed out that there is "no one clear winner in TMS functionality” and encouraged members to carefully prioritize their objectives in order to select the solution that best meets those needs.

There also is a clear move toward industry consolidation with Wall Street Systems and Sungard as two primary examples of vendors merging platform solutions under their particular brand umbrellas.  This has led to the important question of future support, and members should carefully vet these concerns before locking into what might be deemed a sunset solution from a vendor’s perspective.

Treasury system functionality trends include an increased focus on process mapping functionality to allow for unique workflow analysis and approval processes, robust dashboard functionality, comprehensive risk management capabilities and mobile technology.  As treasury needs expand, so do the requirements they are demanding as part of their TMS solution, forcing treasury technology vendors to actively enhance functionality to include these new requirements.

A final bit of advice for those on the road to TMS vendor selection is to get up close and personal with RFP finalists.  Ask the hard questions and make sure you are happy with the answers.  Get the vendor to provide a real demo, not just a PowerPoint presentation.  Budget conservatively and assume the estimate for implementation costs will be 1-2 times the license costs. 

Thanks to all members who joined the webinar and good luck on your TMS implementation journey!