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

Blog entry
By afriberg, November 21, 2014

Members of the NeuGroup’s EuroTPG convened for their autumn 2014 meeting earlier this week, hosted by a member in Zurich and sponsored by Reval. Reval and a speaker from Fides tackled the technology aspect of treasury management, including the crucial piece of connectivity to banks in order to facilitate cash-related projects like enhancing visibility and rounding up liquidity. Member-led sessions covered the appropriate way to tackle treasury integrations after M&A, considerations when setting up an in-house bank, and pay-on-behalf-of, POBO and receive-on-behalf-of, ROBO.

Key Takeaways

Higher cash visibility. Related to the next-generation liquidity structures and bank account rationalization is increasing cash visibility to 90 percent or above levels and automating the cash-reporting process; this is with a view to shift from calculating daily or even intra-day cash positions to taking decisions and actions based on those positions. This increased cash visibility is an important part of efforts to reduce working capital needs and increasingly a means to manage pushback by banks not wanting to see unexpected balances of over $100 million left on deposit in jurisdictions where they don’t need or want the added liability.

How to connect? Reval’s presentation on their link-up with Fides showed members the alternatives to direct SWIFT connection and how each might impact their cash visibility (and pave the way for STP on the payments side as well, the other aspect of the connectivity equation). Here are the key ways to connect:

  1. Bank portal or portals: OK when you only have a few banks.
  2. Host-to-host connections: Also OK when dealing with few banks, but as soon as you want to send bulk payments or SEPA credit transfers, banks will not entertain host-to-host. Some banks in the Nordics may do it if you do a lot of business with them, but generally, at this stage, banks will push toward SWIFT.
  3. SWIFT Alliance Lite: It is proliferating rapidly but requires a bank investment and contracts with all the banks you are using, and some banks may not have all their branches on SWIFT.
  4. SWIFT Service Bureau. Fides is one of several service bureaus and it offers solutions for connectivity by sitting in between the company and the banks, and addresses some of the shortfalls of Alliance Lite. Services include: account statement validation; payment validation; conversion services; pre-market sanction filtering service; and outsourced SWIFT for Corporates onboarding (where required). Because Fides is a subsidiary of Credit Suisse, it has a FI BIC code, which helps in making bank reporting more smooth and turnkey.

From intercompany lending and netting structures to the full IHB. A member-led session on considerations for an IHB sparked a discussion of how far to take an intercompany lending program to the full structure of an in-house bank. If a company already has a robust netting and intercompany lending program to shift liquidity, the business case for a full IHB may be diminished. This is the counterpoint to the vision of the full-scope IHB obviating cash pools. Another consideration is the extent to which pooling and other bank liquidity management structures will be impacted by Basel III and related LCR (liquidity coverage ratio) regulations. Banks’ reluctance to accept large deposits may require greater intermediation by an in-house “bank”. While all agreed that an IHB offered the most flexibility and structure to add a payment and collection factory with POBO/ROBO, the additional benefit had to be considered carefully before going to tax and legal to get clearance for the IHB. Scrutiny of transfer pricing in intercompany lending structures also has had an impact.

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

The European Treasurers' Peer Group (EUROTPG) is a membership group for MNC treasurers and treasury operations directors overseeing treasury in Europe, who come together to exchange knowledge, share experiences and discuss solutions to common challenges .

The NeuGroup is the leader in peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.

0
Blog entry
By wchan, November 20, 2014

In China where cultural norms are strong, and the regulatory environment is complex and evolving rapidly, selecting a new banking partner may pose huge challenges.

The Asia Treasurers' Peer Group (ATPG) discussed this topic at their recent meeting, hosted by Intel, and sponsored by Standard Chartered Bank. Many companies today use their global banks in China to meet their China cash management banking requirements. The ATPG heard from a guest presenter, who shared their story on the rather unique alternative of partnering strategically with a local Chinese bank.

Choosing this approach to banking in China was a challenge up-front, and included spending a lot of time training the local Chinese bank on the IT and operational needs of western MNCs, but the company viewed it as a worthwhile investment on a long-term banking relationship as the company further entrenched itself in a key market for its business.

One strategy to consider included selecting a first level bank branch (i.e. hierarchically one step away from headquarters control and status) that has a high level of interest in your company’s business to ensure the appropriate level of attention and service from the bank branch. Shanghai branches may not be ideal for some, since there are many big companies located in Shanghai vying for bank’s top client attention. The largest Chinese banks which are pre-occupied with servicing the State-Owned Enterprises (SOEs) may also not be ideal banking partners for the average corporate.

For a more in-depth look at the key takeaways from this meeting, subscribe to iTreasurer.com, where you will find the executive summaries for the meetings of all groups in The NeuGroup Network.

The Asia Treasurers' Peer Group (ATPG) was founded in 2011 for regional treasurers of large MNCs with treasury operations in Asia. As the first NeuGroup in Asia, it is now the catalyst for other Asia-based NeuGroups that serve members in this 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 its iTreasurer publication and The NeuGroup Network, which includes 18 invitation-only groups serving more than 350 treasury and finance professionals across functions, industries and global regions.

0
Blog entry
By gcassone, November 18, 2014

It's sometimes a struggle to measure and showcase treasury performance.

The fall meeting of the AT30 peer group took place last week in Memphis at the worldwide headquarters of FedEx Corporation. This was the fifth AT30 meeting and was sponsored by RBS.

We are the Champions
Members had a very active discussion on measuring treasury performance, which is driven in part by the nature and the culture of the company. The member-led session highlighted that the uniqueness of a company adds to the complexities of the valuation and organizational differences impact what measurements may look like from one company to the next.

One of the most important measurements for many is the cash forecast, the accuracy of which allows the treasury to be more cash efficient. For those members with sizable cash movements, forecasts are updated on a daily basis. As one member expressed treasury’s main role is to be a true “champion of working capital” which is supported by the transparency and accuracy of global cash balances.

Many members measure value by looking at hedge effectiveness and reduced volatility, and by comparing hedge/no hedge actions, while others look to “beat the market”.

How to Measure your Decision-making?
To some degree, treasury continues to struggle with showing its effectiveness and members often have a “hard time to getting management to see how well treasury did.” While treasury’s contributions are often measured against a performance benchmark, a quantitative measure, the more elusive question raised in this session was how to measure quality. How well do you make key decisions and how can that value be derived and highlighted to others? This idea resulted in some healthy debate among members.

Management decisions and ultimately performance are also driven by risk preferences, another variable in measuring value-added. As one member remarked, “We should all be floating (rates) if you do (only) the numbers”.

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

The Assistant Treasurer’s Group of Thirty is a membership group for assistant treasurers at MNCs who come together to exchange knowledge, share experiences and discuss solutions to common challenges in their roles and careers as assistant treasurers.

The NeuGroup is the leader in peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.

0
Blog entry
By jneu, November 14, 2014

Members learned what foreign banks face in the US and what MNCs can look forward to in China, plus much more.

The Tech20 Treasurers’ Peer Group met last week with a full agenda covering corporate bond trading concerns, cash/leverage considerations, cybersecurity, tax changes and much more.

We thank BNP Paribas, starting with Jean-Yves Fillion, Chief Executive Officer for North America, for supporting the meeting and providing valuable insight into what it takes today for a foreign bank to be fully committed to the US, the new dynamics in the convertible debt market and internationalization of the RMB.

Here is a sampling of the meeting takeaways:

  • The secondary trading market for corporate bonds is broken, but it will take a crisis event to fix it. While there seems to be agreement that the secondary corporate bond market is indeed in need of reform based on arguments presented by BlackRock, members saw little chance that the market would succeed in implementing the reforms suggested without a large adverse market event. They hope they are wrong.
  • Netting cash against gross debt is the way of the world. The most important change in S&P’s new rating methodology for tech firms is that it allows for issuers to net available cash and liquid investments against gross debt. The default is to net 75 percent, however, one of S&P’s top tech sector analysts said that it will consider information that supports a higher or lower haircut.
  • Don’t be data obese. The reality with cybersecurity is that it is impossible to protect all information, so firms need to decide what information is really valuable and focus protection and response plans on that. Since it is easier to protect a small amount of valuable information and focus your response, firms need to lean to purge more data. Too many firms are “data obese,” one of our panel of cybersecurity experts noted.
  • RMB gets favored treatment with reforms. As part of its effort to promote the RMB, China will offer the most compelling reforms for transactions and products denominated in RMB first. Thus, to take maximum advantage of Chinese liberalization it makes sense to be doing treasury business in RMB. 

The Tech20 also bid a fond farewell to Dick Grannis, a long-time member, who is retiring this month from QUALCOMM. 

The Tech20 is an invitation-only membership group for top treasurers in the tech sector. For 14 years running, the group facilitates leading peer knowledge exchange to help members save time with current projects and priorities by implementing others’ best practices and avoiding their mistakes. 

0
Blog entry
By afriberg, November 13, 2014

FX Managers’ Peer Group 2 looked at how to take a value-at-risk approach a step further.

The FXMPG2 convened for their summer 2014 meeting in San Diego in mid-September, sponsored by Deutsche Bank. The agenda was anchored by a sponsor presentation rules-based hedging which took a look at how to take a value-at-risk approach a step further by incorporating a view on currencies.

Deutsche Bank led the session on rules-based hedging and began by looking at the benefits of currency diversification and correlation effects, but also how each individual currency's contribution to overall risk must take into account its volatility. Applying value-at-risk modeling to this analysis, one can identify the greatest risk-reduction bang for the hedge buck.

Cost does not equal value. Measuring the cost of hedging does not show its effectiveness or value. Instead, Deutsche Bank’s presenters suggested looking for example at risk reduction at given levels of option premium spend. To decide what level to hedge/spend, a company must have a clear view of its risk tolerance: a quantitative framework should be able to be calibrated for whether, for example, upside is worth less than downside.

• Please do take a view. If you agree that there are systematic returns in FX, as the presenters proposed, you should be open to a systematic, rules-based approach to medium-term hedging, meaning stepping away from "no view," market neutral hedge decisions. Signals to look for are (1) PPP and reversal to the mean (the example used was in the last several decades, the EURUSD has trades within a 20 percent band of PPP 71 percent of the time and periods outside of that have been short lived); (2) carry, i.e., high-yielding currencies don't depreciate as much as the implied forward indicates; and (3) momentum, meaning the past trend is likely to continue in the short to medium term. Each company can weight these three factors differently in the rules that will determine hedge decisions. A caveat: don't "over-optimize" based on historicals: consider in-sample/out-of-sample choices, recognize that volatility is a blunt instrument and that there are more ways than PPP to measure the long-term fair value of a currency.

For a more in-depth look at the key takeaways from this meeting, subscribe to iTreasurer.com, where you will find the executive summaries for the meetings of all groups in The NeuGroup Network.

The NeuGroup is the leader in peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.

0
Blog entry
By afriberg, November 12, 2014

Key takeaway comes from FX Managers’ Peer Group meeting.

The FXMPG summer 2014 meeting took place in early September in New York, sponsored by Thomson Reuters and Reval. The meeting covered some new angles on risk management topics such as discussions on risk management philosophy and communication as applied to FX; China hedging, an ever-changing undertaking under the evolving internationalization of the RMB and members’ increasing exposures in this market.

In the group’s continuing series of FX program reviews from “Soup to Nuts,” members heard a thorough review of a member company’s program and the benefits and challenges of the introduction of a trading company structure.

One of the key takeaways of this session focused on comparison communication:

Peer comparison and constant currency as key report items: When communicating FX results internally, one key item to illustrate the efficacy of the program is to compare (using publicly available data) key competitors’ YOY growth due to currency on a quarterly basis, which allows you to demonstrates lower volatility in this metric than your industry peers. Another important item is a side-by-side of “as reported” and constant currency growth numbers.

For a more in-depth look at the key takeaways from this meeting, subscribe to iTreasurer.com, where you will find the executive summaries for the meetings of all groups in The NeuGroup Network.

The NeuGroup is the leader in peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.
 

0
Blog entry
By Anonymous, November 03, 2014

Can Treasurers' Group of Thirty members continue to balance post-crisis incentives to fortify balance sheets, support changing businesses, and meet activist demands while tax rules tie up sizeable amounts of liquidity?

The Treasurers’ Group of Thirty met at Gap Inc. in October to discuss, among other things, current projects and priorities, working capital as a driver of firm value, reacting to the end of the dollar carry trade in approaching developing market currency risk, as well as the compliance demands of an array of recent regulatory requirements.

The projects and priorities discussion, in particular, outlined the major tension facing large-cap treasurers today: having survived the financial crisis and reacted in its aftermath, they are now forced to balance financial strength, support of changing business models, plus compliance and activist demands on cash all at once. And, all the while, US MNCs face powerful disincentives to use the pockets of cash growing off-shore to finance this balancing act at home. Something has got to give.

Members say they are dominated by capital allocation-related projects, especially efforts to respond to activist pressures with increases to share buybacks and dividend payouts. Adding to these pressures, is the constraint on liquid capital created by US tax rules that impede US corporates from tapping off-shore cash for domestic use.

HSBC, as the meeting sponsor, offered insights from Julian Roberts and John Dower, representing its working capital advisory group, to help members make the most of their working capital contribution to ROIC, which is emerging as the most significant driver.

A representative from HSBC’s FX advisory team, Ivan Asensio, later noted how the shift from a positive to negative US dollar carry trade with emerging markets is dramatically changing the way members must deal with FX exposure in these markets.

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.

The NeuGroup provides leading peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.

0
Blog entry
China, SAFE
By mkmoore, October 24, 2014

The NeuGroup’s CEO and Founder Joseph Neu visits with SAFE Director General and President of its China Forex magazine Mu Zhiqian.

To reciprocate for his visit with The NeuGroup’s Assistant Treasurers’ Group of Thirty (AT30) at their HSBC-sponsored meeting last May, Joseph Neu, CEO and Founder of The NeuGroup met in Beijing this week with Mu Zhiqian, State Administration of Foreign Exchange (SAFE) of China Director General and President of its China Forex magazine. The purpose of the meeting was to continue the knowledge exchange established between SAFE and NeuGroup members to help them better understand China’s business environment, regulatory reforms and to support their businesses in the country with the best possible treasury capabilities.

As at the AT30 meeting in May, this dialogue was facilitated by Lewis Sun, Head of Sales for HSBC China’s Global Payments and Cash Management team.

Mr. Mu reiterated his offer made to the AT30 that he is happy to provide answers to specific questions that members might have and The NeuGroup is glad to serve as intermediary for these going forward. Helping communicate SAFE’s FX policies and reform efforts, as well as bridge the gap of understanding between SAFE and FX market participants, is part of his mission as President of China Forex. This bi-monthly magazine has a quarterly English edition and Mr. Mu provides frequent commentary in its pages.

Mr. Mu also oversees China Forex’s advisory council, which serves to communicate foreign exchange policy information and facilitate knowledge exchange between banks, enterprises, and SAFE. “It is not unlike your NeuGroup forum,” Mr. Mu noted. In addition, China Forex offers consulting and training services on FX and related policy issues to MNCs and other foreign investors. See China Forex’s English language website (www.safeforex.com.cn) for more information.

Key advice

Asked the key advice Mr. Neu should take back to NeuGroup members, Mr. Mu urged them to show patience with China’s reform efforts. These, he reminds, still follow Deng Xiaoping’s, China’s chief reform architect, philosophy of “crossing the river by feeling for the stones at the bottom.” Experimentation and innovation are still going to come in phases via pilot programs to test them in practice: “we want to see the potential negatives,” before implementing them more broadly.

When asked about the pilot fatigue that this reform approach is creating with MNCs, Mr. Mu encouraged members to be bold. SAFE understands and appreciates the time you spend when you participate in pilot programs, he noted. It will encourage first movers to benefit. Reforms are increasingly driven by real market demand, he said, thus members should ask for what they really need in practice, so that the pilot programs can do more to bridge the gap between  what is allowed in China and world-class operations. What Mr. Mu appears to be pointing out is that there is a yin and yang to doing business in China: you need to be patient and bold at once.

0
Blog entry
By Anonymous, October 21, 2014

Friday, October 17th marked a milestone in The NeuGroup history as we held the pilot meeting of the Asia CFO Peer Group, a group for Asia-based regional CFOs of large western MNCs.

The meeting, held in Shanghai, also marked the third time that a new group has been launched in partnership with BNP Paribas, and we would like to thank them for their support with this initiative.

The speed at which this new group shared their challenges and actively sought solutions from one another was striking. Members support complex organizations in an environment of high growth, tight talent pool, dizzying regulatory evolution and intense scrutiny on compliance. The opportunity to compare notes with others in similar situations via the peer group model was very well received by the members of this new group.

Session discussions included:

The China CEO of L’Atelier, a specialty BNP Paribas subsidiary which offers eCommerce consulting services, discussed the growth rate and applications of eCommerce in China. The group was also interested to learn of a permissible bank account structure within the SFTZ that allows for a freer flow of operating funds between subsidiary company’s on-shore and off-shore.

The topic of staff development garnered much attention, as members discussed the need to focus their efforts on retaining their top performers and doing whatever is needed and possible to accomplish that. Battling for higher salaries, positioning for additional opportunities and exposure, and communicating to them their value are some of the ways this gets done.

The session on SSCs featured a case study by a member company which had recently set up a new SSC operation in Shanghai. The presenter wowed the group with their tale of the Herculean efforts to successfully incorporate into the new SSC the target activities of 67 legal entities in 13 countries over the course of 14 months. One participant described their reaction to the presentation as “truly inspired.”

The NeuGroup is very excited about the success of this event and the prospect of furthering our proven model of knowledge exchange to executive levels in China. If you would like information about this new peer group please contact Bryan Richardson at brichardson@neugroup.com .

The NeuGroup provides leading peer knowledge exchange and intelligence for treasurers through its iTreasurer publication and The NeuGroup Network of 18 member groups serving more than 350 treasury and finance professionals across functions, industries and global regions.
 

0
Blog entry
By gcassone, October 07, 2014

A meeting highlight was a member-led discussion on what critical steps to take now in preparation for when a crisis hits, and how to ensure that treasury operations get running again.

The ninth meeting of the Engineering and Construction Treasurers’ Peer Group (E&CTPG) took place this week in New York City at BNP Paribas Bank, host and six-time sponsor of the E&CTPG.

Crisis Management “To Dos”
E&C members’ crisis to-do lists certainly lengthened after the session on maintaining business continuity in the event of an unforeseen stop in their treasury operations.
 
From on-site anthrax to company-wide system failure, members were presented various scenarios and asked to consider how prepared their treasury is to deal with the crisis, including which tools to employ given the severity of the situation and the security required to transact treasury business.

The active discussion that followed each crisis “for instance,” often generated more issues than answers. However, members agreed that tackling the low hanging fruit alone – back-up systems access, offsite staff and bank contact lists, alternate meeting location – could make a big difference in a crisis situation.

Beyond the more obvious fixes, the need for treasurers to look closer at what crisis plan is in place and fine tune their preparation was evident. Put simply, management planning and testing of back up operations today can save you some headaches tomorrow when a crisis suddenly hits.

And with the vast majority of the group responsible in whole or in part for their treasury’s business continuity plan, treasurers are expected to be ready for the unexpected.

Gain access to executive summaries from all meetings of 16+ practitioner-focused membership peer groups for senior treasury and finance professionals in The NeuGroup Network by subscribing to iTreasurer at www.iTreasurer.com.

The Engineering & Construction Treasurers' Peer Group (ECTPG) is the premier forum for treasurers at the world’s largest engineering and construction corporations. Members meet to discuss topics on their agendas, share experiences and discuss solutions to common challenges. The ECTPG is part of 16+ practitioner-focused membership peer groups for senior treasury and finance professionals with more than 330 members at 180+ companies and facilitated by The NeuGroup.
 

0