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

Blog entry
By Anonymous, July 26, 2013

The AT30 peer group has voted and conferenced and developed their agenda for their summer meeting in September hosted by Google and sponsored by Citi. The agenda includes two topics that are robust enough they are broken into two parts. The first is on the matter of managing bank relationships. Bank partners are some of the most important relationships for any business and the global shifts in regulations and capital requirements are influencing the playing field. Selecting and effectively managing the right ones is a critical role for treasury. This session will focus on the managing portion of that equation and include discussions on bank scorecards and allocating treasury’s wallet.

The second portion of this session takes a slight turn and addresses approaches to bank consolidation. Large MNCs continue to re-engineer banking relationships around the globe. In designing an optimal banking structure, liquidity optimization is usually a driver but other key considerations include costs, bank wallet allocation, counterparty risk management, and supporting the needs of the operating business. This session will address how companies are making those determinations and approaches they are taking for execution. In addition to member views on these matters, the group will also hear the perspectives from Citi, the meeting sponsor.

Another big topic is liquidity practices for emerging markets. The group settled on a first round discussion specifically on Argentina and Brazil. It’s good news and bad news but Latin America is no Europe. Good in that it’s not stuck in the muck of economic doldrums. Bad in that it does not have the sophisticated financial solutions for pooling and repatriating cash. This session will discuss how members are approaching this challenge and what solutions banks may have to help.

Part two shifts to Asia with a specific focus on China and some new government initiatives for easing currency controls. China is on a quest to internationalize its currency and turn Shanghai into a global financial center on par with New York, London and Hong Kong. Fortunately, they are realizing that to do that you can’t keep everyone’s money locked up in your country. Consequently, the doors for getting cash out are starting to open and companies are lining up to get in on the action. This session will address the various pilots being sponsored by SAFE and the PBOC that allow companies to move currency more freely across the border.

Other topics of interest include 1) developing an optimal investment policy that will be led by Oracle, 2) how treasury can add value to the business led by Best Buy and 3) a follow up session on treasury management systems. The last meeting included a session focused exclusively on SAP treasury and its benefits and shortcomings. This session will focus on the other side of the discussion for those members who are steering away from SAP’s TMS solution and their reasons why.

Blog entry
By mkmoore, July 10, 2013

Bank Mendes Gans (BMG), a subsidiary of the Dutch bank ING, is joining the European Treasures’ Peer Group (EUROTPG) as the sponsor of the Fall 2013 meeting on November 21, 2013.

BMG is returning as a second-time sponsor of The NeuGroup. “We are delighted to welcome BMG back as sponsor. BMG’s first collaboration with the NeuGroup was through its sponsorship of the Global Cash & Banking Group (GCBG) in 2007 at Amgen in Thousand Oaks, CA,” says Anne Friberg, Senior Director of Peer Knowledge Exchange and NeuGroup leader of EUROTPG.

BMG is a niche bank specializing in intercompany netting and cash pooling and is a recognized world leader in cross-border, multi-currency notional pooling. It has been serving multinationals in this capacity since the 1960’s, starting with Dow Chemical (once a substantial shareholder), which essentially outsourced its netting and cash pooling to BMG to help launch the original platform. Notional Pooling was a topic of interest at the most recent meeting of the EUROTPG, and the group will have a full session dedicated to it at its upcoming autumn meeting. BMG will co-present on the pooling theme with its client, EUROTPG member United Parcel Service (UPS).

The NeuGroup’s European Treasurers’ Peer Group (EUROTPG) brings together like-minded senior treasury practitioners in Europe to share experiences and best practices with their peers. All members are senior treasury practitioners with responsibility for European treasury and risk management operations at global corporations. EUROTPG is one of 15+ NeuGroups (www.neugroup.com) representing more than 300 members at 180+ companies.

Blog entry
By Anonymous, June 07, 2013

The Engineering and Construction Treasurers’ Peer Group had their seventh meeting this week which was sponsored and hosted in New York by founding sponsor BNP Paribas. The meeting agenda covered a wide range of topics including fraud, inter-company transactions, treasury dashboards, economic and bank market update, doing more with less – comfortably, and a member profile. The following are a few highlights from the discussions:

Dashboards – what you want them to see. Dashboards have a variety of purposes including tracking key metrics and data points, reporting within treasury, reporting to executive management and showcasing treasury. What gets included in a dashboard is dependent on ease of access and reportability. But the key content should be a mix of what the audience wants to see and what the author wants the audience to see. Common data points include tracking of cash balances and cash flow (ideally by entity and/or region), debt capacity and utilization, counterparty exposure, and contingent obligations such as LC’s, corporate guarantees and acquisition contingencies.

Credit – “It’s here. It’s cheap. Do it”. That was the summary statement by Renaud-Franck Falce with BNP Paribas regarding the state of the bank credit markets. His exhortation was to take advantage of the cheap liquidity and lock in your credit needs for as long and as low as you can. There is considerable bank appetite for revolving credit, letter of credit lines and bridge loans. But there is less appetite for term loans. The one caveat is that banks are signing up for lower commitment levels requiring more participants in the syndications.

Balancing Security with BCP. Most members have experienced some element of fraud in their treasury, some with actual monetary losses. The group had quite a discussion on their experiences with creative fraudsters who have been successful at penetrating the fortresses of large corporations. Breaches covered the gamut of old fashioned cooking the books to intercepting passwords into bank systems and transferring money. One operational challenge that surfaced is balancing precautions with the need for business continuity planning. Some members have elected to disallow anyone from accessing bank systems from outside the office (such as from a hotel or coffee shop), believing the risk is too great that login credentials will fall into the wrong hands. However, many companies rely on employee laptops to conduct treasury business in the event the office is disabled. One solution that surfaced was to have people in other offices trained to intercede in the event of a corporate site disruption.

Members will be meeting again in October in Chicago and expect to have an in-depth discussion on the cross-border currency pooling opportunities developing in China.

The Engineering & Construction Treasurers’ Peer Group started in 2010 as a suggestion of BNP Paribas who believed this industry would benefit from being part of a NeuGroup.

Blog entry
Google, M&A, Merck, TMANY
By mkmoore, May 31, 2013

The NeuGroup discusses M&A at 2013 New York Cash Exchange; four steps to ensuring M&A succeeds after the deal is done.

One of the most important keys to the success of a merger or acquisition is how quickly and efficiently the target’s processes and procedures can be integrated into the processes of the purchaser. And while there is no one-size-fits-all approach to integrating a newly acquired finance team into the current program, there are some general guidelines treasurers can follow.

This was the topic of a recent session facilitated by the NeuGroup at the Treasury Management Association of New York’s (TMANY) 2013 New York Cash Exchange conference. With the NeuGroup’s Global Cash and Banking Group members Google and Merck weighing in, practitioners were shown the steps they can take to make integrating a new company a smooth and successful process.
One step at a time
The panel described four major steps to follow in the creation of an M&A integration playbook, including the definition of the integration strategy, naming the integration team members and their specific roles and responsibilities, creating a detailed questionnaire of appropriate process questions and identifying specific milestones for success. 

In defining the strategy, treasurers should always create – in as far advance is practical – a robust, standardized list of critical questions that must be answered within the first few days of the acquisition. These might include questions regarding policies, acquired company philosophy, banking structures and account access, as well as the acquired company’s approach to cash management. Also, defining roles and responsibilities is crucial. This leads to step two: identifying the integration team.

Naming team members is critical as it will give them – the sponsors, integration and functional leads – more time to prepare. That prep might also include other questions, which is step three, like identifying bank signatories, types of bank accounts and who has access, how daily cash is handled and some investigation of what investments are currently outstanding.

Finally, stick to the playbook. While this might fall under the heading of a “the best laid plans…” scenario, executing the playbook with as few deviations as possible is best. Most importantly, execute the critical, balance-sheet affecting parts of the plan: cash, board approvals, and banking. And while having the team named ahead of time, do not hesitate to seek assistance when necessary.
On behalf of The NeuGroup, we would like to extend a special thank you to Ronni Horrillo and Kristen Clavel from Google, and Cheryl Rabito from Merck for their time and excellent contributions to the panel discussion. 

Blog entry
By thoward, May 28, 2013

We thank all the participants at the Internal Auditors’ Peer Group (IAPG) meeting on May 15-16 at HP in Palo Alto. A special thanks goes to MetricStream for their support and presentation on GRC. Judging by the opening session discussion, the internal audit function continues to evolve and expand – sometimes to areas that make auditors less comfortable. In some instances, members have added an advisory role to their mandate. But for some this raised the question of when is one an auditor and when an advisor? Are they mutually exclusive? If an advisor, are you an auditor at the same time? Depending on the company, that answer varies. For some it’s the size of the issue: if it’s a big mature issue, you’re an auditor; if it’s a simpler process – say, pointing out the potential issues of an upcoming project – then it’s advisory. This tension ran through out the meeting, as it often does at IAPG sessions.

Further meeting highlights included:

  • Audit universe continues to expand. One member presented on how they are managing the continued expansion of the audit universe, which continues to expand at a rapid clip. The company’s current coverage structure had to change to keep up. Therefore, it adopted a new approach: American Process Quality Control (APQC), which was designed from a manufacturing standpoint but can be used for audit. The benefits are that APQC is a timeless process that won’t change based on organizational changes or on the size of the audit universe.
  • ERM still pinch point. One of the outcomes from a lively discussion on enterprise risk management was that there is still a question of how much involvement and/or ownership there should be when it comes to IA and ERM; most group companies it seems adhere to the IA as “third line of defense” model. At one company, however, IA oversees ERM, where the chief audit executive is “more than a program manager” when it comes to managing who actually owns the risks (this was in response to one member who said at his company, the business units own their risks and he feels he’s the program manager).
  • GRC tools used for proactive risk-based audits. MetricStream presented on the end-goal for Internal Audit to leverage technology to harness Big Data and provide a framework for collaborative risk assessment across functions. Members are closer to the starting point of using GRC tools for more proactive risk-based audits, however, as very few make use of GRC functionality outside of their audit functions.

Thanks again to all IAPG meeting participants for your active contributions to the meeting sessions. We look forward to our next meeting scheduled for October 28-29.

 The Internal Auditors’ Peer Group was formed in March 2006 to serve chief audit executives at IP-rich MNCs. The IAPG joins our Corporate ERM Group to serve more comprehensive risk managers in the NeuGroup Network.

Blog entry
By Anonymous, May 26, 2013

The Asia Treasurers’ Peer Group – Singapore had their fourth meeting last week which was hosted by Cargill and sponsored by Deutsche Bank who returned for their second consecutive event.  Deutsche Bank’s ongoing support of the group proved particularly beneficial at this meeting as they listened in on an unplanned and spirited discussion of member preferences for bank relationships and sales strategies. The following are a few highlights from last week’s meeting:

  • Supporting the Local Business Units. Regional treasury centers are clearly in place to manage the traditional treasury functions of cash, debt, FX, and investments. But the regional treasury role has an increasing and important tie to the local business operations. Many of the member companies have a dual reporting relationship into both the treasurer at HQ and also to the regional business head. Treasury has a long list of skills and solutions ripe for adding value to the business such as assessing and analyzing various risks, supply chain financing, and customer financing solutions. “Treasury teaches business units how to manage their cash flow and balance sheet”, noted one member.
  • The RMB is Slowly Coming Out of its Shell. Growing cash that is trapped in China is a significant issue for many companies, enough for them to limit the amount of investment they are willing to make in the country. This inability to use RMB also runs counter to China's ambitions to host a major international financial center and attract regional treasury centers. One member gave a case study of their journey with the Chinese currency regulator, State Administration of Foreign Exchange (SAFE), which has progressed over the past several years. SAFE, along with the Peoples Bank of China (PBOC), the country’s central bank, have been piloting various approaches for reducing currency controls. This member, along with several others in the group, is participating in one of the pilots and they are optimistic that the government will continue to evolve favorably. The irony is that with interest rates so much higher in China than elsewhere, and the potential tax consequences, there is little incentive to bring out the cash, unless it is truly needed. “We just wanted to have this mechanism in place in case we need the money”, noted the member doing the case study.
  • Comparing Notes on Compensation. Talent acquisition and retention are a significant challenge in Asia. Members strongly believe treasury, which HR and consultants typically lump in with all other finance functions for compensation purposes, requires enough specific and valuable skills to warrant a premium compensation scheme in relation to other finance functions. Convincing HR of this is typically an uphill battle. But it can be won with the right management and data support. One member has been successful in this area but affirms that it can be a long battle. “You just have to keep fighting for it and giving evidence of why it is warranted” he noted. With this in mind, members believe there would be value in assessing the group on their compensation levels for the different treasury roles in the regions of China, India and Singapore. The group refined the framework for this study at the meeting and will be completing a survey over the coming weeks.

There was also a member profile presented by our host, a country profile on India presented by our sponsor and a discussion on meaningful metrics and KPI’s regional treasury can use to both show value and bring value to their constituents. We thank all of the members for their contributions to the discussion and overall success of the meeting.

The ATPG - Singapore was founded in October 2011 for regional treasurer's of large MNC's with treasury operations in Asia, primarily Singapore. As the first NeuGroup in Asia, we expect it to be the catalyst for other Asia-based NeuGroups to better serve our members with operations in the region. 

Blog entry
By afriberg, May 24, 2013

Europe challenges treasurers to find further efficiencies.

We would like to thank all the participants in our European Treasurers’ Peer Group (EUROTPG) meeting last week at Nokia in Geneva for the active discourse. We also appreciate the contribution of Chatham Financial for updating members on key EMIR obligations for corporate end-users of derivatives.  Here are some key meeting highlights:

  • Pooling efficiencies. Evolving company structures and European standardization are enabling several members to delayer their cash pooling efforts and reduce the treasury infrastructure required to manage them. Bank Mendes Gans’ (BMG) service remains a standout enabler and is also recognized as a “bank agnostic” overlay which is advantageous from a bank relationship management point of view. Unfortunately, there is an “accounting psychology” that stands in the way of eliminating physical collection and payment accounts in many countries.  Pooling efficiencies are needed, as members focus on mobilizing all available liquidity, while also looking pro-actively at what they will do if European short-term yields go negative.
  • NFC or NFC+? With regard to EMIR, the European equivalent of the US Dodd-Frank Act, the most critical aspect was to clearly determine if your treasury activities fall under the Non-Financial Counterparty (NFC) category or the NFC+ category, where they exceed thresholds for speculative derivatives use. The latter will have margining considerations for non-cleared transactions. Both have daily valuation and timely confirmation requirements (as of 15 March 2013) and will have portfolio reconciliation, compression and dispute resolution requirements (from 15 September 2013). Questions still remain regarding how FX fits into EMIR across Europe, although there is a possibility that the US exception for FX will influence the Europeans to grant a similar exception in EMIR. On the trade reporting side, questions arose as to how exactly reporting would work when a company amends an existing trade.
  • Cross-border transactions still in regs limbo. Another outstanding concern is the treatment of cross-border transactions; neither Europe nor the US has finalized rules on this. For transactions involving a US and an EU entity, both Dodd‐Frank and EMIR will apply until/unless there is a “substituted compliance” or recognition regime in place. A key issue here – one that is subject to a regulatory stalemate at the moment – is whether either side will recognize equivalency on a regime basis or on a requirement-by-requirement basis. The US has indicated an inclination to go with the latter with Europe inclined to the former, hence the stalemate.
  • Legacy concerns holding back SEPA prep.  Many members’ payment and collection mechanisms in Europe have used legacy formats for so long that companies are concerned about the repercussions of implementing new SEPA formats, even the IBANs. The people who implemented the legacy systems are long gone, and this doubles the concern about the unforeseen consequence that might be triggered by even basic changes. With IT and programming resources in short supply, big-bang adoption of the SEPA formats proves difficult.  Italy and Spain, in particular, face similar issues from a country perspective.

Again, we appreciate the sharing by our EUROTPG members on these and other topics covered at the meeting last week.

The NeuGroup’s European Treasurers’ Peer Group was launched in February 2008 for regional treasurers of MNCs based in Europe. This membership group joins our Latin American Treasury Managers’ Peer Group and our Asia Treasurers’ Peer Group to form the regional portion of the NeuGroup Network serving the treasury profession.

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.