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

Blog entry
By thoward, January 17, 2017
The New Year issue of iTreasurer starts off with more Trump, what else? As with his predecessor, people are seeing a variety of presidents in Donald Trump, from being a threat to American democracy and for that matter, the world, to being the restorer of the American dream and making America great again for everyone. Whatever their personal views, from a business standpoint, treasurers probably lean toward the latter view, i.e., a more positive depiction in their painting of The Donald portrait. They see the possibility of tax and regulatory relief and other bullish things for business.
So it is on page 1 NeuGroup founder Joseph Neu delves into what Trump will mean when it comes to corporate taxes. In “Capital Planning: It’s All About Trump’s Tax Plan,” Mr. Neu points out that treasurers have had repatriation tax holiday and tax reform on their minds for years and are hoping the new president makes meaningful progress during his term. And if it is repatriation tax relief, what will they do with that money? “Depending on the sector, most firms will look at strategic acquisitions and then share repurchase and dividends,” Mr. Neu writes. “Depending on the state of their leverage and rating outlook, some may also retire debt, but given the current rate outlook and recent low-rate opportunistic funding, there will likely be few taking this route.”
On page 4 iTreasurer contributor Julie Zawacki-Lucci writes about what 2017 will bring for treasury budgets. After mining the data collected from numerous peer group meetings, Ms. Zawacki-Lucci concludes that it will be a good year for budgets. “Purse strings appear to be loosening slightly for 2017,” she writes.
In our peer group meeting summary that begins on page 7 we take a look at the takeaways from The NeuGroup’s Treasurers’ Group of Thirty Large-Cap edition (T30 LC). One key takeaway is that the treasury function’s stock is rising. That’s been reflected in compensation levels, which have been moving higher. “The increasingly strategic role of treasury is showing up in respectable compensation levels, especially in pharma and biotech,” according to Anne Friberg, who runs the group. Treasury’s sphere of influence is also expanding, according another takeaway from the meeting.
In a similar vein, beginning on page 11, James Volkwein and Joseph Mauro of Deutsche Bank author a story on five trends to watch in 2017. Among them is “corporate treasury’s role as the principal risk manager of the organization,” which will continue into 2017 and beyond. In the piece they also note “the longer-term trend of treasury becoming more strategic as its mandate expands.”
Finally in "2017—The Donald Debuts: Delights, Doubts, and the Dollar" on page 15, Anne Friberg weighs in on a Trump administration and its impact on the US dollar and taxes. Will it be Dr. Jeckyll Trump, going “whole hog on expansionary fiscal policies—tax cuts, infrastructure spending—as he has more than hinted in speeches, tweets and other pronouncements?” Or will it be Mr. Hyde Trump, killer of free trade treaties and bullier of business? Whoever emerges after January 20, one thing is certain, Ms. Friberg writes: “The year 2017 may bring both elation and exasperation with the new president, but likely not ennui.”
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
Blog entry
By jneu, December 22, 2016

Thoughts on the season I wanted to share.

As the holidays are now upon us, this is the time for exchanging joy. The rest of the year, NeuGroup is focused on encouraging value creation with knowledge exchange. For the next week or so, we encourage you to exchange some joy. There is a lot of sentiment out there, with and without valid reason, encouraging sorrow and unhappiness. 

Ignore it for a while and enjoy.

Me, I will be enjoying thinking about past holidays, including those that exist in memory with just a bit of Gluehwein gauziness. It sets a joyful mood.

Happy Holidays! 

Blog entry
By thoward, December 19, 2016
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way..." -- Charles Dickens, A Tale of Two Cities
We would venture that Dickens's classic opening to A Tale of Two Cities fits the mood of today. It certainly has been an interesting year. And for our last issue of 2016, iTreasurer reflects on this unforgettable year from a treasurer's perspective. So in the heart of the issue is a review of the year’s big themes through the lens of NeuGroup peer group meetings and the top takeaways from them.
Also in this issue we weigh in on how a Trump administration will impact corporate treasury; highlight the findings from a 2016 NeuGroup Peer Research FTE and compensation survey; discuss the challenge of managing pension funds in a low rate environment and look at how financial technology companies are changing how supply chain financing gets done.
Starting on page 1, iTreasurer takes a look at the possible impact Trump's presidency will have on the global economy and how business gets done. President-elect Trump’s phone call with the Taiwanese president and his hyperbole regarding companies sending jobs overseas raises many, many questions. But, writes contributor John Hintze, “these questions and others impacting corporate treasury are unlikely to find much clarification before Trump’s inauguration. However, the new president will have the tools and in many instances the political support to make dramatic changes to trade, taxes and the US economy.”
Next, contributor Julie Zawacki-Lucci sorts out the takeaways of an FTE and Comp survey conducted in the middle of 2016. One of the main takeaways was that being a part of treasury is “a good place to be.”
“Total compensation levels for NeuGroup treasury members were higher than suggested in other broader treasury surveys,” observes Ms. Zawacki-Lucci. “Total compensation for treasurers averaged $845k, with the minimum at $214k and the maximum at $1.77M. Of that total, on average, $317k was the base/cash salary, $163k cash bonus, and $277k in equity grants and performance based equity awards (vesting in approximately three years).” A good place indeed.
On page 7 begins our look back at the year that was. And what a year. “Never a dull moment, and treasury management reflected it, from picking up the pieces following the shocking Brexit, to confronting the challenge of Section 385, to then picking up the pieces again after a shocking US election. But all the while, treasurers maintained their solid presence as the company cash-management stalwarts.”
Geri Westphal then discusses pension management with input from Société Générale. Corporations the world over have been facing many challenges in their pension plans. First it was the crash and then in the aftermath, persistently low interest rates. The situation has also been exacerbated by high asset values, and both issues have created the need for tools that can help mitigate interest-rate and draw-down risk. That’s because at current levels, “pension fund deficits can impact corporate valuations and can potentially handicap corporate development plans,” Ms. Westphal writes.
Finally, we look at how fintech companies have been driving innovation in supply chain finance and thus “continue to streamline the buyer-supplier experience, eliminating age-old tensions and adding a new tool to working capital management.”
Enjoy the issue.

For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com

Blog entry
By brichardson, December 13, 2016
The NeuGroup launches a new peer group for assistant treasurers.

The Assistant Treasurers' Leadership Group, The NeuGroup's newest peer group, held its inaugural meeting last month at Dolby Labs in downtown San Francisco. The meeting was sponsored by hometown bank, Wells Fargo. 

More than 20 companies were present for the day-and-a-half meeting, which began with an extended session during which members reviewed their company profile and current projects and priorities. The session included a deeper dive into the Dolby organization and set the stage for the balance of the meeting by giving everyone a summary of participant companies. This allowed members to pursue sidebar and follow-up conversations with others having similar challenges or projects.

Following lunch and a tour of Dolby’s new in-house theater, the group was led by Adobe’s AT in a discussion on how treasury brings value to key corporate initiatives. Referencing a list of examples submitted prior to the meeting, the group discussed roles in M&A deals, capital structure, instilling discipline into business development spending, and de-risking and restructuring pensions. Adobe cited their own example of taking over accounts receivable and disbursements 18 months ago to improve those operations.

The next session was on the topic of capital structure and featured Wells Fargo and Tech Data. Wells Fargo gave an overview of what they are seeing in the market, which is a focus on hurdle rates for Return on Invested Capital (ROIC), return of capital to shareholders, and tax reform and repatriation. Tax reform is naturally a big topic. The likely prospect of returning all of that offshore cash is a major impact to corporate operations. Wells noted that rating agencies have been quiet about their reactions to repatriation and the likelihood of seeing most of that cash just go to shareholders.

Tetra Tech is involved in a significant acquisition of a portion of Avnet, which rating agencies and shareholders love. The tie-up will add considerable synergies. The company had to lever up to make the acquisition but has managed to retain its investment grade rating, in part, by promising to pay down debt and return to their BBB profile within 24 months.

The last session of day one addressed tools for improving working capital management. The discussion focused on supply chain financing, with members debating the pros and cons of the different vendors and models. One member noted that his company opted to focus on simply imposing a lot of discipline to working capital management before seeking out tools.

Day two began with an Open Forum that was closed to the sponsor. The majority of the time was spent discussing members’ experiences and views toward the various banks they use. For any particular bank, some members had positive experiences while others had negative experiences. The conclusion was that that was driven by how much business you have with them and the quality of the relationship manager. A seasoned and tenured RM is going to make a very positive impact on your relationship.

The meeting wrapped up with a session on that perpetually challenging topic, cash flow forecasting, led by a company that has been under pressure to know their cash flows intimately. The company was purchased in a LBO by a private equity firm and was structured with debt anticipating revenue in the $6 billion range. The company has exited poorly performing businesses to improve margins, which has been successful. But the debt is still there and is weighing on cash flow. Historical approaches to forecasting were not keeping up with the new structure, so drastic measures were taken to improve forecasting accuracy and, just as important, timeliness.

The inaugural meeting was a very positive launch for this new group, and everyone looks forward to its continued progress and development. And if you ever get the chance to attend movie theater fitted with “Dolby Cinema” technology, do it, as the sight and sound will blow you away.

For more than two decades, 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 flagship publication, iTreasurer, and The NeuGroup Network, which includes 18 invitation-only groups serving more than 400 treasury and finance professionals across functions, industries and global regions. Visit NeuGroup.com for more information.

Blog entry
ATLG, Dolby
By jneu, December 07, 2016

Dolby Laboratories hosts the launch of newest NeuGroup.

One of the highlights of our newest, Assistant Treasurers' Leadership Group meeting last week in San Francisco was being able to experience the powerful sound and vision technologies of a Dolby Cinema. It definitely is a dramatic difference from the traditional movie-going experience. A big thank you to Dolby Laboratories for hosting and to Wells Fargo for their sponsorship of the inaugural meeting. Here are a few takeaways, I'd like to share:

  • Staying in the credit sweet spot. Since the financial crisis it has been said that BBB is the new AAA, since this investment-grade rating offers the optimal balance of financial flexibility and leveraged cost of capital. As the new normal shifts, as it looks like it will under President Trump, firms will have to assess how this credit sweet spot may change, especially as repatriated cash comes into the mix for so many large US firms. Everything you've learned about capital structure and allocation these last years needs now to be revalidated at least.
  • Working capital tools still have gaps. Members discussed working capital tools supporting both dynamic discounting and supply chain finance. Working capital management is a perennial treasury topic that takes on added significance with the probable changes coming in the rate environment. The challenges to implementing effective working capital improvements are many, and you can add to them the fact that tools aimed at aiding working capital management have functionality gaps including easy integration with ERPs in some cases.
  • Frontier market entry gatekeepers. Given the whipsaw effects on emerging and, especially, frontier markets caused by shifting US policy, now is the time to ensure that sales has a gatekeeper to challenge the economics of market entry into them. Treasury serves this role well. Someone needs to curb enthusiasm when sales proposes entering into a place like Nigeria. Sales may be forcecast to be strong with healthy margins, but the bad news invariably overlooked is that pricing has to be in naira and that's a currency that may never leave the country, is subject to high deval risk and is expensive to hedge.

This was the last NeuGroup meeting of 2016 and we look forward to more invaluable knowledge exchange next year. Happy Holidays!

Blog entry
By bshegog, November 29, 2016
A trifecta of market events, including the recent presidential election, form the backdrop for a lively meeting of the Treasury Investment Managers’ Peer Group (TIMPG2) hosted by PIMCO in Newport Beach earlier this month. 
Manny Roman, CEO of PIMCO, kicked off the meeting by sharing his thoughts on the new and exciting world we face. Does the unexpected become the new normal? Mr. Roman asked the members this question as he pointed to Brexit and the US Elections. He also said that fewer investors are currently in the marketplace, as they do not always respond the way we think they should. 
The recent election, money market fund reform and the fact that the Fed might start tightening again in December provided plenty of fodder to chew on as the meeting progressed. Just days after Trump’s election, the members enjoyed hearing Libby Cantrill, PIMCO Head of Publicity, discuss the implications. 
Joachim Fels, PIMCO Global Economic Advisor, also walked members through the economic themes likely to drive the markets in coming months. According to Mr. Fels, a Fed rate hike will most likely occur in December, and one or two more hikes will take place in 2017. 
Members went on to present on topics ranging from counterparty risk management to best uses of technology. The very busy day-and-a-half was focused on rate hikes, floating NAVs, growing counterparty risk and very low yields in money market funds. 

For more than two decades, 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 flagship publication, iTreasurer, and The NeuGroup Network, which includes 18 invitation-only groups serving more than 400 treasury and finance professionals across functions, industries and global regions. Visit NeuGroup.com for more information.

Blog entry
By jneu, November 25, 2016
Three takeaways from this week's HSBC-sponsored EuroTPG meeting in London. 
The European Treasurers' Peer Group met this week in London at HSBC. I share my key takeaways from the meeting below.
  1. Trumponomics changes. An HSBC economist framed the  economic outlook with a President Trump as leading to higher US growth in the near term, as much as 3% next year, tempered by uncertainty around trade policy longer term. Debt and deficit spending are also likely to change the global rate environment with a certain Fed rate hike and quicker pace of tightening over the next 18 months. The knock-on effect will also llikely spell the end negative rates in Scandinavia and eventually the euro zone itself.
  2. Innovation with virtual accounts. Members gave HSBC good feedback on their innovation plans with virtual accounts. These plans include more granular layering of virtual accounts, even down to the invoice level for automatching, for on behalf of payments and receipts. They also include new reg-optimized pooling structures that may deliver many of the same operational benefits of notional pooling and in-house bank structures. From a member perspective, hopefully, virtual accounts also will not come with the same compliance headaches as physical ones and, eventually, virtual acount portablity might make it easier to shift cash operations, payment and collection structures between banks or other payment service providers enabled by PSD 2. 
  3. SWIFT service bureau concerns. In a member discussion of SWIFT and TMS set-ups, the issue of SWIFT service bureau cyber security and related limited liability coverage concerns came up.The ensuing discussion suggests that security, insurance and trust will increasingly factor into bank connectivity solutions.
I look forward now to our last meeting of 2016 next week in San Francisco, where we will launch our newest, Assistant Treasurers' Leadership Group sponsored by Wells Fargo.
Blog entry
By bshegog, November 23, 2016
The NeuGroup’s Corporate ERM Group questions the value of formal risk statements. 
The Corporate ERM Group recently conducted its 2016 conference call to discuss how members are using formal statements and data to improve risk management. The group also compared notes on presenting to the board of directors.  
Risk statements can help members take more risk. The goal of the risk statement is to show where a corporation can absorb or add risk. One member outlined the company’s process for driving risk awareness at executive levels and giving guidance even at lower levels. Although only half of the members currently have a formal risk statement, many feel that their organizations have less formal risk policy statements to use as guidance. Those without a risk statement were given some reasons to consider a more formal process for putting one in place. 
Data use is finding its way into risk management. Although members agreed that they have more data than uses, they are finding ways to incorporate data into the risk-measurement process to either expedite processes or cover areas not currently reviewed. Some of the more common uses fall under the audit group, however, members also use data to check vendor terms on invoices and in the employee health and safety area. Still, there are certain areas of risk that are impossible to measure with data (for example, weather issues impacting suppliers), and members discussed alternative mechanisms for dealing with these risks. 
For more than two decades, 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 flagship publication, iTreasurer, and The NeuGroup Network, which includes 18 invitation-only groups serving more than 400 treasury and finance professionals across functions, industries and global regions. Visit NeuGroup.com for more information.
Blog entry
By gwestphal, November 22, 2016
The NeuGroup recently attended the 2016 AFP Conference in Orlando, Florida, and spoke with experts about the changes they are seeing across the treasury and cash management landscape. As part of our discussion with Mark O’Toole, Vice President Treasury & Commodities Solutions at OpenLink, we learned that comprehensive exposure management is a common theme that several of his clients are focused on as a top priority. Many treasury organizations are working hard to update systems and improve reporting, which will allow them to consolidate their exposure data to get a more complete view of both FX and commodity exposures for the entire enterprise.


Recent statistics from The NeuGroup validate the client changes noted by Mark. According to input from several treasurer-level groups, FX and Commodity Risk Management is second on the list of top projects and priorities for 2016. 

Commodity risk is complicated, and it has become increasingly more important to evaluate risks across the entire enterprise, including procurement, treasury and supply chain. With an effective risk management program, companies can quantify and consolidate net exposures, allowing them to achieve a more holistic view that includes both commodities and currencies. A key strength of OpenLink is its ability to provide an integrated treasury and risk management system with full asset class coverage, FX exposure and commodity procurement price risk on a single platform. This enables treasurers and CFOs at commodity-intensive companies who have sophisticated treasury needs to manage risk in today’s volatile market climate.
OpenLink, founded in 1992 and owned by leading private equity investment firm Hellman & Friedman, is a global software and services business that has grown both organically and through strategic acquisitions to achieve revenues in excess of $300m. The company services over 600 clients, including some of the world’s largest commodity and energy companies, financial institutions and central banks. 
Blog entry
By thoward, November 21, 2016
In the November issue of iTreasurer, we delve into the aftermath of two big regulatory and tax issues: money market reform and the US Treasury’s new tax rules on inversions, otherwise known as Section 385. We also discuss recent visits by intrepid NeuGroup reporters to recent conferences in Vienna and Orlando, Florida.
Beginning on page 1 is our look at the aftermath of Treasury’s Section 385 implementation. Despite expectations for a bad outcome, Section 385 turned out to be not nearly as onerous as expected. Corporates got the carve-outs that they were looking for; however, Treasury kept certain parts of the rules that will keep treasurers busy nonetheless. Also in a bit of history, making the distinction between debt and equity has been controversial for more than 30 years. And in an attempt to sort out the jungle of court decisions related to the issue, Congress made 385 part of the Internal Revenue Code in the Tax Reform Act of 1969, which gave the Secretary of the Treasury license to “issue regulations as may be necessary or appropriate to determine whether an interest in a corporation is to be treated… as stock or indebtedness.”
In our peer group meeting summary this month we showcase the Global Cash and Banking Group. At its meeting in California in the spring, members discussed the future of eBAM and whether treasury sees any value in it; this is because eBAM adoption rates have been low due to a lack of standardization among banks. Members also discussed M&A integration and the importance of building a model to integrate/divest businesses in a more efficient manner as well as the resurgence of in-house banks.
Reporting on the proceedings at October’s Eurofinance meeting in Vienna, contributing editor Anne Friberg discusses whether treasury reached its “tipping point.” The answer is “yes, probably,” writes Ms. Friberg: “a tipping point toward a broader and more strategic remit, under increasing pressure to do more with less, but with opportunities to take advantage of innovation from banks and fintechs, while perhaps faced with bank relationship challenges in the context of the choice to bundle or unbundle certain services.”
On pages 14-15, contributor John Hintze writes that there could be some hope for beleaguered prime money market funds (MMF) now that the October 14 SEC rules have kicked in. That’s because two trends are shaping up that could bring cash back to the funds after it left for government funds ahead of the new rules. “One is that spreads between institutional prime and government MMFs have widened since the October 14 compliance deadline of new rules,” Mr. Hintze writes. “The second is that prime fund portfolios’ weighted average maturities (WAMs) have lengthened somewhat. These shifts may eventually bring back some lost luster to prime funds for corporate treasurers, but so far inflows have yet to materialize, and views split sharply about whether they ever will.”
Nonetheless, there remain skeptics who doubt that prime will recover any of the departed cash. “From what we’ve heard, no matter what the yield on prime MMFs, they’re not going to see money return,” one observer notes in the story.
Enjoy the issue.
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.