That Treasury’s Got Talent
Tags: Bank Treasurers' Peer Group, corporate debt, HSBC, iTreasurer, pension contributions, Raytheon, treasury talent
In the latest issue of iTreasurer we discuss several trends that have been percolating throughout the year so far, and which also promise to continue to be top of mind heading into the end of the year.
On page 1 we take a look at the perennial treasury challenge of managing and, more importantly, keeping talent. A 2018 first-half NeuGroup cross-peer group poll shows the topic has moved up to No. 5 in the Treasurer Top Projects & Priorities, bumping FX management/hedging to No. 6. Indeed, talent remains more important to treasurers than a variety of important issues, including M&A and divestitures, supply chain, strategic planning and cybersecurity, among many other topics. Accordingly, managing this key resource is critical, particularly as the unemployment rate creeps lower.
In our “Anticipated Exposures” section on pages 4-5, we discuss companies’ concerns about being ready when new lease-accounting standards go live at the start of 2019. Also, corporate debt rose to a record 45.5% of US gross domestic product in Q1 of 2018. Finally, will US tax reform’s new corporate rate reduce the likelihood that US companies choose inversions to countries with lower rates? And should companies reconsider their cross-border configurations—especially with countries like Canada?
On page 6, in “Piloting Pension Moves as Tax Rates Fall, Interest Rates Rise,” we examine Raytheon’s recent announcement on tax-deductible contributions to defined benefit plans. The defense contractor said it would make a $1.25 billion pension contribution by Sept. 15. Companies like Raytheon on calendar fiscal years have until that date to make the contributions before the deduction on the contribution falls to 21%, the new corporate tax rate.
This month’s peer group meeting summary features NeuGroup’s Bank Treasurers’ Peer Group. At its first-half meeting, members discussed bank regulatory reform, shared their experiences with the latest rounds of stress testing and considered how regulatory reform will affect them. Members also mulled the rate outlook and how to adjust asset sensitivity and, perhaps most importantly, how to model deposits—looking beyond betas, or the sensitivity to Fed rate moves, to myriad other factors. This all relates to shifting analytical resources from focusing solely on stress testing to looking at banking business challenges like deposit acquisition and runoffs.
On pages 11-14, we talk to HSBC about its new global strategy, which has seen heavy investment in technology and an engagement to open architecture, or open banking, to help its clients with digital transformation. Treasurers at multinational corporations face immense pressure to make better use of emerging digital technologies—both to increase efficiency in treasury’s key areas of responsibility and to help the larger company meet its strategic objectives. And this overarching pressure to automate and embrace transformation has put additional focus on what is perhaps the single most important relationship treasury has outside the company—with its banks.
Finally on page 15, we discuss how prenegotiated bankruptcies make filing easier, which may explain the rise in Chapter 11 filings.