Welcome To NeuGroup

Connecting Every Finance Professional Who Wants To Share And Learn

Welcome To NeuGroup

Connecting Every Finance Professional Who Wants To Share And Learn

Our Mission

To help our members in Corporate Finance and Treasury reach their full, professional potential. We assist our members and those who serve them to drive success for their companies, their customers, their teams, their peers and themselves.

Our Vision

To connect every finance professional who wants to share and learn with others seeking the same. Bring the best of these professionals into our leading membership network for knowledge exchange to be a source for solutions, advice to achieve greater success and for new insight and validation for the advancement of Corporate Finance and Treasury professions.

The Corporate Finance and Treasury Elite From the World's Most Iconic Companies
NeuGroup Process

Share Your Projects And Priorities And What You Would Most Like To Learn From Other Finance Professionals

Connect

NeuGroup helps you forge meaningful connections with fellow finance professionals who share similar projects and priorities or have useful experience with them.

Exchange

NeuGroup establishes trust to facilitate open and honest knowledge exchange and inspires you to share and learn to reach your full professional potential.

Distill

NeuGroup distills useful content from each exchange to drive success and focuses on new insight that is validated by our peer groups of leading finance professionals.

Testimonials

NeuGroup Helps Our Members Drive Success For Themselves, Their Teams, Their Companies, Their Customers, Investors And Every Other Stakeholder In Reaching Their Full Potential

Our NeuGroups

NeuGroup currently connects 500+ corporate finance and treasury professionals from hundreds of the world’s most iconic companies for knowledge exchange in over 20 peer groups and distills insight from these exchanges to help them succeed.

No Walk in the Park: Overcoming Resistance To Embrace a Cash Culture

One treasurer’s rocky quest to shift his company’s focus from P&L to cash.

When one NeuGroup member saw an opportunity to elevate treasury’s role within the company while focusing its overall view of cash, he took it—but the journey was no walk in the park.

  • He encountered some resistance from leadership and the FP&A team, but was able to work with them to reconcile two methods for cash flow forecasting and take a more active approach to cash management.
  • The member, the treasurer at a high-growth tech firm, addressed how to overcome these internal obstacles, which he said are common to treasurers working to build a cash culture and move away from a P&L focus.

One treasurer’s rocky quest to shift his company’s focus from P&L to cash.

When one NeuGroup member saw an opportunity to elevate treasury’s role within the company while focusing its overall view of cash, he took it—but the journey was no walk in the park.

  • He encountered some resistance from leadership and the FP&A team, but was able to work with them to reconcile two methods for cash flow forecasting and take a more active approach to cash management.
  • The member, the treasurer at a high-growth tech firm, addressed how to overcome these internal obstacles, which he said are common to treasurers working to build a cash culture and move away from a P&L focus.

Destroying the ivory tower. The member said treasury tends to land in a unique kind of corporate silo that he called an “ivory tower;” not only separate from the rest of the company, but seemingly elevated above it.

  • For him, this led to tension with other divisions even before he embarked on his cash mission. “It is a big issue when treasury is not connected to the company’s [operations], management and the board,” he said.
  • “When treasury is only focusing on operational matters, like cash positioning, it is not ideal,” the treasurer said. He felt treasury was performing very well on the day-to-day operations side but was restricted by not being involved in the long-term cash or capital structure planning.
  • “In our case, we also had a high debt leverage, so we needed to have full control of the company’s cash model,” he said. “FP&A was in charge of that but wasn’t really doing it. So we had to transform the company’s culture.”

Hard work pays off. When the treasurer was first brought in to help manage strategic cash planning (also known as the indirect model for long-term cash forecasting), he said FP&A was hesitant to let go. Being able to strategically manage these relationships was key to the project’s success, he said.

  • To soothe relationships, treasury now shares the responsibility, working alongside the FP&A team. “We work with external functions on a weekly basis, we have weekly reviews with teams and corrective action items, but we do not manage these functions,” he said.
  • Now, treasury is part of the company’s process for strategic cash planning three years out, as well as the short-term forecast, which he said allows for better alignment between the two types of forecasting and a more holistic cash framework.

Internal discord. When another member said her CFO had expressed concern about a disconnect between the long-term cash flow forecasting and treasury’s short-term forecast, she similarly suggested allowing treasury to assist with both forecasts to bring them into harmony. It didn’t go over well, so she looked to her peers on how to overcome this resistance.

  • The member who successfully completed this transformation suggested his approach to these situations: using a “treasury road map” to illustrate his vision to leadership. It breaks down, area-by-area, the approach the company took two years ago, how it is performing now and a vision for the next two years.
  • “Just being able to have these conversations is good,” though they’re not always easy, he said. “I think, and this is key for me, if you’re transparent and have a regular review of projects, then that works.”
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No Sale: Convertibles at Great Prices Fail to Impress IG Corporates

Companies rated investment grade expressed reluctance to issue convertible bonds, despite favorable conditions.

It can be a nonstarter to raise the topic of convertible bonds with treasurers at investment-grade companies that can already issue debt with very low interest rates and don’t want their stock diluted when investors convert bonds to equity.

  • But many NeuGroup members whose companies have high credit ratings, including some at a recent meeting of NeuGroup for Capital Markets, say all their banks have pitched convertibles. And some treasury teams are also getting questions internally from CFOs and board members.
  • One member, echoing others, said 0% coupons and conversion premiums in the range of 50% to 70%, along with updated FASB accounting standards (see chart) that could simplify the process, makes convertible bonds “more attractive, but it’s an odd gamble when rates [for straight debt] are below 3%.”

Companies rated investment grade expressed reluctance to issue convertible bonds, despite favorable conditions.

It can be a nonstarter to raise the topic of convertible bonds with treasurers at investment-grade companies that can already issue debt with very low interest rates and don’t want their stock diluted when investors convert bonds to equity.

  • But many NeuGroup members whose companies have high credit ratings, including some at a recent meeting of NeuGroup for Capital Markets, say all their banks have pitched convertibles. And some treasury teams are also getting questions internally from CFOs and board members.
  • One member, echoing others, said 0% coupons and conversion premiums in the range of 50% to 70%, along with updated FASB accounting standards (see chart) that could simplify the process, makes convertible bonds “more attractive, but it’s an odd gamble when rates [for straight debt] are below 3%.”

Ideal conditions. One member with experience issuing convertibles before his company became investment grade said the most difficult part of the process was documentation, so the simplification by FASB is significant.

  • The FASB changes come amid market factors that have historically been good for convertible bond issuance:
    • Low interest rates
    • High equity prices and high valuations such as PE (pricing/earnings) ratios
    • High volatility levels
  • These condition have sparked a flood of companies with non-investment grade ratings, or no ratings, to issue convertibles. The Financial Times, citing Refinitiv, reported that in January and February, companies raised almost $34 billion, 68% more than in the first two months of 2020.

Dilution. The big downside to convertible instruments, NeuGroup members said, is dilution of a company’s common stock, which potentially makes the shares less valuable to shareholders.

  • “If the stock price goes to 10% above my strike price, my upper bounds, I’m diluting myself $4 billion, is that really worth 20 basis points of savings?” one member asked. “Your base is much higher because your company has doubled the wealth, but you still have to explain why you’ve taken $4 billion of dilution.”
  • The same member said, “As much as banks love to pitch convertibles because they can charge [more than for straight debt deals], some of our closest banks have been honest and been like, ‘You’ve heard about convertibles a lot I’m sure, but we don’t recommend them for investment-grade companies.’”
    • Another member added, “Some [banks] said, ‘If your stock goes up by a hundred percent, are you really still going to be worried about dilution?’ Economically, yes, I will.”
    • “I’ll echo those thoughts,” another member said. “Although there is great headline attractiveness, 50 basis points is not worth the risk of dilution.”

Pair convertible with a buyback? One member raised the intriguing idea of pairing a convertible issue with a stock repurchase plan to offset or hedge the dilution of additional stock. The member, however, said he’s still too skeptical of convertibles to embrace the strategy.

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Treasury’s Key Role as Corporates Support Black Communities

Treasurers weigh investments, deposits and transactions that will benefit Black communities.

Treasury teams within the NeuGroup Network are playing a key role at companies that are stepping up efforts to support Black communities and Black-owned financial institutions.

  • NeuGroup members discussed their initiatives and options at a recent Virtual Interactive Session (VIS) that followed a webinar in which Netflix detailed its commitment to allocate 2% of cash holdings—initially up to $100 million—into financial institutions and organizations that directly support Black communities in the US.

Treasurers weigh investments, deposits and transactions that will benefit Black communities.

Treasury teams within the NeuGroup Network are playing a key role at companies that are stepping up efforts to support Black communities and Black-owned financial institutions.

  • NeuGroup members discussed their initiatives and options at a recent Virtual Interactive Session (VIS) that followed a webinar in which Netflix detailed its commitment to allocate 2% of cash holdings—initially up to $100 million—into financial institutions and organizations that directly support Black communities in the US.
  • Director of treasury Shannon Alwyn told VIS participants that Netflix approached this project—an idea from someone in HR which treasury executed—by asking, “How can we make a difference in the normal course of business—how to do something without really doing anything—to make this more than a moment?”
  • Part of the answer to that question involved moving a portion of non-operating cash from one set of banking partners to other financial institutions.

The Netflix plan. Netflix is taking a first step by putting $35 million into two vehicles:

  • $25 million will be managed by the Local Initiatives Support Corporation (LISC), which will invest in Black financial institutions serving low- and moderate-income communities and Black community development corporations.
  • $10 million will go to Hope Credit Union in the form of a so-called transformational deposit to fuel economic opportunity in the South. This is a two-year CD with a 30-day call option in case Netflix needs the liquidity.

Big Picture. In general terms, companies looking to make an impact have three pillars to consider:

  1. Depositing cash into banks that directly serve Black communities.
  2. Using Black-owned institutions for financial transactions such as bond issues or stock buybacks.
  3. Direct investment of debt, equity or contributions in kind (e.g., technology, training and building housing).

There are obstacles to making investments that benefit communities. Investment policy constraints are among the biggest.

  • Most firms need peer benchmarks to ok carve-outs for depositing significant amounts of excess cash with smaller institutions and to approve equity investments that are said to have much more of a multiplier effect than loans financed by bank deposits.

Inspired by Netflix. A treasurer who attended the Netflix webinar and the NeuGroup VIS said his company, inspired in part by Netflix, is now looking to support Black-owned community development financial institutions (CDFIs) via options that include:

  • Making deposits directly into minority depository institutions (MDIs) that serve Black communities. This requires due diligence, partly because of the relatively small asset size of many Black-owned banks.
  • Using an intermediary similar to LISC that can help spread the company’s investment across a bigger group of Black-owned MDIs. “That’s what everyone is grappling with—trying to get adequate scale and diversification and some level of diligence,” the treasurer said.

Other paths to progress. The treasurer is also looking into options discussed by other companies who spoke at the VIS. They include:

  • A structured fund similar to one described by a member from a large technology company.
    • That tech company also uses the Certificate of Deposit Account Registry Service (CDARS) with a CDFI in New Orleans.
    • And the company makes use of the Insured Cash Sweep (ICS) service that involves hundreds of institutions.
  • A separately managed account (SMA) used by another company. The account is managed by RBC’s Access Capital, which helps financial institutions comply with the Community Reinvestment Act.
    • The SMA’s fixed-income investments include highly-rated issues from GSEs that support single-family loans and small businesses. The treasurer exploring his options called this “an elegant solution.”

Investment policy changes. The treasurer said it’s highly likely his company will need to amend its investment policy to accommodate whatever decisions senior management ultimately make. That will require approval by the CFO; the finance committee and the board will be notified.

  • During the Netflix webinar, Ms. Alwyn said, “We actually did have to get an exception to our investment policy for a certain portion of our cash in order to be able to do this. Because it is honestly taking on a quite a different risk profile than we’re used to. We decided that we need to take on a little bit more risk if we want to create change.”

Advice for peers. Ms. Alwyn said the company had to “carve out a specific portion” of its non-operating cash to devote to this initiative and “we kept that small.” She suggested that other treasury teams contemplating similar moves may want to think about:

  • Ratings from external agencies.
  • Duration requirements.
  • What size bank you’re willing to do business with.
  • “Getting comfortable with what level of risk you’re willing to take on as a company.”
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Juneteenth and Beyond: NeuGroup Member Companies Take Action on Racial Justice

Treasurers at major retailers discuss what’s been done so far and what lies ahead.

Calls for major societal change in the wake of the killing of George Floyd have sparked many corporations, including NeuGroup member companies, to take a range of actions in support of change and racial justice. For some, those actions included the observation of Juneteenth, which commemorates the end of slavery in the US.

Treasurers at major retailers discuss what’s been done so far and what lies ahead.
 

Calls for major societal change in the wake of the killing of George Floyd have sparked many corporations, including NeuGroup member companies, to take a range of actions in support of change and racial justice. For some, those actions included the observation of Juneteenth, which commemorates the end of slavery in the US.

  • At a NeuGroup virtual meeting for retailers last Friday on changing regulation and business norms post-crisis, a member from a major American retailer described his company’s quick decision to make Juneteenth (June 19) a company holiday.
  • Noting that the company doesn’t typically move as quickly, he credited its fast action to its cross functional crisis leadership team which is approaching the company’s reaction to recent events as it would a crisis such as a hurricane or COVID-19.
  • The company kept stores open but paid time and half to hourly workers on Juneteenth; other, eligible workers had the option to take the day off with full pay; and the company’s headquarters offices were closed.
  • “As we pivoted to this issue, we had to decide if we wanted to follow or lead,” the member said. “We wanted to lead.” 

Education and sincerity. One participant, who is African American, encouraged others on the call to better educate themselves on matters of slavery and black history, noting that few on the call knew the meaning of Juneteenth until recently.

  • This treasury professional said that what matters is sincerity and action, not talk, taken to address underlying problems. She said there is a difference between “what you know is expedient and what is taken to heart, what is sincere and what is a press release.”

 A good start. Another participant noted the pride he felt in seeing how both his current and former employers have tackled the issue of race head-on, including the CEO of the company where he works now urging conversation and learning. “I couldn’t be prouder of how people have responded,” he said.
 
Accelerated change.  In the last few weeks, the national conversation shifted from COVID-19 to racial justice crisis, focused on diversity and inclusion and black lives.

  • That, observed NeuGroup founder Joseph Neu, highlights the extent to which COVID-19 has forced business thinking to be open to accelerated change and the urgency for companies and finance teams to embrace a faster pace of change for good.

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Treasurers Rise to the Challenge of Managing Teams Remotely

One treasurer shares how he keeps staff united and upbeat—and offers his take on leadership during a crisis. The COVID-19 pandemic has forced many treasurers to confront the challenges of managing finance teams remotely.

  • At a recent NeuGroup virtual meeting of mega-cap companies, one treasurer shared his approach to keeping his team cohesive, as well as an observation about how people perform during a crisis.

Together apart. To build a sense of togetherness and maintain unity when everyone is in a different place, the treasurer created a virtual “war room” where every morning each of his direct reports speaks up and updates the group on critical information including domestic and foreign cash levels.

One treasurer shares how he keeps staff united and upbeat—and offers his take on leadership during a crisis.

The COVID-19 pandemic has forced many treasurers to confront the challenges of managing finance teams remotely.

  • At a recent NeuGroup virtual meeting of mega-cap companies, one treasurer shared his approach to keeping his team cohesive, as well as an observation about how people perform during a crisis.

Together apart. To build a sense of togetherness and maintain unity when everyone is in a different place, the treasurer created a virtual “war room” where every morning each of his direct reports speaks up and updates the group on critical information including domestic and foreign cash levels.

  • He holds another war room call at the end of the day to learn, for example, about any cash shortfalls and ask his direct reports about the calls they’re holding with their teams and how the broader treasury group is functioning.
  • He also sends an email update to the entire treasury staff at the end of the day to reinforce the feeling that they are members of a team. He includes a fun fact about himself (first concert, favorite food, etc.). And he has received positive responses by sharing how he spends his workday.
    • “They are very interested in what your day looks like,” he said, adding that he would likely share some of what he got from the NeuGroup meeting that day.

Fun stuff. To keep things light and spirits high during an extremely tough time, the treasurer had people wear something fun for St. Patrick’s Day. (Another member jokingly suggested having an “ugly sweater day.”)

  • Every Friday, as part of the end-of-day call, the team has a virtual happy hour. The overall goal, he said, is to create a “good environment” in the virtual workplace.  

Crisis response. In mid-March, two weeks or so into working from home, the treasurer had observed that some members of his team had not yet stepped up as leaders or started thinking outside the box as they navigated “unchartered waters” created by the pandemic.

  • “Most people tend to do what they are comfortable with during a crisis, rather than hit it head on,” he said. “Top leaders tend to shine during a crisis.”
  • To help maintain focus and motivation, the treasurer does a weekly review, listing the major accomplishments from the treasury/risk team.
  • He also pays tribute to individuals who hit milestones, like a work anniversary, or who go “above the call of duty.”
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Closing a Quarter for SOX Can be Difficult in New, Remote World

An internal auditor describes what his company has done to successfully close a quarter when some physical tasks can’t be done.

Part of Sarbanes-Oxley, the internal controls act released in 2002, requires a corporate’s chief executive and financial officers to certify financial and other information contained in the issuer’s quarterly and annual reports. But what happens in a crisis? What if some of that info requires someone in place to record inventory or in-person meetings when employee movement is heavily restricted during the current pandemic?

An internal auditor describes what his company has done to successfully close a quarter when some physical tasks can’t be done.

Part of Sarbanes-Oxley, the internal controls act released in 2002, requires a corporate’s chief executive and financial officers to certify financial and other information contained in the issuer’s quarterly and annual reports. But what happens in a crisis? What if some of that info requires someone in place to record inventory or in-person meetings when employee movement is heavily restricted during the current pandemic?

Practice. One answer is the punchline to the joke, “How do you get to Carnegie Hall?” Practice, practice, practice. That’s essentially what one member of NeuGroup’s Internal Audit Peer Group has done over the past few years. The company developed a robust business continuity plan where SOX was a particular focus and has used it a few times over the years for natural disasters and has audited the plan several times. So with COVID-19, “We’re in pretty good shape,” the member said.

Take a photo. Despite the company being comfortable with remote working, there still are challenges to closing the quarter amid the global pandemic. This includes practices like obtaining “wet ink” signatures, getting people in place for inventory observation or cut-off testing for shipping.

  • In this case, the auditor said, the company “did what it could when it came to inventory.” Local managers took photos of inventory before they were told to leave the premises. And managers were able to obtain wet signatures while keeping in mind social distancing rules. Where this couldn’t be done, e-signatures like those provided by DocuSign were allowed.
    • In one of NeuGroup’s treasury peer group zoom meetings recently, one practitioner in Europe said his relationship banks were permitting DocuSign functionality for 90 days.
  • Preparation. The member’s company listed all the controls it thought it wouldn’t be able to use when people couldn’t access company buildings or managers had little access to each other.
    • “We identified the controls and have been able to postpone some reporting,” he said. “It’s going to be an interesting quarter, but I think we’ll be able to close with no problems.”
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DIY: Forming Mentoring Circles That Lead to Sponsorship

More takeaways from the Women in NeuGroup meeting featuring three senior executives at one company.

The Women in NeuGroup (WiNG) virtual meeting held last week highlighted the use of mentoring circles as a building block for sponsorship—where someone senior to you in the company advocates for your advancement. Our first story described how the process works at one major American multinational, as described by three senior executives. Below are more takeaways from the meeting as distilled by Anne Friberg, senior director of peer groups at NeuGroup.

  • Yes, you can build your own. It doesn’t really require corporate sponsorship to build mentoring circles like the one featured at the WiNG event. You can start your own with women (and men) whom you know and just go for it. The one stumbling block may be to get budget approval for things like traveling along with mentors to other company facilities, for example, but most of the suggested actions don’t incur much cost. (Of course, almost no one is traveling now, but that will change some day.)
  • Don’t be afraid to ask someone to be a mentor (or even sponsor). The worst that can happen is they say no. The key is not to let that dent your confidence, and the silver lining is that it also opens up for a conversation of what it would take for them to consider mentoring or sponsoring you.

More takeaways from the Women in NeuGroup meeting featuring three senior executives at one company.

The Women in NeuGroup (WiNG) virtual meeting held last week highlighted the use of mentoring circles as a building block for sponsorship—where someone senior to you in the company advocates for your advancement. Our first story described how the process works at one major American multinational, as described by three senior executives. Below are more takeaways from the meeting as distilled by Anne Friberg, senior director of peer groups at NeuGroup.

  • Yes, you can build your own. It doesn’t really require corporate sponsorship to build mentoring circles like the one featured at the WiNG event. You can start your own with women (and men) whom you know and just go for it. The one stumbling block may be to get budget approval for things like traveling along with mentors to other company facilities, for example, but most of the suggested actions don’t incur much cost. (Of course, almost no one is traveling now, but that will change some day.)
  • Don’t be afraid to ask someone to be a mentor (or even sponsor). The worst that can happen is they say no. The key is not to let that dent your confidence, and the silver lining is that it also opens up for a conversation of what it would take for them to consider mentoring or sponsoring you.
  • It can get awkward with close associates. What if you started out at the same level with a long-time colleague, but now you’re in a more senior role and you’re mentoring that person? And what if you really feel you cannot in good conscience sponsor this person for a promotion or joining your team? Remember the key tenets of productive mentor and sponsor relationships: They require trust, honesty, communication and commitment. When you’ve known someone for a long time and may be friends outside work, this is hard.  But—gulp—take a deep breath and be honest about why you cannot sponsor someone, and be generous about sharing what you believe the areas of improvement required for your sponsor support are.
  • Prepare yourself for being sponsored. Not everyone is as aware as they would like about their own skill set or what’s required for being “discovered” and sponsored. If that sounds like you, it may pay to take an assessment from StrengthsFinder or similar services. That way, you can be more confident in putting yourself forward for something that suits your strengths, or seek out opportunities where you may need to dig deeper and develop an area that’s less of a strong suit for you to balance out your skill set. And mind you, a sponsor who’s gotten to know you may well see strengths and capabilities more clearly than you do.
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Using Mentoring Circles to Cultivate Organic Sponsorship for Women

Mentoring circles can help women find sponsors who can advocate for their career advancement.

Three women who are senior finance executives at a major multinational corporation described how their company organically builds sponsorship using so-called mentoring circles to support the development needs of high-potential talent. The three spoke this week at a Women in NeuGroup virtual meeting.

  • One of the women described mentoring circles as groups of 10 to 20 people led by more senior employees to discuss topics of common interest and engage in activities to support career development.

Mentoring circles can help women find sponsors who can advocate for their career advancement.

Three women who are senior finance executives at a major multinational corporation described how their company organically builds sponsorship using so-called mentoring circles to support the development needs of high-potential talent. The three spoke this week at a Women in NeuGroup virtual meeting.

  • One of the women described mentoring circles as groups of 10 to 20 people led by more senior employees to discuss topics of common interest and engage in activities to support career development.

Sponsor vs. mentor. “A mentor talks with you, and a sponsor talks about you.” That concise phrase captures a key difference between the two roles, as described in the panelists’ presentation. In addition:

  • A mentor helps you navigate your career, provides guidance, acts as an advisor or sounding board.
  • A sponsor uses strong influence to help you obtain high-visibility assignments, promotions; advocates for your advancement and champions your work and potential to senior leaders.

Why sponsorship matters. The presentation cited research showing:

  • 70% of individuals with sponsors felt more satisfied with their career advancement.
  • Women with sponsors are 22% more likely to ask for “stretch” assignments.
  • Women are 54% less likely than men to have a sponsor.

A Catalyst report also notes that among the benefits of sponsorship are increased loyalty and tenure and a willingness to give back by mentoring and sponsoring others.

Personal stories. One of the women cited her promotion from the senior director level to an officer role as the best example of how she benefited from sponsorship. She said a colleague took a calculated risk in recommending she take his job because he believed in her based on the work she did. Her advice: “You have to work for mentorship and sponsorship; it doesn’t just come to you.”

  • She and the other panelists agreed that doing a great job in the position you’re in is critical in building the trust necessary for a mentor to become a sponsor.

Sponsors cannot be assigned. No matter how structured and well-thought-out a program to advance the careers of women and other under-represented groups, you can’t force sponsorship. So the presenting company uses mentor circles “to create an environment” where a sponsor relationship can develop organically.

  • The structure of the mentor circles at the company promote various opportunities to talk, travel and work together, allowing mentors to learn enough about their mentees to make a decision to sponsor some but not all of them. That means the sponsor uses her own reputational capital to influence decisions about promotions for the mentee.

Agree on expectations. Panelists and participants agreed that the best mentorship relationships begin with a clear intentions and goals. “Be very deliberate about it,” one panelist said. “It’s important to have a shared set of expectations.” She recommends seeking mentors in other areas of the company to whom you would not normally have access. Another panelist said that it pays to be flexible and find both women and men to serve as mentors and sponsors.

Know when to end the relationship. One panelist praised a former mentoring circle leader who was clear in saying, “Your name has been given to me, I want to invest in you; but when this is not valuable, let’s admit that and move on and give someone else the spot.”

Transparency matters. Some participants described being surprised at learning—after the fact—that someone had played the role of sponsor for them in supporting their advancement.

  • One woman only found out after she left her previous company that she had people in her corner who were very supportive of her work and capabilities. That could have made all the difference for her motivation to leave or stay.
  • In general, she said, knowing she has a sponsor will motivate her and make her feel nurtured. Absent that knowledge, it’s possible to “misinterpret how the organization feels about you,” she said.
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Org Charts and Beyond: How Leaders Help Prepare Teams for Change

Many treasurers want to give team members the skills to move to other areas or companies.

NeuGroup members at a recent Treasurers’ Group of Thirty meeting delved into the nuances of treasury department organizational structures and how they meet specific company needs. Participants enjoyed seeing on a screen exactly how other treasury teams have been put together and why. And they had a laugh when one person didn’t recognize his own org chart.

  • But many members clearly feel the weight of managing relatively small teams with highly specialized skills where advancement is difficult, turnover is high among analysts, and competition for skilled talent is fierce, resulting in shallow benches at some companies.
  • Given that set of circumstances and other factors, some treasurers feel duty bound to prepare their staffs for the future and change by ensuring they have the training and experience to move ahead.

PE realities. The treasurer of a private-equity owned company noted the inevitable: “We’re going to get sold someday, so how do I make sure that [team members] have all the skills necessary to look good for their next job?” he said.

Many treasurers want to give team members the skills to move to other areas or companies.

NeuGroup members at a recent Treasurers’ Group of Thirty meeting delved into the nuances of treasury department organizational structures and how they meet specific company needs. Participants enjoyed seeing on a screen exactly how other treasury teams have been put together and why. And they had a laugh when one person didn’t recognize his own org chart.

  • But many members clearly feel the weight of managing relatively small teams with highly specialized skills where advancement is difficult, turnover is high among analysts, and competition for skilled talent is fierce, resulting in shallow benches at some companies.
  • Given that set of circumstances and other factors, some treasurers feel duty bound to prepare their staffs for the future and change by ensuring they have the training and experience to move ahead.

PE realities. The treasurer of a private-equity owned company noted the inevitable: “We’re going to get sold someday, so how do I make sure that [team members] have all the skills necessary to look good for their next job?” he said.

  • He seeks to provide staff engaged in otherwise segregated duties with exposure to different areas within treasury, so they’re “marketable” outside their current functions. “We talk to the private-equity [staff], and about the goals we’re setting as team; we share everything,” he said.
  • NeuGroup meetings play a role in educating team members, he said, noting that his company recently hosted the cash management peer group.
  • He recently switched the roles of two employees, the directors of treasury operations and of liquidity and capital markets.
  • The treasurer looks for cross-functional opportunities, such as the capital markets director working on a project with the tax team.

Transformation opens opportunities. Mergers mean change, and a peer group member who started as treasurer at a company digesting a transatlantic merger has required staff to have a “sense of urgency and the ability to knock down barriers, find solutions and execute,” or depart.

  • Some professionals had been in treasury functions for a decade or more, leaving a shallow bench that in part will be rebuilt with recruits hired fresh out of college. They will be trained across treasury “infrastructure,” including bank account statements and management, TMS and bank portal, with the goal of moving them up.
  • The treasurer also communicates openly to staff about his own departure: Whenever that arrives, it will provide opportunity for advancement to others. “Until that happens, my job is to provide training and career development, so they have the right sorts of skills to go somewhere internally or externally and be successful.”
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Mike Likes It, but Would Your Team Vote for an Open-Office Plan?

Open-office plans like the one Mike Bloomberg adopted at City Hall have fans and skeptics. Where do you stand (sit)?

Presidential hopeful Mike Bloomberg in December tweeted the picture above of the “bullpen” office he had as New York City mayor and wrote, “I’ll turn the East Room into an open-office plan, where I’ll sit with our team.”

No one can say if that will ever happen, of course. But the subject of open-office plans definitely sparked interest at a NeuGroup meeting this month when one member asked how others organize their office space.

Breaking down walls. One member surprised peers by saying that within a few months his company will move completely to open space, with no walls between people, and that arrangement will apply also to top executives, including the CEO, CFO and legal counsel.

Open-office plans like the one Mike Bloomberg adopted at City Hall have fans and skeptics. Where do you stand (sit)?

Presidential hopeful Mike Bloomberg in December tweeted the picture above of the “bullpen” office he had as New York City mayor and wrote, “I’ll turn the East Room into an open-office plan, where I’ll sit with our team.”

No one can say if that will ever happen, of course. But the subject of open-office plans definitely sparked interest at a NeuGroup meeting this month when one member asked how others organize their office space.

Breaking down walls. One member surprised peers by saying that within a few months his company will move completely to open space, with no walls between people, and that arrangement will apply also to top executives, including the CEO, CFO and legal counsel.

  • “If you want to exchange confidential information, there will be a room, but you won’t be allowed to sit there all day,” he said.
  • Another member called his firm’s environment open, “but we do have individually assigned desks, so we’re not completely free.”

Backlash. The concept of open-space seating has been around for decades, especially among technology companies that have viewed open-space environments as conducive to exchanging ideas.

  • More recently, however, there has been something of a backlash, with studies like one in 2018 by Harvard researchers showing that open-space workplaces can significantly reduce employee productivity.

Alternatives. Another meeting participant’s company had expressed interest in open space, but for now employees remain in cubicles with low walls, and managers have offices.

  • Its finance arm’s building is being renovated, however, and the result will be low-wall cubicles and every manager’s office will be the same size, no matter their rank.

Still, meeting members suggested most treasury departments remain conservative on the seating front, with team members sitting in cubicles with high walls—a “legacy thing,” as one person put it.

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Making the Devil’s Advocate an Angel on Your Shoulder

NeuGroup risk managers make space for contrarians to question decisions and combat overconfidence.

Rather than shunning contrarians for challenging conventional thinking, corporates need to make sure their decision-making processes always include a constructive devil’s advocate—someone who forces teams to consider all the ramifications of whatever action—or inaction—a company is contemplating.

  • This was among the key pieces of advice given by Michael Zuraw, head of enterprise risk management at ON Semiconductor, during a presentation on decision-making at a recent ERM-focused NeuGroup meeting. He said this best practice applies to all collaborative teams.
  • “Cognitive biases can occur at any link in the [decision-making] chain,” Mr. Zuraw said. “When you’re making a big decision, you need a contrarian thinker who says, ‘Why do we believe that? What if we’re wrong?’”

NeuGroup risk managers make space for contrarians to question decisions and combat overconfidence.

Rather than shunning contrarians for challenging conventional thinking, corporates need to make sure their decision-making processes always include a constructive devil’s advocate—someone who forces teams to consider all the ramifications of whatever action—or inaction—a company is contemplating.

  • This was among the key pieces of advice given by Michael Zuraw, head of enterprise risk management at ON Semiconductor, during a presentation on decision-making at a recent ERM-focused NeuGroup meeting. He said this best practice applies to all collaborative teams.
  • “Cognitive biases can occur at any link in the [decision-making] chain,” Mr. Zuraw said. “When you’re making a big decision, you need a contrarian thinker who says, ‘Why do we believe that? What if we’re wrong?’”

Designate the devil’s advocate. Mr. Zuraw recommends team leaders designate a team member to play devil’s advocate in meetings. “You need to be able to identify, and provide space for, the realist in the room,” he said.

  • “This is the one who’s going to do a check and keep you honest with yourself and is going to help you identify and recognize biases that can creep into your decision.”
  • One member had worked at a company whose culture discouraged contrarian positions, going so far as to not invite staff members who always added a wrinkle to the latest plan with an objection or contrary opinion.
  • To combat this, the company implemented an idea endorsed by Mr. Zuraw: A devil’s advocate rotation that allows everyone on staff to play the role. “So everyone learns the skill of asking those questions, and everyone recognizes that it’s not frowned upon, it’s a value-add to the process.”

Learn from mistakes. One member said his company had once passed on making an acquisition, a decision the team is still “haunted” by. The problem: a failure to consider the risk of not doing the deal left the corporate too hesitant to pull the trigger.

  • When opportunity arose again, a willingness to question themselves—as a devil’s advocate would—prepared the team to make a better decision, resulting in the company’s largest acquisition ever.
  • “It was an enormous risk,” the member said, but by considering all sides, he believes the company made the right decision. “We would not be able to be as effective and efficient for our customers without the acquisition,” he said.

An object in motion. Many teams with established processes have what one member called a “bias toward inertia,” where teams are set in their ways and have a resistance to making any changes—another reason to include contrarians unafraid to voice doubts and bring up any potential risk.

  • To further combat inertia and paralysis, Mr. Zuraw also recommends what he calls a “pre-mortem” meeting right in the midst of a process to take stock, challenge key assumptions and prevent overconfidence.
    • “Making no decision is as big of a risk as any decision you could make,” he said.
  • “I think the concept of a gray rhino is a good one, and that speaks to the need for a pre-mortem,” one member said. “There are natural disasters, but a lot of things that do happen people thought about [and] knew was on the horizon, but nobody spoke up.”
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Squeezed for Time: Internal Auditors Presenting to Audit Committees

How auditors make sure their voices are heard when their time before the AC is limited.

Internal auditors often get squeezed for time when it comes time to appear before the audit committee (AC) of the board of directors.

  • Given that reality, some members of NeuGroup’s Internal Auditors’ Peer Group (IAPG) have devised other ways to make sure their views are heard—or read—by members of the AC. Following are some takeaways on the subject discussed at a recent IAPG meeting.

How auditors make sure their voices are heard when their time before the AC is limited.

Internal auditors often get squeezed for time when it comes time to appear before the audit committee (AC) of the board of directors.

  • Given that reality, some members of NeuGroup’s Internal Auditors’ Peer Group (IAPG) have devised other ways to make sure their views are heard—or read—by members of the AC. Following are some takeaways on the subject discussed at a recent IAPG meeting.

Short shrift. NeuGroup members say their appearances before the AC may be limited to just 15-20 minutes. In one member’s case, the AC also is the finance committee—and finance presents first.

  • This means the audit report comes at the end of the session and becomes more of a quick overview “on themes and trends.” Thus, this auditor struggles to promote the continuous improvements the internal audit function has accomplished.

Readers make leaders. Another member says her AC is “very diligent” about reading the material audit sends the committee ahead of time. This includes reading the appendices, slides and other supporting documents. That gives her confidence the AC sees the audit function’s accomplishments.

  • Otherwise, the auditor said it is “hard to put all we’ve accomplished into 20 minutes,” adding that she still has to “speed talk” her way through the presentation.
  • Another member intersperses his report with bullets “here and there” showing what the audit team has accomplished.

Pole position. Some companies rotate the sequence of reporting. If yours doesn’t, consider suggesting it. Because if you’re at the beginning of the AC’s session, which can include financial reporting, cyber, tech and other operational issues, you can get more time.

Work-arounds. Several members said they have good relationships with AC members and can follow up with them after the meetings (or between AC meetings) to go into more detail about what the audit team is up to.

  • One lucky member said that audit meets with the AC beyond the typical quarterly meetings. She said she meets with the committee nine times in a year, which means at five of those meetings she can share more of what audit is doing.
  • Another member said they do “four plus 10-K” for a total of five AC meetings.
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Test Your Knowledge of Treasury! A Trivia Contest to Attract Talent

One treasurer uses a quiz to educate, promote communication and build interest in treasury among finance teams.

Treasury teams often struggle to attract talent when competing with more glamourous finance functions. Part of the problem is a lack of understanding of what treasury does.

  • To build awareness and interest in treasury and enhance communication with other finance teams at his company, one treasurer created a contest to test the knowledge of senior leaders.
  • He described the quiz at a recent meeting of NeuGroup’s Treasurers’ Group of Thirty, sponsored by Standard Chartered.

One treasurer uses a quiz to educate, promote communication and build interest in treasury among finance teams.
 
Treasury teams often struggle to attract talent when competing with more glamourous finance functions. Part of the problem is a lack of understanding of what treasury does.

  • To build awareness and interest in treasury and enhance communication with other finance teams at his company, one treasurer created a contest to test the knowledge of senior leaders.
  • He described the quiz at a recent meeting of NeuGroup’s Treasurers’ Group of Thirty, sponsored by Standard Chartered.

Treasury 101. As many as 40 contestants compete for a small prize by answering a multiple-choice questionnaire called Treasury 101 that consists of 20 to 25 questions on subjects including:

  • Treasury organization
  • Cash management
  • Strategic objectives
  • Corporate finance
  • Risk management
  • Insurance

Time’s up. After the contestants have selected an answer, the subject matter expert tells them which one is correct and spends a few minutes providing more color, the treasurer explained.

  • “For instance, ‘How many people work in treasury?’ We might say 20, and then show the staff’s geographical dispersion or an organization chart showing who they are and what everybody does.”
  • As for results, he said, “We tend to find that most attendees have very little knowledge of the treasury function in general.”

The serious objective of having fun. The treasurer said the contest has three objectives:

  1. “To educate others about who is treasury and what we do.
  2. “Establish interest in treasury and create a bench of potential talent who might be interested in a career in treasury.
  3. “Have some fun and interaction with other finance departments.”

Positive results. In addition to the game being well attended and well received by participants, the member said the contestants are always a little more knowledgeable and appreciative of treasury’s role in the company after the event.

  • “It’s generated a lot of interest,” he said. And though participants in the game tend not to get too many questions correct, many participants reflect on how much they learned about treasury and how much fun they had.
  • While the game is better organized in an office location where lunch or snacks can be offered, in the current climate, it also works well virtually.
    • Anyone who thinks they can win by turning to the internet should know “they will not find the answers on Google—that’s for sure,” the treasurer said.
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Differing Opinions About Audit Opinions

Internal auditors use a variety ratings or opinions for their reporting, despite a trend of not using them.

There is a growing trend of internal audit departments moving away from using audit opinions, or ratings, to rate the progress of a mitigation effort. The idea is to focus on the audit issue itself and mitigate it. Despite this trend, many auditees and audit committee members are happy with the current system and push back against suggestions to get rid of ratings.

Following an audit of a process, the auditee gets a rating or opinion on the progress they’ve made on fixing the process – the audit issue. Ratings methods differ; some employ colors.  Green generally means good while colors like yellow or orange mean “needs work” or “needs improvement;” red means things are bad and not being addressed at all. “I’ve never seen a red since I’ve been an auditor,” one member said at a recent virtual meeting of NeuGroup’s Internal Auditors’ Peer Group (IAPG).

Internal auditors use a variety ratings or opinions for their reporting, despite a trend of not using them.

There is a growing trend of internal audit departments moving away from using audit opinions, or ratings, to rate the progress of a mitigation effort. The idea is to focus on the audit issue itself and mitigate it. Despite this trend, many auditees and audit committee members are happy with the current system and push back against suggestions to get rid of ratings.

Following an audit of a process, the auditee gets a rating or opinion on the progress they’ve made on fixing the process – the audit issue. Ratings methods differ; some employ colors.  Green generally means good while colors like yellow or orange mean “needs work” or “needs improvement;” red means things are bad and not being addressed at all. “I’ve never seen a red since I’ve been an auditor,” one member said at a recent virtual meeting of NeuGroup’s Internal Auditors’ Peer Group (IAPG). 

In the meeting, members described their various rating scales – no two the same – and said in some cases they were asked to move away from them. One reason for this was that many of the functions being audited focused too much on the rating and not on the underlying issue. “The (audit) finding gets lost,” said one auditor. 

  • But auditors say they get pushback when they discuss moving away from ratings. “Execs like the overall rating because they don’t have to read the whole audit report,” said one IAPG member. Added another member, “Audit reports sometimes have too many pages. [AC members and executives] will read through them and then ask, ‘what’s important here?’ So the ratings and colors are needed.” 

And despite the industry effort to drop ratings, some IAPG members have actually added more rating categories to their scales. Several members who have three ratings for findings, typically along the lines of “satisfactory,” “needs improvement” and “ineffective” or “unsatisfactory,” have added more nuance. In a few cases they have split the middle rating, “needs improvement,” into “moderate improvement opportunity” and “needs significant improvement.” 

Language matters. Members also mentioned that there’s sometimes pushback over the language of ratings. 

  • For one member, the legal department made IA change the red rating “ineffective” to “major improvement needed.” This was because, in the case of a lawsuit, ineffective could be misconstrued and create a problem.
  • Another member mentioned that sometimes auditees, particularly millennials, take issue even if their mitigation efforts are good or get the top rating. In this member’s case, that rating is “satisfactory,” which to some ears sounds mediocre or worse. But the auditor said it’s not his job to say it’s anything more than that. 
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Closing a Quarter for SOX Can be Difficult in New, Remote World

An internal auditor describes what his company has done to successfully close a quarter when some physical tasks can’t be done.

Part of Sarbanes-Oxley, the internal controls act released in 2002, requires a corporate’s chief executive and financial officers to certify financial and other information contained in the issuer’s quarterly and annual reports. But what happens in a crisis? What if some of that info requires someone in place to record inventory or in-person meetings when employee movement is heavily restricted during the current pandemic?

An internal auditor describes what his company has done to successfully close a quarter when some physical tasks can’t be done.

Part of Sarbanes-Oxley, the internal controls act released in 2002, requires a corporate’s chief executive and financial officers to certify financial and other information contained in the issuer’s quarterly and annual reports. But what happens in a crisis? What if some of that info requires someone in place to record inventory or in-person meetings when employee movement is heavily restricted during the current pandemic?

Practice. One answer is the punchline to the joke, “How do you get to Carnegie Hall?” Practice, practice, practice. That’s essentially what one member of NeuGroup’s Internal Audit Peer Group has done over the past few years. The company developed a robust business continuity plan where SOX was a particular focus and has used it a few times over the years for natural disasters and has audited the plan several times. So with COVID-19, “We’re in pretty good shape,” the member said.

Take a photo. Despite the company being comfortable with remote working, there still are challenges to closing the quarter amid the global pandemic. This includes practices like obtaining “wet ink” signatures, getting people in place for inventory observation or cut-off testing for shipping.

  • In this case, the auditor said, the company “did what it could when it came to inventory.” Local managers took photos of inventory before they were told to leave the premises. And managers were able to obtain wet signatures while keeping in mind social distancing rules. Where this couldn’t be done, e-signatures like those provided by DocuSign were allowed.
    • In one of NeuGroup’s treasury peer group zoom meetings recently, one practitioner in Europe said his relationship banks were permitting DocuSign functionality for 90 days.
  • Preparation. The member’s company listed all the controls it thought it wouldn’t be able to use when people couldn’t access company buildings or managers had little access to each other.
    • “We identified the controls and have been able to postpone some reporting,” he said. “It’s going to be an interesting quarter, but I think we’ll be able to close with no problems.”
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Corporate Finance Ranks Most Concerned About 2020 Risks

What, me worry? Yes! Finance execs most worried about risks in the new year.

Corporate finance executives have jumped to the lead in terms of companies’ top executives concerned about the magnitude and severity of risks their organizations face in 2020, with economic conditions and regulatory scrutiny their top concerns.

What, me worry? Yes! Finance execs most worried about risks in the new year.

Corporate finance executives have jumped to the lead in terms of companies’ top executives concerned about the magnitude and severity of risks their organizations face in 2020, with economic conditions and regulatory scrutiny their top concerns.

On a scale of one to 10, chief financial officers’ impression of risk faced by their companies in the year ahead jumped to 6.5 from 6.0 in last year’s survey. That puts them in the lead from fifth place last year, out of seven categories of surveyed executives that comprised board members and six types of C-suite executives. Dr. Mark Beasley, professor and director of the Enterprise Risk Management Initiative (ERMI) at N. Carolina State University, noted that chief audit officers’ assessment of risk also increase noticeably from last year, and chief risk officers’ bumped up slightly, to 6.0 from 5.9.

Chief executives officers and boards of directors instead saw their concerns about risk lesson in this year’s study compared to last year’s.

The research was conducted by ERMI and consultancy Protiviti, and co-authored by Mr. Beasley and Ken Thomas, a managing director in Protiviti’s Business Performance Improvement practice. The survey received responses from 825 C-Suite executives and directors in companies across the globe. The top five concerns for CFOs were:

Economic conditions. Although the second concern overall, CFOs marked economic conditions starting to restrict some growth opportunities as their top concern, a big jump from last year’s survey when it was not even among the top 10 risks.

Regulatory changes and scrutiny. CFOs worry that an emphasis on regulations may increase and noticeably affect the manner in which their companies’ products and services will be produced or delivered. Mr. Beasley noted that the regulations extend beyond financial requirements to areas such as privacy, with European privacy regulations already in effect and those in California arriving in 2020, and increased government scrutiny of business models such as the big technology firms’.

Resistance to change. As innovative technology is deployed at an ever more rapid pace, CFOs are concerned about their organizations’ ability to embrace that change and remain competitive.

Top talent. Related to the previous concern, CFOs are concerned about their companies’ ability to attract and retain top talent in a tightening talent market, and consequently their ability to achieve operational targets. “How does [corporate finance] move from more production-type activities to more machine learning and other artificial intelligence technologies, taking people away from the analytics they used to spend time on and using that talent in the most efficient way,” Mr. Thomas said.

Cyber, of course. Pervasive across companies, cyber-risk concerns keep CFOs awake at night worrying about whether their organizations are sufficiently prepared to manage cyber threats that could significantly disrupt core operations and/or damage the company’s brand. Mr. Thomas noted that finance departments’ increasing use of technology-driven analytics ingests pulls data from multiple sources, heightening the risk. “Companies are moving to more tech-driven activities and operations that rely ever more on sources of data that can be impacted,” he said.

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Payoffs From ‘Preaching the Gospel of Global Treasury Operations’

Partnering with global business services (GBS) helped one treasury team boost cash visibility and achieve consistency.

Companies expanding globally have often left regional affiliates with their own treasury back offices to support the local business, resulting in fragmentation of the treasury function and costly inefficiencies. That takes time away from corporate treasury that could be spent addressing more strategic issues.

  • “Preaching the gospel of global treasury operations,” the assistant treasurer (AT) of one NeuGroup member company said, required convincing local business leaders that corporate treasury didn’t seek to wrest control.

Partnering with global business services (GBS) helped one treasury team boost cash visibility and achieve consistency.

Companies expanding globally have often left regional affiliates with their own treasury back offices to support the local business, resulting in fragmentation of the treasury function and costly inefficiencies. That takes time away from corporate treasury that could be spent addressing more strategic issues.  

  • “Preaching the gospel of global treasury operations,” the assistant treasurer (AT) of one NeuGroup member company said, required convincing local business leaders that corporate treasury didn’t seek to wrest control.
  • In the case of cash, he told those leaders, “We’re not here to take it, but to make sure you have the cash you need, when you need it.”

Reaching out to GBS. Treasury’s first practical step to reduce the fragmentation of operations was to reach out to global business services (GBS) centers for Asia-Pacific (APAC); Europe, Middle East and Africa (EMEA); and Latin and North America. 

  • Corporate treasury explained that fragmented treasury options made it difficult for the company to locate and measure cash in a timely manner, and to track bank accounts and their signatories.
  • Among the questions the AT asked: “Can we partner with you and build out regional treasury operations centers, to bring that work to those centers and bring consistency to fundamentals such as opening and closing bank accounts?”

Dividing duties. Key to the argument was clarifying that corporate treasury would control the strategy and the health of the processes, including the company’s in-house bank and global treasury operations, while the lower-cost GBS centers would retain responsibility for operational execution.

  • The approach to implementing the initiative in each region differed, since each GBS center was at a different stage of development.
  • The regional treasury office (RTO) teams now report administratively to the GBS operations leader, while taking much of their technical direction from corporate treasury.
  • The exception is EMEA’s GBS, which houses the in-house bank, where employees also administratively report directly to corporate treasury, “because of the complexities of the work and the close linkage they have with executing treasury strategies,” the AT said.

The benefits. Consistency is first and foremost, the AT said, adding that while the approaches to centralizing treasury activities in the GBS centers may have varied, the processes and standards they apply across the globe are now consistent.

  • That should reduce “hiccups” stemming from local treasury offices entering into hedges without fully understanding those instruments, something that in the past resulted in unnecessary costs and risk, a comfort to him and the treasurer, the AT said.
  • With its regional treasury centers now all using the same treasury management system (TMS), corporate treasury has 90% visibility into its cash, enabling balance sheet cash to be slashed in half, a boon for a net-debtor company from a credit perspective.
  • Centralizing treasury around those centers has expanded the use of a tool to uncover unnecessary or excessive bank fees. “That’s enabled us to get more competitive pricing from our banks quickly,” the AT said.
  • The Latin American treasury team center often spent a majority of its time reconciling prior-day transactions, the AT said, and now, with access to the TMS, “That team can deploy their intellectual capacity in other areas that produce savings for the company.”

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RMB vs. USD: Watching Closely as China Builds ‘Parallel Universes’

Standard Chartered advises keeping an eye on China as accelerating use of the RMB helps the nation separate itself from the pack.

In a recent meeting of NeuGroup for Tech Treasurers centered around China’s economy, Standard Chartered’s global head of research Eric Robertsen kicked things off with an anecdote. Just over ten years ago, a Congo-based wood supplier had its supply of wood bought out by a Chinese business that paid in USD. Just three years later, Chinese businesses were still buying out this supplier but paying in RMB.

Standard Chartered advises keeping an eye on China as accelerating use of the RMB helps the nation separate itself from the pack.

In a recent meeting of NeuGroup for Tech Treasurers centered around China’s economy, Standard Chartered’s global head of research Eric Robertsen kicked things off with an anecdote. Just over ten years ago, a Congo-based wood supplier had its supply of wood bought out by a Chinese business that paid in USD. Just three years later, Chinese businesses were still buying out this supplier but paying in RMB.

  • “I think that narrative is becoming directly applicable to the world today as we think about the evolution of China, Asia and the currency payment world,” Mr. Robertsen said. “What China is doing is creating parallel universes in a number of different areas across a number of different platforms.”

RMB as a reserve currency. Currently, the RMB (CNY) only makes up about 2% of allocated central bank reserve management portfolios, with the dollar at just under 60% and the Euro at roughly 20% (see chart).

  • “And yet, we all know how important China is to global trade,” Mr. Robertsen said. “I argue that the CNY weight is much too small relative to its usage in the overall market. So there is a benign but extremely interesting and structural trend: the growing relevance of RMB and RMB-denominated assets in global portfolios.”
  • One member expressed skepticism that the RMB could be a “freely floating” reserve currency in the near future, despite China’s ambitions. Mr. Robertsen responded that just five years ago, the notion of big inflows into China’s bond market was nonexistent, and today, those flows have increased to such a magnitude that China is actually able to start allowing less restricted outflow of capital.
    • “But I don’t think they’re quite there yet, they’re still not a freely floating currency,” Mr. Robertsen said. “When do they become a reserve currency in practice? Probably five years. The IMF has already labelled CNY a reserve currency but in practice, they still have a way to go.”
  • A more cynical view is that China seeks to replace the dollar as the global reserve currency and that its pursuit of a digital currency is a way to work around the dollar system, but Mr. Robertsen doesn’t subscribe to that theory.
    • “I think what they’d like is to have separate ecosystems, and in each to have their trading partners using RMB exclusively,” he said. “And that also gives them quite a bit of protection should US-China or Europe-China political tensions escalate.”

China for China. Internally, multiple members have said they’ve begun “decoupling” their China operations team from the rest of their global team, essentially treating the nation as its own region to deal with the increasing complexity.

  • “There’s a view that China is big and important, and there is going to be growing investment and capacity to serve China,” one member said. He said the flip side is that there will be increasing investment in supply chain for growth outside China and the rest of Asia.

Supply chain impact. “Manufacturing platforms in China to serve other parts of Asia is something that is trending away,” the member said, but it’s not something that will happen immediately.

  • “What we have seen in our conversations with clients in Asia is that supply chains are being shifted” away from exclusive reliance on China, Mr. Robertsen responded. “There has definitely been a gradual migration to diversify supply chains.”
  • “If you have a corporate campus in Shenzhen of 200,000 employees, moving that to Vietnam doesn’t happen in a heartbeat, these are long-term processes,” he continued. “The idea that corporates will shift entire supply chains from China immediately is misleading,” but the change is happening.
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The Option to Use Options: Hedging FX Risk in Emerging Markets

FX risk managers rely on flexibility at a multinational that wants to participate in beneficial currency moves.
 
The ability to use options is essential for an FX risk manager at one NeuGroup member whose company wants to participate in favorable currency moves when hedging exposures in emerging markets. He described the company’s approach at a spring meeting sponsored by HSBC.

  • The bank cited research showing that “the incentive to hedge EM risk has increased over the past 10 years” and “bouts of EM currency weakness have become more frequent and recoveries less marked.”
  • “It has been worth spending the carry on [Latin American] and [Central and Eastern Europe, the Middle East and Africa] currencies,” the HSBC presentation said.
  • However, “passive blanket covering is too onerous over the long run,” according to the bank. “A tactical approach” creates a better balance of “risk reduction vs. the cost of hedging.”

FX risk managers rely on flexibility at a multinational that wants to participate in beneficial currency moves.
 
The ability to use options is essential for an FX risk manager at one NeuGroup member whose company wants to participate in favorable currency moves when hedging exposures in emerging markets. He described the company’s approach at a spring meeting sponsored by HSBC.

  • The bank cited research showing that “the incentive to hedge EM risk has increased over the past 10 years” and “bouts of EM currency weakness have become more frequent and recoveries less marked.”
  • “It has been worth spending the carry on [Latin American] and [Central and Eastern Europe, the Middle East and Africa] currencies,” the HSBC presentation said.
  • However, “passive blanket covering is too onerous over the long run,” according to the bank. “A tactical approach” creates a better balance of “risk reduction vs. the cost of hedging.”

The optionality option. The NeuGroup member’s tactical, opportunistic approach includes options, which can allow the company to benefit from market volatility. “We really do value the ability to participate, so we really like to use option structures to help us in emerging markets,” he said.

  • Because the company reports earnings in US dollars, “I protect against strong USD and try to benefit when the dollar weakens,” he added. The company does not want to “miss weak dollar cycles.”
    • “By using options, if the [EM] currency appreciates, I’m only out the premium spent and I can continue to gain on the underlying exposure,” he explained.
    • “It is really a risk management strategy whereby the company is comfortable with spending some amount of money to protect earnings while still being able to gain in the event the currency moves in our favor.”
  • The member favors using options to hedge high-carry currencies, usually over a three-month time frame. He first considers, separately, each currency where the company has major exposures. The countries include Brazil, South Africa, China, Mexico and Chile.
  • It then creates a portfolio of the entire bucket of EM currencies it hedges and examines “how we’re doing relative to year-over-year,” the member said.
  • “We’ve done a lot of back testing with HSBC and other partners to look at our portfolio of emerging market currencies, trying to establish an efficient frontier,” he said.

Balancing act. In response to a question from a peer about indicators, the member said the FX team has regular meetings and conversations with the treasurer and the CFO so their views and opinions can be overlayed into the analysis of the relative value of currencies.

  • The team spends considerable time analyzing local mobility data to uncover trends as well as talking extensively to counterparties to learn their views.
  • The group looks at worst case scenarios and whether “we can live with it, knowing we want to be able to participate,” he said.
  • The company’s outlook has shifted from being extremely bearish on USD to a view that incorporates the US outperforming other economies (dollar bullish) in the short-term as well as a longer-term view that is more bearish.
  • “We’re balancing the different views and that’s where the option strategy helps us please everyone,” he said. “With all the uncertainty coming out of Covid, we really want to be able to participate.”

More systematic. The member said the company is moving from a very flexible, dynamic and opportunistic stance heavily based on market views to something more structured but still relatively loose.

  • “We’re still pretty risk tolerant, but maybe not as much as we were,” he said. The goal now, he said, is to be a bit more systematic but still flexible.
  • That means having the ability to lock in forwards or extend duration, he explained. But also having guardrails around the budget to spend on option premiums.
  • The member said this new framework should provide his team “more certainty about what we can produce” and reduce Monday morning quarterbacking that may arise when hedging decisions are questioned after currency moves.
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China and Beyond: Understanding Central Bank Digital Currencies

Insights from HSBC on CBDCs, as China’s tests of a government-backed digital currency, dubbed e-CNY, grow larger.

Most multinationals in the NeuGroup Network do business in China, just one reason finance teams need to stay on top of the country’s expanding tests of a digital version of the yuan known as the e-CNY, a so-called central bank digital currency or CBDC.

  • HSBC’s global head of FX research, Paul Mackel, spoke at a NeuGroup virtual interactive session sponsored by the bank this spring to help treasurers get up to speed on CBDCs and China’s e-CNY trials, as interest in these topics grows.
  • “I first started talking about this with my team a year ago, and now we’re getting requests from clients daily, from many different types of clients on our spectrum, to have discussions about what’s happening,” Mr. Mackel said.

Insights from HSBC on CBDCs, as China’s tests of a government-backed digital currency, dubbed e-CNY, grow larger.

Most multinationals in the NeuGroup Network do business in China, just one reason finance teams need to stay on top of the country’s expanding tests of a digital version of the yuan known as the e-CNY, a so-called central bank digital currency or CBDC.

  • HSBC’s global head of FX research, Paul Mackel, spoke at a NeuGroup virtual interactive session sponsored by the bank this spring to help treasurers get up to speed on CBDCs and China’s e-CNY trials, as interest in these topics grows.
  • “I first started talking about this with my team a year ago, and now we’re getting requests from clients daily, from many different types of clients on our spectrum, to have discussions about what’s happening,” Mr. Mackel said.

An e-CNY for an e-China. China’s crackdown on cryptocurrencies like Bitcoin, as well as its embrace of non-bank payment methods, increases the potential impact and implications of a CBDC in the country.

  • Due to the proliferation of app-based payments like WeChat and AliPay, Chinese citizens currently far outpace any other nation’s use of digital or mobile wallets (see chart below), with over 800 million payments by mobile phones.
  • China has publicly addressed the inherent risk of a population that heavily relies on these types of non-bank payments. If one of these apps ran into an obstacle, “that could be a source of concern,” Mr. Mackel said.
  • He said “the line of thinking from the PBOC is that the e-CNY is going to complement what Alipay and WeChat pay already do” for consumers, while also offering an alternative and a way to hedge internal risk from the PBOC’s side.
  • On the other hand, amid China’s increasingly strict regulation on cryptocurrency, Mr. Mackel believes the e-CNY could be an attempt to alleviate the curiosity around digital or crypto currencies.

A broader impact? In terms of the impact in other markets, it may be limited—for now. In the US, the Fed recently started to research the topic with MIT and the European Central Bank has published a number of whitepapers on what an e-Euro may look like, but for now it’s all theoretical.

  • “What China has done, given their apparent success, is they’re making other central banks look far behind the curve,” Mr. Mackel said
  • “Over next two to three quarters, I think that the information transfer between central banks and [other companies] will only steepen the learning curve.”

CBDC pros and cons. Central banks cite many reasons for exploring CBDCs, including improving the safety, robustness and efficiency of the payments system as well as its use as a monetary policy tool to spur financial inclusion.

  • In the meeting, HSBC said the primary benefits of central bank digital currencies are:
    • Lower transaction costs.
    • Easier transaction processing for less developed banking systems (if CBDCs are enabled for cross-border transactions).
    • Real-time indications of consumption.
    • Useful for policy setting or combating inflation.
  • Among the drawbacks:
    • Russia’s central bank identified a CBDC as a potential tool to combat sanctions.
    • A digital currency would make it far easier for a central government to track users based on ID.
    • In a time of crisis, a run on a central bank digital currency could have a widespread impact on bank funding.
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Rescue Mission: Saving Trapped Cash in Depreciating Currency Markets

For projects in volatile economies, creative thinking from treasury could be critical.

Profit is not a profit until it’s back in the US. That reality for many multinationals formed the backdrop at a recent NeuGroup meeting for treasurers of large-cap companies where members shared their approaches on how to react when a country’s economic environment takes a problematic turn.

For projects in volatile economies, creative thinking from treasury could be critical.

Profit is not a profit until it’s back in the US. That reality for many multinationals formed the backdrop at a recent NeuGroup meeting for treasurers of large-cap companies where members shared their approaches on how to react when a country’s economic environment takes a problematic turn.

  • Emerging market nations including Argentina, Turkey and Brazil dominated the conversation, as their currencies carry risk of intense devaluation, exacerbating regulatory rules that can trap cash within their borders.

Work-arounds. One member said his company’s solution to trapped cash is an intercompany loan system within a given country. This can be a gamble, as depreciation could cause a blowout in a project’s WACC (weighted average cost of capital).

  • As the cash sits in a depreciating currency, WACC for the project can be thrown out of kilter. But at least you are using cash more effectively within the country and reduce the need for additional cash injections.

Buy, buy, buy. In one case, a treasurer was surprised by the business leaders in a region flaunting EBITDA figures at the start of a project, when the profits may take a 30%-50% haircut. One treasurer said that in one of the regions with a depreciating currency, his firm has covered sizable foreign exchange exposure with what he called “unconventional, material hedges.”

  • In this case, the member said he had to be creative to retain value in the region and resorted to buying commercial property and apartment buildings—at blue-chip prices.
    • The organization even explored wineries, airplanes and other hard assets, but some were unable to scale with the company’s needs.
  • “Everybody in [these regions] knows this game,” he said. “When you expect a devaluation coming, all your customers will prepay you. We’ve had strict rules about them paying us in advance. It’s something you have to do, since everyone is after hard assets.”

Don’t play with fire. One treasurer said that if he had been brought on to a project in one of these countries earlier, he would have advised against doing work there.

  • Ultimately, it is the decision of the business whether to enter, stay or do business in a particular market, but if treasury is involved earlier, it can raise awareness of the true risks and costs of doing business there..
  • “We just don’t want excess cash in a place we’re not sure if we’re getting our money back,” he said.
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Talking Shop: Reducing Impact of Negative Interest Rates in Europe

Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected].


Member Question: “What solutions are available to reduce the impact of negative interest rates in the eurozone?

  • “Our bank there charges 1% on euro deposits. We have cash pooling, but converting to USD daily seems like a pain.”

Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected].


Member Question: “What solutions are available to reduce the impact of negative interest rates in the eurozone?

  • “Our bank there charges 1% on euro deposits. We have cash pooling, but converting to USD daily seems like a pain.”

Peer answer 1: “Our global bank charges us 0.5% at the moment, but our local controllers mentioned there are EMEA regional banks that will waive the interest charge with a minimum deposit. We haven’t had time to explore that yet.”

Peer answer 2: “We are currently being charged 0.4%. We do weekly EUR to USD conversion to minimize the costs as well as investing USD in offshore money market funds.”

Peer answer 3: “Have you spoken with your bank about notional pooling? If not, that may be an option to discuss and see if they have solutions.”

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Oil and Gas Treasurers Weigh Finance Roles in Transition Strategies

How much time do companies have? Takeaways from the first meeting of a NeuGroup focused on oil and gas treasury support of energy transition conducted in partnership with Societe Generale.

By Joseph Neu

Last week shook the oil and gas sector. Exxon Mobil saw two board seats go to directors backed by the energy transition activist hedge fund Engine No. 1 (yesterday, the company said a third seat will likely go to the fund), which convinced big asset managers to back its proxy statement. Shell, meanwhile, had a Dutch court rule that it must advance its decarbonization targets.

How much time do companies have? Takeaways from the first meeting of a NeuGroup focused on oil and gas treasury support of energy transition conducted in partnership with Societe Generale.

By Joseph Neu

Last week shook the oil and gas sector. Exxon Mobil saw two board seats go to directors backed by the energy transition activist hedge fund Engine No. 1 (yesterday, the company said a third seat will likely go to the fund), which convinced big asset managers to back its proxy statement. Shell, meanwhile, had a Dutch court rule that it must advance its decarbonization targets.

  • These landmark events cast some doubt about how much time US firms in the sector have to rethink their energy transition, ESG and decarbonization strategies in light of rapidly shifting public policy, regulation and market perceptions of risk.

Big picture. There is still hope that the US, which is generally thought to lag Europe by a few years on ESG mandates, will not follow the European path of energy transition favoring renewable energy investment to the detriment of (by taxing) anything else. However, while the US response will almost certainly be more nuanced, there is no guarantee it will be reasonable, based on analytical rigor or science-based, as most everyone in the sector hopes.

  • Meanwhile, the pace of change is most certainly accelerating. So it is time for US oil and gas companies to accelerate rethinking of their business strategy on decarbonization, perhaps with more than one nuanced and unnuanced scenario, to tell stakeholders a responsive, responsible and credible story (one that keeps the lights on and meets science-based target initiatives to mitigate climate risk).
  • This will allow treasury and finance teams to devise a strategy to secure funding for transition at a reasonable cost. And fortunately, most companies don’t have an urgent need for capital, having prefinanced ahead of the pandemic and pent-up demand bringing pricing up and free cash flow levels closer to normal.

Key takeaways from the meeting:

  1. The degree to which natural gas and carbon capture/sequestration are accepted as part of the US energy transition will drive strategy. There are many midstream companies that will find it very difficult to pivot in the near- to medium-term from natural gas, which has been responsible for substantial US emissions reduction since 2007. So the finance strategy for energy transition will be dramatically different if these businesses are forced to pivot immediately from natural gas. Almost as significant is the extent to which carbon capture/sequestration will be accepted as part of a decarbonized energy transition strategy—as opposed to a renewables-only one:
    1. This will vastly impact the finance strategies of those upstream.
    2. Capital providers’ expectations and who will provide capital to energy transition projects of widely varying risk/return profiles will depend on how this question gets answered in the US over the next months and years. 
  2. Finance strategy cannot be the tail that wags the dog. Treasury and the rest of the finance function supports the business and its strategy. So the business strategy must be set first before a finance strategy to fund it can be made.
    1. Treasurers cannot advocate to banks looking to pull back from fossil fuel credit commitments that they need to support them through the transition until they have a clear picture of what the transition will look like.
    2. The same can be said for marketing bonds to fixed-income investors increasingly subject to ESG mandates and rating agencies incorporating carbon assessments and ESG impacts into their credit rating. You need a business strategy and KPIs tied to it before you can start thinking about investor relations (IR) talking points, green bonds or sustainability-linked financing, much less structuring new project financing.
  3. Be part of the dialogue. While the finance team cannot wag the dog, it should be working with sustainability and ESG teams to understand the thinking going into the revamped strategies, the targets and the why behind them, so that they can better tell the supporting finance story to capital providers and their influencers as soon as it is set.
    1. The more they can understand what peers are doing and why helps, too. As does collecting market intelligence on what capital providers and their influencers (e.g., policymakers, regulators, raters, market participants) are advocating that will impact access to and cost of capital.
    2. The external dialogue also goes both ways. As one treasurer noted: “Without education on environmental activities, we allow others to put a target on our backs.”

Joseph’s next post will focus on takeaways from this pilot meeting that zero in on determining what providers of capital really want from players in the energy industry amid this seismic transition where risk is being redefined.

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Talking Shop: Processing Fees for a Domestic Cash Pool in China

Editor’s note: NeuGroup’s online communities give members another forum to find answers to their questions. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected].


Member question: “Has anybody set up a China domestic cash pool? I would like to understand market practice on the bank’s processing fee for this.

  • “[Our bank] is charging us a 0.1% processing fee on the outstanding borrowed balance in the domestic cash pool. Can someone give me a benchmark for this?”

Editor’s note: NeuGroup’s online communities give members another forum to find answers to their questions. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected].


Member question: “Has anybody set up a China domestic cash pool? I would like to understand market practice on the bank’s processing fee for this.

  • “[Our bank] is charging us a 0.1% processing fee on the outstanding borrowed balance in the domestic cash pool. Can someone give me a benchmark for this?”

Peer answer: “We have operated a domestic entrustment loan (cash pool) in China with several banks, including [your bank]. The entrustment fee we paid was 8 basis points at the time, but we moved to another provider within the last couple years.

  • “Our experience is that pricing is largely dependent on the size of the pool and related cash management activity with that banking partner.
  • “Overall, we concentrate a lot of our cash management activity to the six global transaction banks in our RCF, which results in significant pricing scale.”

Member response:  “This is very helpful. We have a very tight relationship with [the bank] globally and having this benchmark will help us to get some kind of market indication. I have tried to negotiate our fee down.”

For more on this topic, please see our post from Feb.:Cash Pools in Asia for Corporates Trying to Access Funds in China

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Talking Shop: Use a Non-Canadian Bank for Cash Management in Canada?

Editor’s note: NeuGroup brings members together to answer questions and help each other in a variety of forums, including online communities—one of many benefits of membership. Talking Shop shares valuable insights from these members-only exchanges, anonymously. Send us your responses: [email protected].


Member question: “Has anyone successfully used a non-Canadian bank for its primary cash management bank in Canada? If so, who? If not, why, and which Canadian bank are you using?

  • “Our understanding is we need to have a Canadian bank, but we are struggling to validate if that is still true and why. We currently have many service and technical issues [with our bank].”

Editor’s note: NeuGroup brings members together to answer questions and help each other in a variety of forums, including online communities—one of many benefits of membership. Talking Shop shares valuable insights from these members-only exchanges, anonymously. Send us your responses: [email protected].


Member question: “Has anyone successfully used a non-Canadian bank for its primary cash management bank in Canada? If so, who? If not, why, and which Canadian bank are you using?

  • “Our understanding is we need to have a Canadian bank, but we are struggling to validate if that is still true and why. We currently have many service and technical issues [with our bank].”

Peer answer 1: “My previous company experiences have led me to avoid using [the bank you use] in Canada. They are difficult to work with, don’t use standard BAI or payment formats, etc. These lead to difficult integrations with an ERP or TMS.

  • “On the other hand, I have had good experiences with ScotiaBank, RBC and Bank of Montreal. Only Canadian banks have the portals available to do the provincial tax payments, one reason to continue to use them. Collections are easier with a Canadian bank as your receipts bank.
  • “I am considering a split approach currently. For example, using [one US bank] for electronic payments (as they are a large provider for us globally for this) and leaving receipts, check payments and tax payments at one of our Canadian partner banks.”

Peer answer 2: “While we use a Canadian bank in Canada, we did explore using a non-Canadian bank, but that non-Canadian bank also cleared through the Canadian bank.

  • “From our experience, ordinarily, it wouldn’t be an issue, but if you have any deposits, etc. that you need to track, you get stuck with having to wait for the correspondent bank to respond.”

Peer answer 3: “We’ve gone through a similar transition. We were using [two US banks] for AR and payments. Both operated in Canada through partner banks at the time: TD Bank and RBC.

  • “In 2019, we transitioned to Scotiabank at the request of our local business who was having collections challenges working with [a US bank’s] structure.
  • “With any bank transition comes the usual change management issues, but the business is happy and there are no major pain points from a treasury perspective.”

Other peers use: JPMorgan, RBC and HSBC.

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Fight and Flight: Bank Fee on SEPA Payments From UK Sparks Pushback

Corporates respond by moving accounts to other countries, pushing banks to drop the fee and lobbying regulators.

The number of banks charging corporates a fee for payments going from the UK to countries in the single euro payments area (SEPA) is growing, and some NeuGroup members are taking action to minimize the impact.

  • Echoing what treasurers in Europe reported at a recent meeting, the head of cash product at a UK-based bank said that “a lot more banks in Europe are now charging” the fee, including some large institutions.
  • One member is working with a bank (that does not charge the fee) to lobby regulatory bodies to limit these types of fees and deductions. “We view this as a fee grab in a post-Brexit world of financial services,” he said.

Corporates respond by moving accounts to other countries, pushing banks to drop the fee and lobbying regulators.

The number of banks charging corporates a fee for payments going from the UK to countries in the single euro payments area (SEPA) is growing, and some NeuGroup members are taking action to minimize the impact.

  • Echoing what treasurers in Europe reported at a recent meeting, the head of cash product at a UK-based bank said that “a lot more banks in Europe are now charging” the fee, including some large institutions.
  • One member is working with a bank (that does not charge the fee) to lobby regulatory bodies to limit these types of fees and deductions. “We view this as a fee grab in a post-Brexit world of financial services,” he said.

Quick background. Corporates began seeing these so-called fees for receipt in January, following the last-second Brexit deal finalizing the UK’s exit from the EU and the European Economic Area (EEA). Withdrawal from the EEA meant banks could start charging for receipt of SEPA payments from non-EEA accounts. 

  • This put the UK in the same category as Switzerland, which is also a member of SEPA but not in the EU.

Unacceptable or fair? In some cases, the receipt fee is deducted from the principal payment by the beneficiary bank. As SEPA payments are mostly used for payroll and suppliers, members said they find this “unacceptable.” When the UK was still in the EU, payments were protected from deduction by a regulation called the Payment Services Directive 2.

  • The receiving banks for payroll and supplier payments are chosen by beneficiaries, making it very difficult to change banks. That gives the existing banks pricing power, at least in the short-term, to charge new fees.
  • “What does SEPA membership mean, if it doesn’t mean the absence of fees?” said NeuGroup senior executive advisor and former banker Paul Dalle Molle. “Why should Switzerland and the UK be a member of SEPA if this is the result? It doesn’t make sense.”
  • One bank with a large European presence told NeuGroup Insights that these “new fees are likely being applied to compensate for the increased costs caused by Brexit for the banking system.” The bank did not say whether it charges the fee.

Fighting back. In some cases, members report success contesting the SEPA payment fee. “I advise [you] to challenge the fee with the bank, or find another bank,” one member said. He acknowledged that is an unsustainable solution for corporates that may use a UK-based account for payroll across the continent.

  • To get around the fees, multiple members who once used UK-based accounts for payroll have opened accounts in other locations across Europe, with Dublin and Luxembourg emerging as hot spots. However, migration could prove costly for a company with a limited number of accounts.
  • Another member has resorted to issuing wire transfers, which incur higher fees than SEPA payments but are more predictable and guarantee protection of the principal payment.
  • “Lobbying, using wires, switching to EEA-based remitting accounts and switching banks are all smart things to do,” said Mr. Dalle Molle. “When the European regulators hear complaints and see a drop in SEPA volume, they’ll go back to the banks and say, ‘What are you doing?’” 
  • US and UK-based banks are also developing solutions to resolve the issue. For example, one member is working with a bank to develop a technical solution—a monthly subscription in which the bank guarantees protection of the principal and eats the cost of SEPA fees.

Varying fee sizes. As the fees are applied in a case-by-case basis, the amount charged can also vary. Depending on the bank, this could be applied as a fixed fee or a percentage.

  • One NeuGroup member said the fee charged was around three euros. But another member said he was told a large payment would incur a fee of 600 euros, which he called “bordering on the completely ludicrous.”
  • Another member said that his company is also seeing a charge based on volume, which he called “outrageous,” though he is only seeing it from “a select few [banks], it’s not yet across the board.”
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Cadence Design Systems, Inc. • Corporate Vice President Finance and Treasurers

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Salesforce • Executive Vice President, Treasury & Finance Operations

"Tech 20 has been one of the key foundational pillars of my career development over many years...I have many friends in this group and spend a lot of time outside of the formal meetings exchanging ideas...I feel like it keeps me informed as a treasurer and helps me be smarter on trends going on."

Zac Nesper
HP Inc. • Vice President of Treasury

"I always love coming to the NeuGroup sessions with my peers...I belong to the Tech20 group I learn a lot from the other treasurers and I always have takeaways for my team."

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Autodesk, Inc. • Vice President of Tax, Treasury and Risk Finance

"One of the things I truly, truly appreciate is the ability to benchmark with my colleagues...that information can really only be garnered from conversations with my colleagues here at Tech 20."

Odette Go
Lam Research Corporation • Vice President and Treasurers

"I've been attending benchmarking meetings with the NeuGroup since 2001. I find the meetings super valuable because I'm able to benchmark with colleagues and our frank discussions under Chatham House Rules helped me to see around the corners."

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Microsoft Corporation • Vice President and Treasurer

"I have joined the Tech 20 group and benefit from that because I can get a lot of my industry peers together at one time and can discuss topics, challenges and how to come up with solutions and that helps me get all this knowledge all together as support to my career."

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Alibaba (China) Co., Ltd • Treasury Vice President

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