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Justin Jones In D&I, Senior Executive, The NeuGroup Insights Interview

She Told the CFO She Wanted To Be Treasurer One Day. Now She Is.

Advice on advocating for yourself from Sandra Ramos-Alves, treasurer of Bristol Myers Squibb.

Sandra Ramos-Alves was an assistant treasurer at Celgene when Bristol Myers Squibb bought it in 2019. By June of 2021, she was acting treasurer of BMS. And in October of that year she was named senior vice president and treasurer of the pharmaceutical giant that had acquired the company where she had worked for more than 14 years.

In a Strategic Finance Lab podcast episode you can hear by heading to Apple or Spotify, Ms. Ramos-Alves says she may not have her current position if she hadn’t taken the advice of an insistent mentor and mustered up the courage to set up a meeting with the CFO. At that meeting, she told him she was interested in being BMS treasurer “when the time is right.”

In a Strategic Finance Lab podcast episode you can hear by heading to Apple or Spotify, Ms. Ramos-Alves says she may not have her current position if she hadn’t taken the advice of an insistent mentor and mustered up the courage to set up a meeting with the CFO. At that meeting, she told him she was interested in being BMS treasurer “when the time is right.”
That experience taught her the importance of advocating for yourself and telling people what you want. Because someday, when an opportunity arises, they may deliver for you. “We all do own our careers,” she says.
She also tells NeuGroup’s Nilly Essaides that mutual trust and integrity are the foundation of her leadership style. Trust in her team allows Ms. Ramos-Alves to empower people to make decisions and only bring her in when needed. By not wading too deep into the details of every issue, she avoids being an impediment, she says.
Even better, the trust allows her to step away and spend time with her family—her top priority. That includes taking vacations and leaving her laptop at home. But she never completely disconnects, she admits. Her iPhone is always on.

Sandra Ramos-Alves
Treasurer, Bristol Myers Squibb

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Justin Jones In FP&A, Senior Executive, The NeuGroup Insights Interview

FP&A’s Role in Making Finance an Indispensable Business Partner

General Mills CFO Kofi Bruce’s vision of FP&A and finance: NeuGroup’s Strategic Finance Lab podcast, episode 8.

In a world with growing volatility, uncertainty, complexity and ambiguity, also known as VUCA, so grows the importance of finance organizations that can accurately see what’s coming down the pipeline, understand how that will impact the company and how to adjust. And the skills FP&A brings to the table are critical to succeeding in that mission.

In the latest Strategic Finance Lab podcast episode, General Mills CFO Kofi Bruce joins Nilly Essaides, NeuGroup’s managing director of research and insight, to discuss the role FP&A teams must play at organizations navigating an increasingly VUCA world. You can hear their conversation by heading to Apple or Spotify.

General Mills CFO Kofi Bruce’s vision of FP&A and finance: NeuGroup’s Strategic Finance Lab podcast, episode 8.

In the latest Strategic Finance Lab podcast episode, General Mills CFO Kofi Bruce joins Nilly Essaides, NeuGroup’s managing director of research and insight, to discuss the role FP&A teams must play at organizations navigating an increasingly VUCA world. You can hear their conversation by hitting the play button below or heading to Apple or Spotify.

Mr. Bruce’s vision of finance evolution features an FP&A team that connects information from across the enterprise, using its vantage point in the flow of information to develop foresight that produces insight that leads to action that supports business growth.

As Mr. Bruce says in the podcast, FP&A’s role isn’t to only understand what will happen, but also to share “what I think we need to get on right now, and some ways and some places we can start the conversation. That’s what makes a differential FP&A organization.

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Justin Jones In Risk Management, Senior Executive

Internal Audit Debate: Keep Reporting to CFO or Switch to CEO?

An IA expert says reporting to the CFO may divert IA resources disproportionally to finance vs other areas.

More than three-quarters of US publicly traded companies’ internal audit (IA) functions report administratively to the CFO, although a similar percentage of IA professionals see reporting to the CEO as ideal.

Presenting to a meeting of NeuGroup for Internal Audit Executives, Richard Chambers, a former head of the Institute of Internal Auditors (IIA) and a longtime IA practitioner, noted that seeming disconnect as one of several alarm bells IA professionals should consider.
IA reporting to the CFO does not violate audit standards, but it may hinder it from carrying out its function fully, or at least foster that perception.
“When IA reports to the CFO, there tends to be a much higher incidence of it doing work in financial reporting and finance-related risks,” Mr. Chambers said.

An IA expert says reporting to the CFO may divert IA resources disproportionally to finance vs other areas.

Presenting to a meeting of NeuGroup for Internal Audit Executives, Richard Chambers, a former head of the Institute of Internal Auditors (IIA) and a longtime IA practitioner, noted that seeming disconnect as one of several alarm bells IA professionals should consider.
IA reporting to the CFO does not violate audit standards, but it may hinder it from carrying out its function fully, or at least foster that perception.
“When IA reports to the CFO, there tends to be a much higher incidence of it doing work in financial reporting and finance-related risks,” Mr. Chambers said.

The numbers. According to the IIA’s 2022 North American Pulse of Internal Audit report , 76% of chief audit executives (CAEs) say they work administratively for their CFOs. In response, Mr. Chambers launched a poll on LinkedIn that drew 1,700 responses.

“My question was, ‘Ideally, where should IA report administratively within the organization?’ It wasn’t even a contest,” Mr. Chambers said, with 74% citing the CEO, 11% the CRO and the CFO at 9%.

Supporting the CFO line. One member said IA would be way down the list of priorities of his company’s CEO, who is effectively the head of sales and dealing with a host of macro business issues.

As is often the case, the company’s CFO once worked in IA and so understands it better than the CEO, he said. So while Mr. Chambers’ poll may reflect what’s best theoretically, in practical terms reporting to the CFO is a more practical model.
“The skill set of the CFO is better aligned with what IA is trying to do, and having an informed sponsor or stakeholder is much more effective than having someone at the CEO level,” the executive said.

Other perspectives. Each company is different. IA reporting to the CFO may be most appropriate in many cases, Mr. Chambers said, and IA’s tendency to retain responsibility for Sarbanes-Oxley (SOX) reporting can channel it toward the CFO. However, there are issues to consider.

Mr. Chamber’s biggest concern is that CFOs, who typically view themselves as the function’s caretaker, may unintentionally interfere with IA or be perceived as interfering within the organization.
And reporting to the CFO may also disproportionally steer IA resources to financial issues, when risks and the need for controls abound in areas ranging from supply chains to climate and cyber.

Enlightening the CEO. Mr. Chambers recalled working for a four-star command in the Army and similar criticism arising about generals, like CEOs, not having time to listen to audit.

“We had no choice, we had to do it, and lo and behold these generals found it was very enlightening to have audit working directly for them,” he said.

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Justin Jones In FX, Senior Executive, Sponsored Content

Answering the CFO’s Call

A soaring dollar is threatening earnings; get ready for more CFO questions.

The dollar’s ascent is causing a lot of heartburn for CFOs and boards. A stronger greenback reduces the value of FX-denominated income. For many US companies, foreign income comprises a large chunk of total revenue; thus, the hit to earnings can be substantial. In recent NeuGroup peer group sessions, the topic of containing the impact of a stronger dollar on financial results has been prevalent and reached far beyond the confines of our two FX Risk Management Peer Groups. ”The rise in the dollar value has triggered a sharp focus on members’ risk management programs,” said NeuGroup Director Julie Zawacki-Lucci, who leads the FX groups. “Members are re-examining their hedging processes. Treasuries are under pressure to explain their results to senior management.”

A soaring dollar is threatening earnings; get ready for more CFO questions.

The dollar’s ascent is causing a lot of heartburn for CFOs and boards. A stronger greenback reduces the value of FX-denominated income. For many US companies, foreign income comprises a large chunk of total revenue; thus, the hit to earnings can be substantial. In recent NeuGroup peer group sessions, the topic of containing the impact of a stronger dollar on financial results has been prevalent and reached far beyond the confines of our two FX risk management peer groups. ”The rise in the dollar value has triggered a sharp focus on members’ risk management programs,” said NeuGroup Director Julie Zawacki-Lucci, who leads the FX groups. “Members are re-examining their hedging processes. Treasuries are under pressure to explain their results to senior management.”

Asked and answered. “Among our clients, we see CFOs asking a lot more questions,” said Chatham Financial’s Jason Peterson, “because the currency landscape is really impacting corporate earnings.” Treasury is in the hot seat. It must respond quickly and clearly to demands for information and report on the effectiveness of the hedging program and explain the correlation between the company’s currency exposures and EPS—by currency. The upshot is that treasuries need a more sophisticated end-to-end FX risk management solution, which provides greater flexibility and advanced reporting functionalities.

Just having the right data is not enough. It’s critical that companies forge a strong partnership with their risk management technology solution provider. At one company, which derives over 50% of its revenue from overseas, a previous standalone tool became outdated, and the vendor ceased making upgrades. When seeking to replace the product, treasury wanted more than just another product. “We were looking for more of a partner with thought leadership and an industry-leading technology product offering,” said the FX manager. “We looked at multiple options outside of our prior system,” she said. “What we found is that Chatham is an organization that is chock-full of thinkers who are really knowledgeable, who can answer any question and have their fingers on the pulse of the market,” she added.

The need for speed. “You can’t tell the CFO or the board that you’ll get back to them in a couple of days,” Mr. Peterson said. Unfortunately, this functionality is absent from many of today’s TMS because they lack the reporting flexibility of a best-of-breed tool like ChathamDirect, which offers dynamic interaction with data. “BI reporting tools (Power BI) are embedded within our product,” he explained. “It’s a lot easier and faster to extract insight and reporting and drill down by currency. Having access to the information and the ability to cut through and produce visualization enables you to quickly answer critical questions that inform management decisions.”

The ability to run analytics and answer management questions at speed is in large part a function of ChathamDirect’s holistic solution. “With Chatham, we have an end-to-end trading solution,” said one member. “At the front end, Chatham Direct is fully integrated with FXall, our trade execution platform,” he said. “Then new trades migrate seamlessly into the solution to enable analytics and hedge accounting reporting.”

Overcoming legacy concerns. An important reason finance and treasury have sought one-stop solutions has been the difficulty of integrating disparate systems. “The market needs to reorient itself away from adopting all-in-one solutions that often lack optimal functionality in specific areas, in particular for risk management,” Mr. Peterson noted. With the advent of APIs, “today’s systems have a much easier time talking to each other.” For example, ChathamDirect provides real-time integration with the ERPs, trading portals, settlements and G/L hedge accounting—all by leveraging APIs.

As treasury knows all too well, the transition from an existing system to a new system can have important data implications. As one company migrated from its legacy solution “we had to move all existing trades to Chatham,” says the FX manager. “It was a nerve-wracking process. The company had to reformat the data and make sure every single trade, of the thousands on the system, got migrated. Chatham made the process less painful. “They were very instrumental in supporting this difficult process, because of their commercial and technology expertise. “We never felt that they were getting impatient.”

Improving the economics. Accurate forecasting is often the most challenging hurdle that risk managers face. Because of the current economic volatility, forecasts may be less reliable. As a result, many treasuries hedge a smaller portion of their exposure, in order to not run afoul of hedge accounting rules. Thus, they create the potential for a significant impact on earnings—with which most CFOs, boards and investors are uncomfortable. Much of the effect on the bottom line is driven by limited TMS hedge effectiveness measurement functionalities – often limited to the critical terms match (CTM). In contrast, ChathamDirect supports multiple hedge effectiveness methodologies. “As organizations reconsider their hedge programs, marrying the desired economics with the accounting constraints can be a challenge,” said Mr. Peterson. “Our regression and triple regression models enable treasury to protect a larger share of its cash flow exposures, from the typical 50%-60% for the near-month to up to 80%-90%,” Mr. Peterson said. “By increasing the hedge ratio and extending the effectiveness window, treasury can produce better economics for the organization.”

“While we still use CTM for hedge accounting, our understanding of the hypothetical derivative method is that it gives you more flexibility with the effectiveness of your hedges,” one FX manager explained. “We are starting to be a little bolder in looking at the program and improving it.” In a recent situation, the company found that it inadvertently over-hedged. “Chatham was helpful in allowing us to understand the guidance on this.”

Designed by practitioners, supported by practitioners. The expanded functionality and greater flexibility provided by ChathamDirect reflect the origins of the tech platform. “It was developed with deep corporate treasury expertise,” Mr. Peterson explained. In addition, because Chatham operates multiple hedge programs on behalf of Fortune 500 companies, it also has first-hand experience in addressing the challenges of corporate risk management programs; that knowledge informed the solution’s design. In addition, customers get more effective support when they need it, because staff is familiar with the process, not just the technology.

This capability was particularly important to one member who joined treasury’s FX group at the start of 2022; the relationship with Chatham Financial enabled him to quickly come up the learning curve. “I have never done FX before,” he noted. “But I’ve been able to schedule calls whenever I need to and leverage their expertise.” He added that Chatham acts as a resource not only from a system standpoint, but also a strategic perspective. “They speak the language and have practitioner experience.” The ease of communication “exposed me to different functionalities as well,” he said. Ultimately, “this is where the technology and your hedging strategy come together.”

This developmental aspect was also critical for another FX manager, who experienced significant turnover in her group. “Their willingness to bend over backward helped me sleep at night,” she said. The turnover complicated the team’s domain knowledge. “It was good to know that FX was in good hands.”

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Justin Jones In FP&A, Senior Executive

Business Partnering Must Be a Full-Time Job

To prepare for increasing demand for business decision-making support, FP&A needs to review its business partnering model.

When the business landscape is foggy, FP&A shines. Facing a period of economic and market volatility, FP&A leaders are preparing to provide more hands-on support to the business: A recent survey of NeuGroup’s Mega-Cap and Large-Cap FP&A peer groups showed that 100% of members anticipate (or are already sensing) a rise in demand for help from business leaders.

Operational leaders are going to ask a lot more questions about how a recession will impact the bottom line. That impact will vary by line of business, so it’s essential that FP&A runs multiple scenario analyses.

To prepare for increasing demand for business decision-making support, FP&A needs to review its business partnering model.

Operational leaders are going to ask a lot more questions about how a recession will impact the bottom line. That impact will vary by line of business, so it’s essential that FP&A runs multiple scenario analyses.
It also means FP&A will need to provide faster, better and more forward-looking insights to enable management to make smart business decisions about head count, cost reduction and investments.

Partnering best practices. Ensuring an effective partnering model is critical in today’s environment. A productive collaboration underlies “FP&A’s ability to help the company understand the challenges it’s facing and where it needs to pivot,” one member said. In group conversations and several in-session polls, NeuGroup identified three critical business partnering success factors:

Dedicated partners. While finance organizations frequently talk about the importance of business partnering, not everyone is walking the walk. One way to gauge the true level of engagement is to see whether the function has full-time staff devoted to partnering with business units and other SG&A functions.
1. A poll taken during a July 27th joint meeting of the FP&A groups revealed that 100% of respondents have dedicated business partners. By making business partnering a full-time job, FP&A can leverage its “intellect, horsepower and knowledge all across the board,” one member said. “If it’s a part-time job, it just doesn’t work because it gets less attention and doesn’t build the right level of credibility within the business,” said Nilly Essaides, NeuGroup’s managing director of research and insight.
A clear engagement model. The other best practice is establishing a formalized interaction model between the business and its finance partners. NeuGroup research shows that most members have institutionalized collaboration between business and finance: 40% reported it is highly formalized.
1. “You have to establish a process if you want there to be communication between and the business and the finance organization. ” Ms. Essaides said. This may include incorporating an FP&A review of all business cases, establishing a regular cadence of meetings, and ensuring there is an FP&A rep at all strategy meetings.
2. Sometimes, the collaboration can start with a joint project. A recent cross-functional initiative to improve data visibility brought another member’s FP&A team closer together with other SG&A functions, which he said has increased the broader financial acumen of business partners.
Support from the top. Successful collaboration with the business and other functions helps to provide a complete view of enterprise performance to the CEO. But for this to work, it’s crucial that FP&A is viewed as a strategic partner by leadership from the start.
1. “Our CFO and CEO see how finance is strategic,” one member said. “It’s hard to force yourself in [to business conversations] if operational leaders don’t want you in.” That is why strong buy-in from senior management is critical.

An added bonus. Effective collaboration between finance and the business is not only the best way to deliver FP&A expertise, but also a way to develop and retain FP&A talent. Because employees in these roles have an immediate impact on business decisions, they enjoy their work. “These roles have broad benefits and high job satisfaction,” said one member. “It’s not just number crunching; it’s a more strategic partnership, and it helps keep these employees engaged,” she said. “Partnering is the beauty of it all.”

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Justin Jones In Senior Executive, Treasury Management

How Treasury Steps into the Strategic Limelight

Rising rates and a looming recession provide treasury with an opportunity to elevate its profile and and become a leader in board-level conversations.

Tough economic conditions have historically highlighted the critical role treasury plays as the champion of corporate liquidity. This happened during 2008-09 and will likely happen again if credit and cash flows begin to contract.

Rising rates and a looming recession provide treasury with an opportunity to elevate its profile and and become a leader in board-level conversations.

This is not new territory for treasurers, many of whom have already evolved to serve new and broader constituents, becoming more strategic, consultative and less transactional in nature.

Treasurers are getting more involved in M&A transactions. They orchestrate the capital structure, and are working more closely with business partners on issues such as liquidity structures, legal entity setup and taxes. Yet, at many organizations, treasury is still pigeonholed as a back-office function.

Now is the time for all treasuries to become active members in senior-level discussions, so it’s imperative that they rev up efforts to develop strategic capabilities to better assist the C-suite. “Sometimes you have to step out and take on more responsibilities, talk to the CFO, find out how you can help and let them know you’re there,” said one treasurer at the in-person spring meeting of NeuGroup for Retail Treasury.

Five Steps to Creating a Strategic Capability

In conversations with dozens of NeuGroup members, most recently at the retail meeting in Minneapolis, treasurers shared important action items that can help the function develop into a true business partner and produce greater insight to support strategic decisions.

1. Grab a seat at the table. At some organizations, treasury is already involved in supporting board-level decisions. At many, however, that is not the case. Treasury should not wait to be invited. Instead, it should ask to participate in board discussions, which is different from providing data and analysis for the CFO’s presentation. Instead, it means being present and engaged in the conversations, explaining the business implications and sharing scenario analysis of the effects of higher rates, reduced inflow of cash, and the potential deterioration in AR quality.

2. Dismantle silos. There’s typically a natural tension between treasury and FP&A because both build a cash flow forecast but in different ways. FP&A usually takes a more high-level approach by pulling information from existing data sources like the ERP, whereas treasury takes a more granular approach with the objective of ensuring liquidity. To increase its sphere of influence, treasury should collaborate with FP&A to sync the forecasts, or at least spot and understand any discrepancies, to inform decision-making.

In an effort spearheaded by treasury to improve forecast accuracy at one member’s company, the treasury team has a quarterly meeting with the CFO and the FP&A team to align treasury’s cash- forecasts with FP&As longer-term forecasts, which the member said are more P&L-focused.

3. Determine the service-delivery model. Treasuries need to define a clear operating model vision: One approach is to adopt a generalist mindset, using rotations through other finance functions to build broader expertise. Another is to opt for a specialist model and develop deep subject matter expertise to support other parts of the finance function and the business. Both can work, but to work well it’s important treasurers make a conscious decision and drive their culture by recruiting the right talent, providing necessary training and establishing clear roles and responsibilities as well as a career path.

4. Speak the language of the business. Treasurers should put a stronger emphasis on developing soft skills such as storytelling and influencing. It’s one thing to understand a complex transaction and another to translate it to someone else in terms senior and business leaders can understand. To develop this fluency, treasury should engage with business unit leaders and understand their main pain points, e.g., tightening margins, and then provide context and narrative around data and analyses.

“As you shift to pushing more soft skills, it gets into, how do we avoid just telling people what we know? How do we influence and shape the next generation of treasury? It isn’t always easy, especially in a hybrid environment,” one member said.

5. Widen the path into treasury. Because few colleges offer treasury-specific tracks, treasury has traditionally hired junior staff from banks, recent finance majors and promoted internally. As the scope of the role expands, communication, critical thinking and intellectual curiosity are becoming core job requirements. Like other parts of finance, treasury should look beyond finance and business majors or practitioners and hire staff with nontraditional backgrounds, e.g., liberal arts, data analytics and technology. It should also expand its talent pool by offering remote or hybrid positions.

Finally, hiring managers should add some marketing “zing” to job posts, job fairs presentations and interviews, to highlight the exciting aspects of the role, e.g., working with business partners, predicting cash flows and getting engaged in designing the company’s capital structure.

A recession and spiking rates, combined with extreme market volatility, are tall challenges for finance organizations. However, they are also an opportunity to demonstrate the value finance and treasury can add to steer the company forward.

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Justin Jones In Senior Executive, Technology

Stories and Foresight Built on Data: What a CFO Wants From Treasury

A seasoned CFO shares thoughts on automation and how treasury can elevate itself to become a strategic partner.

The path of treasurers who are determined to walk the walk of becoming strategic business partners by devoting more time to value-adding activities and less to tactical tasks runs through automation that frees up bandwidth for intense data analysis.

In making that point at a recent meeting of NeuGroup for Mid-Cap Treasurers sponsored by HighRadius, Jeff Martini, interim CFO of Bishop Lifting Products, said it’s critical that treasury teams become “data guardians” who leverage data to tell stories that lead to action, helping senior leaders achieve their goals. “Treasury’s role is to allow me to make an informed decision,” he said.

A seasoned CFO shares thoughts on automation and how treasury can elevate itself to become a strategic partner.

The path of treasurers who are determined to walk the walk of becoming strategic business partners by devoting more time to value-adding activities and less to tactical tasks runs through automation that frees up bandwidth for intense data analysis.

In making that point at a recent meeting of NeuGroup for Mid-Cap Treasurers sponsored by HighRadius, Jeff Martini, interim CFO of Bishop Lifting Products, said it’s critical that treasury teams become “data guardians” who leverage data to tell stories that lead to action, helping senior leaders achieve their goals. “Treasury’s role is to allow me to make an informed decision,” he said.
“It’s about treasury being able to internalize a data model,” he added. “Being able to hold that model in their heads, understand where the data is moving, how to access it, and how to report, taking away the right stories. You have to understand where the pinch points are, and what you can do differently.”
Mr. Martini, who has 20 years of experience as a CFO, began his career in accounting, which he said is similar to treasury, in that a crucial skill is being able to tell a bigger story through transactions. Top treasurers, he said, are able to “back away from the business and see the full landscape.”

Tech fluency. Getting to a place where treasury can focus on seeing the stories in the company’s transactions, Mr. Martini said, requires freeing up time for technology-fluent team members and giving them the right tools.

As he pushed automation at his company, he turned to HighRadius for a tool that streamlines processes and makes data more visible, aiding treasury’s ability to extract insights.
“I helped to eliminate the spreadsheet-only system and set up a data pipeline up front using HighRadius,” he explained. “The work flow was exclusively Excel, and the analytical stuff is still stuck in Excel, but we’ve gone about 60% away from that.”
“You have to have an awareness of your team’s skillset,” before giving them tools and access to data, Mr. Martini advised. It can be beneficial to limit which team members have access to large data sets, which may slow them down.
- “People aren’t getting value just by touching data,” he said, stressing that only employees who have the skill to dig into data should be touching it.

Sharing is caring. Although it may seem counterintuitive to let go of some of treasury’s responsibilities to elevate its role as a strategic partner, Mr. Martini said that freeing up time to dig into data is the priority, making collaborating with other functions essential.

“If I notice treasury is collaborating with other functions within the company, and even sharing some responsibilities, that’ll get my attention very quickly,” he said, including allowing FP&A or a shared service center or center of excellence to take some responsibilities off treasury’s hands.
- “To earn treasury’s seat at the table, it’s about having a mindset of what is going on with the business and acting in the best interest of the entire organization,” he said.
- “It shows treasury has a strategic understanding of the business and internalizes its complexity. Knowing that can take a huge load off the office of the CFO.”
One treasurer at the session said Mr. Martini’s advice rings true. “When we bring accounting or FP&A together with treasury and can collaborate and explain something we’re doing together to the CFO, it works like magic,” the treasurer said. “The mindset of needing to share is important.”

Areas of expertise. Mr. Martini identified three primary areas in which treasury can provide value to a CFO:

“The number one through number five jobs of a CFO are to never run out of money,” he said. “So anything that can be done to help de-risk and look ahead, from managing capital structure to being able to tell the story of the transactions” is crucial. “As a CFO, uncertainty is the name of the game. So as uncertainty goes up, so does value of trust” in treasury.
Second “is the certain skill of being able to answer a question. It’s not just answering the question but finding the question behind the question. If a CFO asks a question, knowledge is more than just the direct answer, it’s being able to interpret the question” and connect the dots to the context behind it.
The third aspect flips the script: asking the CFO useful questions. “I want to be asked questions that can be helpful,” Mr. Martini said. “Tell me what it is that I can be [for treasury], what are the organization’s broader needs that I’m not seeing? What does the treasurer see that I don’t?”

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Justin Jones In FX, Senior Executive

Sharpen the Focus: Fostering More Productive FX Meetings

Approaches to more productive meetings include highlighting world events, more detailed program updates and updating dashboards.

After a recent quarterly risk meeting, a senior leader gave this advice to one FX risk manager to improve the productivity of future meetings: Highlight only new developments and events, come with any specific asks and leave anything else to pre-meeting reading materials.

Up to this point, much of the two-hour meetings consisted of a comprehensive update on everything the FX team had done in the previous month, including reviewing many specific hedges. That often left little time to propose any new initiatives or changes in strategy that would need to be approved by leadership.
But drastically cutting down the bulk of the meeting, the member said, presented a dilemma, one that resonated with other members at a summit for NeuGroup for Foreign Exchange sponsored and co-hosted by Chatham Financial: “What else can we talk about?”

Approaches to more productive meetings include highlighting world events, more detailed program updates and updating dashboards.

Up to this point, much of the two-hour meetings consisted of a comprehensive update on everything the FX team had done in the previous month, including reviewing many specific hedges. That often left little time to propose any new initiatives or changes in strategy that would need to be approved by leadership.
But drastically cutting down the bulk of the meeting, the member said, presented a dilemma, one that resonated with other members at a summit for NeuGroup for Foreign Exchange sponsored and co-hosted by Chatham Financial: “What else can we talk about?”

What’s new? Sometimes, the member said, pressing current events or updates on new hedging programs help to fill the entire time—but you can’t always count on that. Breaking down the impact of Covid, supply chain disruption and the crisis in Eastern Europe has occupied most of the time in recent risk meetings, “but you don’t always have a black swan event to respond to,” the member said.

Some members responded that the best use of this time is to dig deeper into currency updates and analyze the performance of hedging programs. Not content with only understanding the sources of unexpected FX gains or losses, also known as “noise,” one member shared that he takes an extra step, documenting causes of noise using reason codes.
- “We delve into the results in the key drivers, which requires being prepared for and understanding sources of noise,” he said. “Then, we can share if we are over-hedged or under-hedged, which the board appreciates.”
Since many members said that their teams only track hedging performance through Excel, preparing analysis and charts to visualize it can be very time-consuming. “We perform reconciliation and noise allocation, then identify high-risk currencies and prepare decks before we meet,” he said. “It can be a challenge to perform as much work as we can ahead of time.”

Dig into currencies. To address the challenge, one member set up automated dashboards for each currency in Power BI, which he said has been very beneficial in meetings with leadership, and essentially eliminates any prep time for reports by currency.

“Like many others, our FX risk management policy focuses on reducing volatility,” he said. “What is very important is that we do active, monthly monitoring looking at FX results.”
Power BI pulls FX data from the company’s TMS and ERPs covering gains and losses on monitored currencies, their related balance sheet exposures and the company’s published monthly FX rates for each currency, as shown in the charts below.
“We have a dashboard in Power BI that key people have access to, and then we have a pack of dashboards that export so we can present at board meetings, but also can be a historical record,” he said.
- For now, more detailed analysis of hedging performance is still done in Excel, but the member said he is working to improve this process in a similar fashion.

Making use of extra time. If there is still time remaining after in-depth results and currency updates, one member said he comes prepared to present on concerns that may not yet be on leadership’s radar.

“If there is something we’re seeing as an issue in treasury, leadership may not have as nuanced of a view of it as we do, and we want our voice to be heard when they are talking with a distributor,” he said.
The member recently started using a vulnerability chart of the 10 top EM currencies that the company has exposure to, and plots each currency based on its vulnerability and cost to hedge. In the chart below, currencies (unidentified) are plotted by vulnerability, cost to hedge and exposure. The dotted red lines show how the company can set limits on when hedging becomes too expensive, or when a currency becomes too vulnerable.
“We’re trying to drive conversation with the business and be seen as a vital partner,” he said.

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Justin Jones In Senior Executive, Technology

AI-Enabled Analytics Drives Faster, Better Decision-Making

Author Larry Maisel says advanced analytics fueled by AI helps finance teams explain why something happened, what may happen next and what action to take to prepare for it.

NeuGroup managing director Nilly Essaides recently interviewed Larry Maisel, an analytics expert and president of DecisionVu, about his recently published book, AI-Enabled Analytics: A Roadmap for Becoming an Analytics Powerhouse. The book, co-authored with Robert J. Zwerling and Jesper H. Sorensen, focuses on how to leverage advanced analytics to drive unbiased and actionable insights that add value to enterprise performance.

Essaides: In your book, you make a fundamental distinction between analytics and analysis. How are they different, and why is it important for finance professionals to understand that difference?

Maisel: Analysis is arithmetic on data, simple multiplication and division functions that yield informative results. A finance example would be identifying the variance between budget and actuals. Analytics, on the other hand, is mathematics on data, or the use of statistical, algorithmic and other technique, which can produce insight, foresight and actionable information. So, analysis will tell me that I am under budget by 5%. Analytics, by contrast, will tell me about the drivers of underperformance; it will also provide insight into making decisions in order to take action.

Essaides: Given how far AI has evolved, should today’s finance professionals worry about being replaced by AI-enabled analytics?

Maisel: Not at all. AI is absolutely complementary. It is critical that decision-makers understand the right balance between analytics and human judgment and not lose that perspective. In doing the research for the book, I learned from the work of others, like Daniel Kahneman and Amos Tversky. These two long-time collaborators studied and introduced the concept of a two-system brain, and how that duality affects our decision-making regarding risk and uncertainty. System one is instinctive and based on gut feel. System two is slow, prodding and analytical. We use system one all the time, like when we go to the grocery store and pick a particular product off the shelf. In those cases, system one has an advantage. But when we come to business and making important decisions about our operations or about events, we need to be on guard against system one, because system one has biases, which may cause us to make decisions that might not be the best.

One example Kahneman and Tversky introduced is representativeness bias. That means that we assume things that look like others we’ve experienced before will remain the same going forward. That way of thinking incorporates preconceptions and therefore bias. To address business decisions, scenario analysis needs to recognize that bias; we need to apply mathematics to the data (i.e., analytics) to identify potential outcomes.

Essaides: Can you give us examples of how bias-free analytics can be applied to make decisions in the finance organization?

Maisel: You can think of it in treasury and FP&A as it relates to cash forecasting. Integral to the forecast is your ability to look at accounts receivable and predict the likelihood of which accounts will be paid within which period of time. That’s where AI-enabled analytics can help, by examining time series of data and performing trend analysis.

The sweet spot of advanced analytics is really in the transformation of FP&A from the reporter persona to an advisor persona that tells me not what happened, but why it happened, what may happen next and what action to take to prepare for it. As one of my CFO friends told me: “I don’t want to know something. I want to be smarter about something.” The whole point is to make the CFO more impactful, and the use of advanced analytics goes a long way toward building the CFO’s capabilities to work with the operations and be engaged and welcomed. Using this advantage, treasury and finance executives have an incredible opportunity to go beyond finance and impact strategic decisions.

Essaides: Finance organizations may be hesitant to adopt AI tools because they believe staff does not have the required skills. How concerned should they be?

Maisel: Today’s leading-edge AI tools rely on low- or no-code, with the algorithms already embedded in the solution. That means you don’t have to be a data scientist to make an impact. The tool we offer comes with built-in algorithms, so finance analysts don’t have to write and calculate a formula, for example, to identify correlations, as you would in Excel. It’s more straightforward. You don’t have to be an Excel “jockey” to test for correlations against different dimensions and drive down different paths of data, for example by product, customer or geography. What you need is the skill to be analytical and to be able to interpret what the data is revealing to you.

Essaides: We often hear our members complain about the attitude and response time of their IT organizations when they ask for a new tool. Is that getting better?

Maisel: I have a great deal of respect for CIOs, as many of them are beginning to welcome easy-to-use advanced analytics tools because they understand IT’s role is to bring that technology to the business in a way that contributes to its competitiveness and performance. I see a lot more collaboration between IT and their business partners. In the past, finance executives were often told this was not their domain, and implementations were very cumbersome. In today’s world, agility and quality of data are both very important, and you can achieve that by ensuring the CFO and the CIO work in collaboration. IT is really evolving from being the application guardian into the guardian of data.

Essaides: Your book’s subtitle is a “Roadmap for Becoming an Analytics Powerhouse.” Can the office of the CFO become that powerhouse, i.e., provider of analytics services to the rest of the company?

Maisel: From the CFO’s perspective, one critical step is to assign or hire an analytics champion, who would be an advocate for finance analytics capabilities within the company, as well as make sure the right talent is recruited or identified. A big part of the champion’s role is to ensure the organization has the right processes and tools, and that the analytics culture becomes embedded within the corporate DNA by demonstrating success. The key is to demonstrate how analysis contributes to profitability or improved performance.

In the book, we describe a hypothetical telecom company that was trying to understand the key drivers of its revenue performance. They started by mapping any causal factors that may influence financial results. Our role would be to work with them to run AI-enabled analytics in order to isolate the set of drivers that truly move the needle on performance. This way, you can validate and measure the impact of different elements, for example churn, by identifying critical trends and come up with corrective actions. In the case of churn, for example, this may be allocating more resources to reduce billing errors.

Essaides: For a CFO, treasurer or of head of FP&A, what are some of the things they should be thinking about to reach this new advisory role?

Maisel: The first thing is to identify a proof-of-value area within the company or within finance, for example sales analysis, where finance can apply AI-enabled analytics to support the sales forecast or work collaboratively with marketing to improve demand forecasting.

When you do the pilot, as the executive sponsor, you should make sure you provide sufficient budget and the right resources with the bandwidth to execute a successful project. You also need to make this a priority, so this does not become the flavor of the month. You have to demonstrate your conviction to stay with and focus on the project in order to prove its value.

If the pilot does not produce the expected results, learn from that experience and do another pilot in another area. The value is accumulative to the organization. Over time, as well as through market surveys, we have found that if you apply advanced analytics, compared to mere analysis, you can produce tangible value.

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Justin Jones In FX, Senior Executive

Turn Down the Volume: Cutting Through ‘Noise’ in FX Hedging

NeuGroup members share their common sources of unexpected volatility in cash flow and balance sheet hedging programs.

One goal of a foreign exchange hedging program, one FX risk manager said at a recent NeuGroup meeting, is to minimize the risk that senior executives will face questions during quarterly earnings calls about the impact of currency on results. But uncertainty sparked by global issues like the war in Ukraine, inflation and fallout from the pandemic means this isn’t always possible.

NeuGroup members share their common sources of unexpected volatility in cash flow and balance sheet hedging programs.

One goal of a foreign exchange hedging program, one FX risk manager said at a recent NeuGroup meeting, is to minimize the risk that senior executives will face questions during quarterly earnings calls about the impact of currency on results. But uncertainty sparked by global issues like the war in Ukraine, inflation and fallout from the pandemic means this isn’t always possible.

Those issues can be one source of unexpected FX gains or losses, often called “noise” by treasury teams. And noise can highlight hedging challenges and invite questions from senior leaders who seek the source of the noise. “On a month-to-month basis that’s what we have to spend a lot of our time explaining to leadership,” one member said.
Members at the meeting, a summit for NeuGroup for Foreign Exchange 1 and 2 sponsored and co-hosted by Chatham Financial, said noise often comes from market volatility, forecasts that aren’t timely or accurate enough, or simple human error.
Attributing the noise to a source reveals if it’s an external factor the corporate can’t control, or may help identify errors and process improvements that can be remedied.

Cloudy crystal ball. Cash flow hedging relies on forecasted exposures of foreign revenues and expenses over a company’s planning and hedging horizon. Forecasts that miss the mark are the biggest source of noise, according to a survey at the meeting (see chart below).

Increasing uncertainty since the start of the pandemic has caused forecasting to be far less reliable. One member said that even when volatility leads to increased sales, it makes life harder for the FX team.
- “As we looked at our updated cash flows when Covid first happened and sales were expected to decrease, we started to be over-hedged, so we pushed out positions to make sure we were not,” he said. “In the end, we actually flourished from a sales perspective, but the unknown of Covid led us to be too conservative,” leaving the company under-hedged.
FX impact, cited by 22% of those surveyed as the largest source of cash flow hedging noise, stems from movement in exchange rates that hasn’t been hedged or modeled as an acceptable risk. “How do you differentiate between what the market is doing and the things you’re choosing to do from a hedging strategy perspective?” Chatham Financial’s Amanda Breslin asked the group.
- “Many companies choose to hedge a subset of their exposures based on risk tolerance, cost to hedge, reliance on correlations or forecast visibility. Outcomes that deviate from the assumed degree of residual risk are where we see companies exploring the sources of additional noise.” She added that FX teams need to understand “from a hedge perspective, are they targeting the right ratios, currencies and tenors? It gets quite messy.”

Missing the match. For balance sheet hedging programs, the sources of noise identified by members are a bit broader, which can make solving the issue more complex. The common sources are mismatches in notional value, timing and currency rates (see chart below).

Mismatches in notional are similar to deviations from forecasts in cash flow hedging, as they can occur when forecasted exposures are fully hedged but the company’s actual balances are higher or lower than the forecasted amounts, or when currency exposures go unregistered and remain unhedged. Almost half (48%) the members surveyed identified this as their primary issue, which can also be caused by errors in bookkeeping.
- “We identify errors, which have a huge impact on our balance sheet exposure notional,” one member said. “When we go to the ERP system, often times, [local teams that execute FX transactions] book the balance in a certain FX currency, but actually balance in a functional currency which is not part of the exposure.” Because of this, she said the forecast is often incorrect, resulting in a balance sheet that is either over-hedged or under-hedged.
For other members (26%), a mismatch in rates can cause a cacophony. This issue can arise when the spot rate used to revalue derivatives comes from a market rate, while exposures are remeasured using a company balance sheet rate. “If someone is using the wrong exchange rate, we’re creating a lot of noise,” one member said.
An equal share of members say the biggest source of unexpected results is a mismatch in timing. “We have data coming in from multiple ERPs and multiple systems,” one member. “I’ve seen a lot of companies, a couple days before the end of the month, start generating some forecast exposures to get an idea of what they think the balance sheet will look like.”
- He continued that companies often do pre-balance sheet hedging to get the process started and then when the data becomes available, often five or six days into the month, will make additional hedges on top of that. “That presents a lot of issues,” he said. “You’re going to have timing mismatches, you’re going to have notional mismatches, you’re going to get some noise.”

Communication to turn down the volume. One FX head shared a simple approach to track a source of noise and tackle it, going one step further than simply being prepared to explain its origin.

“The first step is just having a conversation,” he said. Each month, the member meets with controllers for each currency and has a “kumbaya” moment to break down any noise and where it stems from.
- “We talk about what the previous exposure was, what the upcoming one is going to be, and try to figure out why there were issues with the prior forecast,” he said.
After identifying the reason for the unexpected volatility, the team tracks the source using “reason codes” for recurring causes, creating a historical log that tracks the origins of noise. “Now we can identify whether it was a revenue mismatch, whether there was something wrong on the cost side or something wrong with tax, and these reason codes are specifically tied to the P&L impact of that mismatch,” he said. “It allows us to very quickly look back to see exactly what caused the problem and why, so we know who to talk to.”
Another member added that beefing up tracking of these noisemakers can be very valuable when meeting with leadership, which the member ran into when faced with an issue hedging deferred income, which “always comes out at a different rate than the prevailing monthly rate” due to a reliance on forecasting.
- One senior executive who recently joined the company confronted the member’s team, expressing concerns about an unexpected $9 million loss due to this issue.
- “But I showed him the data, and I said, ‘A forecast cannot be perfect, and that’s a big driver.’ And after that he said, ‘well, you know what, I’ve never felt so good about losing $9 million,’” the member said. “You just need to be able to translate what is happening in a way the business understands.”

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Justin Jones In Functional, Neugroup, Risk Management, Treasury Management

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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Justin Jones In Functional, Risk Management

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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Justin Jones In Functional, Treasury Management

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:

“To educate others about who is treasury and what we do.
“Establish interest in treasury and create a bench of potential talent who might be interested in a career in treasury.
“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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Ted Howard In Functional, Treasury Management

Developing Operations-Level Metrics Bolsters Treasury

One company’s approach to different ways of measuring treasury performance.

Tracking traditional treasury metrics including liquidity, compliance with debt covenants and debt capacity is essential, but micro metrics—those at the operating level—can help a company to reduce costs and become more efficient, as well as enabling treasury to show its worth.

A treasurer whose team has focused on metrics provided participants at a pre-pandemic NeuGroup meeting with an update on turning from bigger-picture metrics to operating-level metrics.

“While not rocket science, we’re trailblazing a bit down this path,” he said. “We think metrics can deliver the story about what treasury does and a value link to corporate executives, where we’re in alignment with senior management as well as other operating groups.”

Current and future. The member noted 17 operational metrics his company currently provides in six categories: cash and investments, credit cards, bank account administration, currency, payments, bank fees and insurance. Future metrics may include bank costs, transaction volume and USD processed per treasury employee; FX spreads; intercompany settlements; hedging performance; and cash flow forecasting accuracy.

Activity vs. performance. The member distinguished between activity-based metrics and performance-based ones. The first type, such as interest rates and the number of banks and bank accounts, reflect a point in time. Performance-based ones, such as the number of bank accounts closed, banks eliminated and interest earned, instead explain what has been accomplished and, more importantly, where treasury is headed.

Benefits of performance metrics include:

Transitioning treasury to a strategic approach, fueling questions about what treasury is doing, what processes are missing, and where new processes are needed, the member said.
Setting goals and helping treasury align with other departments. “We encourage sharing metrics with those departments, to find areas to help other parts of the company,” the treasurer said.
Instilling accountability. “Assigning metrics to people and results and what’s expected helps drive accomplishments,” he said.

Lessons learned: Don’t report on everything; use effective graphics to deliver the message; deliver a clear message that’s easy to understand; and don’t get caught in the weeds.

Obstacles and overcoming them. Tracking the source and accuracy of data is key. The treasurer’s team discovered that general ledger data was not 100% reliable because there were too few accounts to handle all the data, prompting the team to add accounts.

“We try to do sanity checks whenever we can, and we use more than one source of data to make sure the data looks right and is reasonable,” one of the treasurer’s team members said.
“We love benchmarking and comparing ourselves against other companies, but making sure companies are in the right peer group is a challenge,” he said.

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Ted Howard In Compliance, Functional

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).

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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Ted Howard In COVID-19, Functional, Risk Management, Senior Executive

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.

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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Ted Howard In Functional, Treasury Management

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.

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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Justin Jones In Cash & Working Capital, FX, Regional

Argentina: Trapped Cash, Election Tea Leaves, Chinese Currency

Dollar-linked investments are one way multinationals are preparing for a possible devaluation of the Argentine peso.

Multinational corporations closely watching Argentina’s primary elections on Aug. 13 for a preview of the general presidential election in October face significant uncertainty about the magnitude and timing of a possible devaluation of the Argentine peso. Many are seeking ways to hedge their exposure to the currency as they struggle to get trapped cash out of a country with capital controls, spiraling inflation, taxes on imports and a scarcity of US dollars.

“The big question mark in the market these days is what is going to happen with the official FX rate after the election,” said Alejandro Haro, CEO of Comafi Bursatil, the brokerage arm of Banco Comafi, which sponsored a recent meeting of NeuGroup for Latin American Treasury held in Buenos Aires. “We think there is a 100% probability of having a sharp movement in the official FX rate in the next year.”

Dollar-linked investments are one way multinationals are preparing for a possible devaluation of the Argentine peso.

“The big question mark in the market these days is what is going to happen with the official FX rate after the election,” said Alejandro Haro, CEO of Comafi Bursatil, the brokerage arm of Banco Comafi, which sponsored a recent meeting of NeuGroup for Latin American Treasury held in Buenos Aires. “We think there is a 100% probability of having a sharp movement in the official FX rate in the next year.”
At the official exchange rate, the peso recently traded at about 280 per US dollar; the unofficial “blue-chip swap” rate that is less favorable for corporates sitting on pesos was about 590. The more than 100% gap between the rates is just one sign of the fear of devaluation and further depreciation.

Dollar-linked investments. That outlook is driving more corporates to seek hedges through buying notes and bonds in Argentina’s relatively small debt capital markets. The yields earned on dollar-linked debt help offset the loss in value of a corporate’s cash amid local currency depreciation.

“We are seeing huge demand these days from our corporate clients on dollar-linked instruments that are linked to the official FX rate, not the blue-chip swap rate,” Mr. Haro said. “It’s a small market but you can use it to invest some of your pesos.”
Comafi Bursatil believes dollar-linked, intermediate investments are attractive, he added, noting that shorter-duration instruments have negative yields. Mr. Haro mentioned a 90-day promissory note recently issued by an Argentine company yielding about minus 12%. “We think that is a very good alterative if you want to be hedged through the elections.” He also cited a local issuer rated AA+ that sold two-year, dollar-linked notes with a yield of minus 9%.
During the surge in demand for hedging in Argentina over the last two years, Mr. Haro said, issuers have continued to issue bonds at a 0% rate, but with some now “pushing tenors” to five years, a rarity in the country.
As Bloomberg recently noted (see chart below), Argentine companies in industries including energy and telecom have taken advantage of demand by investors for dollar-linked assets, using the opportunity to issue low-rate debt to refinance or raise new capital.

Putting cash to work. One company that presented at the meeting that is committed to putting local cash to work listed several actions for doing that, including investing in dollar-linked securities issued by the government that are held to maturity.

But the deteriorating economic situation in Argentina means “it’s been hard now to find alternatives to use all the cash,” the member said.
The corporate is also analyzing making dollar-linked loans to third parties as another way to deploy cash that offers a hedge against depreciation.

The China factor. Adding complexity and perhaps opportunity to the calculus facing companies managing risk is the economic role China is playing in Argentina. In addition to investments in Argentina, China is strengthening economic ties through a currency swap line the South American country has tapped to avoid defaulting on IMF loans.

Some corporates are discussing with advisors the possibility of converting pesos to Chinese RMB and then into dollars. “Now that there’s a deal with China, do we have to maybe go through China to get money out?” one member asked.
The inquiring member had previously been converting pesos to dollars using the official rate. But those transactions have not been approved in many months, leading to the decision to try to access the blue-chip swap rate. To do that, a corporate must show it hasn’t accessed the official market in 180 days, and then won’t be able to access it for 180 days following use of the blue-chip swap rate.
Doing what the member proposed would also require regulatory approval to invoice in Chinese currency. But all other things being equal, Mr. Haro said, “I think to get a payment abroad in Chinese currency will be of much higher probability than to get it in USD. So if that is something you can do, I think that is a good idea.”

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Justin Jones In Banking, Regional

A Mutiny Fizzles, the Challenges Endure for Corporates in Russia

Companies face pressure to reduce bank balances at Raiffeisen Bank, higher bank processing fees and new sanctions.

The dramatic showdown that unfolded in Russia over the weekend threatened to further complicate the challenges facing multinationals still operating in the war-torn region amid sanctions and countersanctions. Some are members of the NeuGroup for Russia-Ukraine Crisis working group, including companies that transport food commodities and medical supplies. One member trying to get ahead of the potential fallout from the apparent mutiny requested a session which took place Monday.

Companies face pressure to reduce bank balances at Raiffeisen Bank, higher bank processing fees and new sanctions.

Members who participated in the discussion have not yet noticed any change in business conditions because of the recent events. But they addressed several new and ongoing concerns.
For example, one food company believes new plantings and grain in warehouses have declined and expects the “grain corridor” to be shut soon. The member said the outlook calls for a worsening of the global food situation in Russia and Ukraine, both important suppliers. Also, there are rumors of a new tariff on fertilizers which could exacerbate the problem.
What follows are takeaways from the session distilled by Paul Dalle Molle, NeuGroup senior executive advisor, who leads the working group and moderated the group’s 26th gathering.

Lower bank balances. With the withdrawal of most Western banks, and in particular Citibank, multinationals have been relying on two remaining institutions, Raiffeisen Bank and Unicredit. For some time, Raiffeisen has required clients to lower month-end cash balances; now the bank is asking for daily balances to be kept very low.

Members have been complying by moving funds held at Raiffeisen to other bank accounts at small, unsanctioned Russian banks or international banks headquartered outside the EU and US and still active in Russia.
This process is familiar to members who faced the same requirements from Citi as it wound down operations in Russia.

Brokerage accounts? To keep balances low, banks have suggested companies open brokerage accounts so excess cash they hold at the bank can be swept nightly from the operating account on the bank’s balance sheet to the brokerage account managed by the bank.

This is a well-known and typical procedure throughout the world, only now being applied to Russia because banks are under so much pressure to reduce their Russian reserves.
However, even if members are OK in principle with this procedure, none present have opened the accounts because the required documentation was daunting—they decided the benefits were not worth the time and expense.

Declined payments. Members reported recent changes in how Raiffeisen is processing payments, declining those less than EUR 50,000, and rejecting some larger payments for unclear reasons. So far, it appears Unicredit is processing all payments normally.

Few exit ramps. Members report that, as usual, the only money exiting Russia is for intercompany trade invoice settlements verified through the normal bureaucratic process; there are no dividends nor capital repatriations.

There are rumors that Russia will impose a 10% or even a 50% tax on these types of payments, but so far members say all payments are coming through correctly. Processing fees from banks, however, have increased.
Members are still unable to repatriate funds from Ukraine.

Sanctions. Some recent new Western sanctions have forced companies to update their list of approved counterparties again and to interrupt or change previous sales already in process.

One member reports that new sanctions on raw material imports by their Russian affiliate will delay or diminish their production of goods that are otherwise compliant with sanctions.
Another noted that Russia has passed a new law allowing it to seize Western assets. Earlier this month, the Financial Times reported the Kremlin secretly ordered legislation to enable Western assets to be appropriated at reduced prices and is discussing even more draconian measures to fully nationalize companies, citing people familiar with the deliberations.

Russian share shortfall. Mr. Dalle Molle cited a report by Reuters this week that Deutsche Bank had uncovered a shortfall in the Russian shares that back depositary receipts the bank had issued before the Ukraine invasion.

The report says Deutsche Bank attributed the shortfall to a decision by Moscow to allow investors to convert some of the DRs into local stock.
This may not affect corporates operating in Russia directly but underscores global investors’ challenges in recovering trapped investments in the country’s companies.

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Justin Jones In Banking, Regional

SVB, Stress Tests and Stigma: Bank Treasurers on Lessons Learned

Liquidity, collateral, the Fed’s discount window and regulators spark talk following the collapse of Silicon Valley Bank.

The banking crisis of confidence sparked by the collapse of Silicon Valley Bank (SVB) in March has pushed many members of NeuGroup for Regional Bank Treasurers to revisit, review and—in some cases—rethink aspects of liquidity stress testing and contingency funding plans. Among the most discussed topics: where collateral is pledged, communication with regulators and the stigma of using Federal Reserve borrowing programs like the discount window.

Liquidity, collateral, the Fed’s discount window and regulators spark talk following the collapse of Silicon Valley Bank.

Bank treasurers shared lessons they have learned and other post-crisis insights at their spring peer group meeting sponsored by Morgan Stanley in May. Bank treasury team members discussed liquidity stress analytics at a session later in the month. Following are some key takeaways from the discussions.

Liquidity and concentration risk. For one member, SVB’s implosion underscores the need to pay special attention to concentration risk and set deposit size limits when performing liquidity stress testing on large depositors. That’s because a sudden decision by big depositors to withdraw funds could have an outsized impact on the bank—as happened at SVB. In response, this bank treasurer used SVB as a tool to amp up his stress testing.

“If you haven’t done it, it’s worthwhile for your liquidity stress test to stick in the balance sheet of one of the banks that failed,” he advised. “We said if we had SVB’s deposit base, what would our liquidity framework have required us to hold in liquid assets?”
His bank designs its liquidity stress testing around the requirements of Federal Reserve Board Regulation YY, which the member said puts significant focus on an institution’s concentration of funding sources.

Contingency funding plans: know what to do. Bank treasurers and their teams need to have absorbed and repeatedly practiced the steps laid out in contingency funding plans and playbooks long before a crisis emerges. Planning and practice can’t take place once trouble arrives. For some members, the goal is to make the execution steps so ingrained that they don’t need to consult the plan.

“If you have to look at your contingency funding plan in a moment of crisis, you probably aren’t prepared to execute it,” one bank treasurer said.
In the wake of the stress caused by SVB, this treasurer looked at his bank’s contingency plan and realized “we pretty much did everything; and part of that is because we’re always testing, we do regular exercises, we’ve kind of developed muscle memory around our contingency funding plan. We know what to do.”
That included immediately positioning the bank to make use of the Bank Term Funding Program the Fed established in response to the crisis by pledging securities, although it didn’t access the BTFP for funds. The BTFP values collateral assets like Treasuries at the full price paid, not the current market value.
For another treasury team, using so-called tabletop exercises to simulate emergency scenarios as well as reacting to an actual event where contingency funding wasn’t ultimately needed also proved useful post-SVB.
- In that chaotic period, contingency funding and daily meetings for reporting became necessary. “The value was convening all of the working groups, pulling those teams together and having them at the ready,” a member on this team said.

Closing times and collateral choreography. NeuGroup member banks came away from the SVB experience with a deeper understanding of the importance of being able to tap liquidity from a variety sources at different times of the day—and the ability to move collateral to get that liquidity quickly.

“Know where the collateral is and know the cutoff times,” one treasurer advised, referring to when various funding facilities close up. Another member said, “It became clear to us that we don’t spend enough time thinking about intraday liquidity and temporal mismatches.”
Timing is part of the challenge and knowing where to go if the bank suddenly needs liquidity. “You start worrying about when desks are going to close,” one member said, echoing a common theme, particularly about when Federal Home Loan Bank windows close.
One treasurer said his team has “regular communication with our [Federal Home Loan Bank] and they’ve educated us on what we can expect to get at certain times of the day; we can’t call them up and borrow our whole line, and we don’t expect to be able to.”

Go to the Fed window? The SVB crisis changed one treasurer’s view of turning to the Fed’s discount window if necessary. Since March, his bank has dramatically increased the number of loans pledged at the Fed after learning “they are much more willing to work with you on electronic collateral” than he was aware.

“At the end of the day, you hope to never have to go to the Fed, but if you have something late in the day, it’s really the only option,” the treasurer said. And “if you don’t have some collateral and you have something that happens late, you’re kind of out of luck.”
This member said there should be no stigma attached to going to the discount window late in the day if the bank pledges to repay the Fed as soon as its Home Loan Bank opens in the morning.
Other members said the stigma will stick unless the Fed takes concrete action to destigmatize use of the window. If you use it, one member said, “regulators will be on you.”

The value of repo. One member recommended his peers position themselves to use the repo markets to access liquidity in times of crisis. But adding this arrow to their liquidity stress quiver may require that bank treasurers help educate regional bank regulators, he said. “A lot of midsized banks don’t actively use repo, so regulators of these banks aren’t as familiar [with repo] as large bank regulators,” he said.

He noted that “when we put securities as [hold to maturity], the first consideration is establishing repo lines that use them as collateral to turn into sources of funding.” His bank has repo traders, part of an operational team with “lots of experience pledging securities.”
He also recommended that peers who have not already done so look into the General Collateral Funding (GCF) repo program run by the Fixed Income Clearing Corporation. It allows anonymous borrowing “as long as you have collateral,” the member said. “We did a test during this [crisis] period and we borrowed against all the collateral we have there, which is probably 10% of assets, in like 15 minutes.”

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Justin Jones In Regional, Risk Management

Russia Pain: OFAC Answers NeuGroup Members’ Sanctions Questions

Compliance officers at the Office of Foreign Assets Control offer insights on bank sanctions and licensing issues.

At a meeting this week of NeuGroup’s Russia-Ukraine Crisis working group, a compliance officer from the Office of Foreign Assets Control acknowledged that the significant reduction in unsanctioned banks available to work with multinational corporations in Russia presents obstacles to companies authorized to do business in the country under US and other sanctions regimes, including firms supplying medicines.

The session, moderated by NeuGroup senior executive advisor Paul Dalle Molle, began with introductions of two OFAC officers, information about sanctions objectives and tools and the five key components of an effective corporate sanctions compliance program:

Management commitment
Risk assessments
Internal controls
Testing and auditing
Training

Bank frustration. One of the main pain points facing multinationals still doing business in Russia is what Mr. Dalle Molle described as “the structural frustration of having business that is allowed under the sanctions but which companies can’t get done because there are no banks available to assist them.” The banking issue affects corporates authorized to export products including medicine, medical devices and agriculture commodities.

“That is something that we acknowledge is a difficulty,” the OFAC officer said. “You get a recent action notice that says a bank you’ve been transacting with is suddenly designated and you can’t do business with them. I understand that is very jarring, very impactful.”
However, in response to a member who asked, “can OFAC share a sense of the likelihood of having more banks sanctioned/join the [Specially Designated Nationals] list,” the officer said OFAC will not “preview” that it plans to designate an entity, in part because that could allow it to take actions that undermine the purpose of putting the bank on the sanctions list.
But he noted that, “in a lot of our designations, of banks in particular, we’ve published general licenses that authorize a gamut of wind-down activities” that may ease the burden on corporates affected by putting a bank on the sanctions list.

General license renewals. Another member asked if OFAC intends to continue to renew General License 13D, which allows transactions, including tax payments, through the Central Bank of Russia that are otherwise prohibited. GL13D is currently in its fourth iteration and expires June 6, 2023. “And if they stop renewing, what advance notification might they expect to give to allow businesses to appropriately wind down or exit from Russia?” the member added.

“It isn’t guaranteed that this authorization will be renewed until the end of time,” another OFAC officer at the session said, noting that the agency will consider the full facts and circumstances of the situation at the time of the expiration.
The officer encouraged members to write to the agency with their concerns about this issue because feedback from the public is among the factors considered in making decisions like this, they said. If GL13D is not renewed, companies could apply for a specific license, which is issued on a case by case basis, the officer said.
The member who posed the question said if the general license is not renewed, it’s “effectively impossible to do business in Russia at that point because you can no longer pay taxes to the central bank.” In advance of OFAC’s decision, the company has to do considerable work to plan for a wind down.
“The more runway to get those renewed earlier is helpful to avoid a lot of panic or work internally, even if you can’t give us permanent guidance on it.” The officer said they would take the member’s views back to colleagues at OFAC.

Seek help and guidance. The extra time and cost to obtain a specific license within a sanctions regime makes applying for them a last resort for many companies. One of the OFAC compliance officers said when applying for a specific license companies should consider applying for interpretative guidance as well.

“Get our interpretation whether you actually need a license for something, whether it is authorized or if you’re unsure if you’re interpreting the regulations the right way,” they said.
The officer encouraged members to make use of OFAC’s email and feedback hotlines to ask questions. “If you’re unsure, please email us.” For a list of ways to contact OFAC, click here.
For corporates that do need to apply for a specific license, the officer recommended including as many details as possible about transactions and the parties involved. The more details you provide initially, the less back-and-forth you may have with the OFAC licensing office.

Harmony. In the last question of the session, a member asked, “Does OFAC have any plans to engage with EU counterparts to create a general license for humanitarian transactions to allow for the use of banks under asset freezes in the EU? One of the most challenging issues on the financial transaction side for us is these divergent requirements.”

A compliance officer said OFAC has amended numerous general licenses across different sanctions programs to harmonize with changes in the UN’s asset freeze procedures. “The EU, the UK and the US are really trying to harmonize as much as possible,” they said.
- “We understand that this can create very challenging issues when you’re looking at jurisdictional issues. I hope in the future that you’ll see more of an effort to harmonize things on the humanitarian authorization front.”

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Justin Jones In Regional, Treasury Management

Reimagining the Regional Treasury Center’s Strategic Role

Post-pandemic thinking on the role of Asian regional treasury centers, often based in Singapore.

By Joseph Neu

I was excited to return to in February for the first time since 2019 to address NeuGroup for Asia Treasury, a group launched in 2011 to connect member companies to this vital region. While much has changed in a dozen years, Asia in 2023 remains crucial for MNC growth plans, so the group’s bridging mission remains more important than ever.

Post-pandemic thinking on the role of Asian regional treasury centers, often based in Singapore.

By Joseph Neu

I was excited to return to Singapore in February for the first time since 2019 to address NeuGroup for Asia Treasury, a group launched in 2011 to connect member companies to this vital region. While much has changed in a dozen years, Asia in 2023 remains crucial for MNC growth plans, so the group’s bridging mission remains more important than ever.

When I met with members before the pandemic, I wanted to help them navigate a more strategic role for MNC regional treasury. Since then, NeuGroup has pivoted further to embrace strategic finance professionals who move beyond SG&A support roles to become valued business partners.
It is my mission now to see regional treasury centers (RTCs)—especially those in Asia—join this pivot. The roles and responsibilities of RTCs must elevate to deliver more value. Treasury operations and low-value transactional work belong elsewhere—ideally in the hands of machines.
The good news is that discussions with members suggest that RTC roles will be more customer- and supplier-facing—aligning them with the strategic finance focus.

Innovation that drives growth. Singapore has gained in strategic significance for MNCs as a gateway to Southeast Asia—becoming even more expensive as a result; the economics support the continuing trend toward local hires vs. expats doing “study abroad programs.” The city-state, meanwhile, has continued to successfully position itself as a finance and innovation center, including for liquidity structures, especially payments.

Chinese tech and other companies are setting up shop to support their international businesses and leapfrogging traditional cross-border structures.
The Monetary Authority of Singapore, the central bank, is supporting numerous projects to unlock value from the (regulated) digitalization of payments across borders. Among these, Project Ubin, has resulted in experimentation with blockchain-based payment rails for programable money.
In 2021, DBS, JPMorgan and Temasek formed a special tripartite technology company “to reimagine and accelerate value movements for payments, trade and foreign exchange settlement in a new digital era.”
Not all programmable money has to live on a blockchain, yet what banks are learning from experimentation with digital currency is showing up in the fiat world, segregating firm funds from those of ecosystem “marketplace sellers” and integrating bank accounts and digital wallets.
Separating real solutions from hype is a role for Singapore-based RTCs. Speaking to experts there will help MNCs do this.

RTCs should be bridging all this innovation to drive business growth.

Technology-enabled treasury operations with programmable money will free up time to do this.
The data from digitalization of transactions will make forecasting and planning that better serve business ecosystems less time-consuming.

RTC incentives no longer tax driven. The other major change from 2011 is that tax incentives are no longer a driver of treasury center location. OECD corporate minimum tax and BEPS have taken tax incentives further off the table in 2023—if not eliminated them as an RTC consideration.

Today, financial infrastructure, policy and government support are what matters. Grants to support strategic finance investment, including the training and development of future-oriented, strategic finance professionals have replaced incentivized tax rates.
Cost and quality of living also count in our post-pandemic world. This is why Thailand is making a bid to attract start-ups and finance types who would rather not have to fly to play at the beach.
Tax structures, of course, never fully go away, so check with your tax department to see if there isn’t something they can design that still works from a cash perspective.

Agility centers. The final lesson from the pandemic being applied at RTCs is how to remain agile and promote agility out to the periphery and back to the center. Indeed, promoting agility from the regional center may be the answer to unlocking the most growth and innovation in Asia.

Supply chains are shifting and MNCs need to be agile to keep them both resilient and sustainable. Let RTCs support these shifts from a finance perspective.
Shared services are transforming with the opportunities empowered by technology. What was once a RTC coordinating role with a low-cost center might become one for higher-value activities with a center of excellence.
Finally, RTCs can educate local monetary authorities and other government policymakers to adjust policies to better promote direct investment and become more agile in how they manage their balance of payments.

The mission. Working with our members and their partners in the region, NeuGroup remains committed to:

Supporting MNCs in Asia.
Making regional treasury centers more strategic and agile.
Connecting members with all finance-business partner activities in the region.
Bridging those finance-business partner activities in Asia with those HQ is planning to bring into the region.
Making the career paths for finance professionals in the region more rewarding.

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Justin Jones In Regional, Technology

How Finance Creates Better Partnerships With Business in Asia

Lessons from finance leaders at NeuGroup meetings in Singapore highlight success factors for business partner roles.

By Joseph Neu

How to navigate finance-business partner roles and related activities in Asia—where they really matter—emerged as an underlying theme at NeuGroup meetings in Singapore last week. Here are a few of my takeaways from lively discussions with finance leaders ranging from regional treasurers to CFOs.

Translator applications. “We are a translator for global corporate strategy and business conditions in each of the regional markets,” explained one member.

It is often HQ that needs to better understand how business plans play out in each of Asia’s markets—and the extent to which each one is different.
There’s a bias to take a regional approach akin to Europe, members said. For most MNCs, Asia is 12 to 14 distinct markets.

Of course, supporting business efforts in each local market also requires finance to translate corporate goals into terms that make sense to business operations there.

If local managers don’t understand how to implement the corporate plan in their market, it won’t succeed.

Technology is a huge enabler. Translator apps on your smartphone or PC make basic communications across languages easier in the region.

Technology to interpret is only getting better.
AI, including ChatGPT, is already writing English emails for team members. This is a time-saver.

Other ways of saving time with technology from auto-reconciliation to programmable money are pulling more transactional work out of human hands so finance teams can focus more on business partner needs.

While technology is pulling more of the low-value work out of the periphery, it is also making all the data available to support business decisions in real time.

A final way technology is enabling better finance-business partnerships is with modeling scenarios for improved planning and risk identification.

Twin models offer a virtual world view of the business (e.g., its supply chains) to scenario plan and identify risks, plus test responses to support business decisions as real-world conditions change.
Predictive modeling is also proving so accurate that forecasting is no longer a pain point, especially where data is unlocked in digital businesses.

Getting to yes. The finance organization needs to fight the problem of being seen by agile business leaders as always saying no.

Enterprise-grade governance and controls—applied to new account openings, new payments currencies and new business model creations, etc.—contribute to finance being seen as blockers vs facilitators.
Countering the negative perception and getting to “yes” in support of a business transformation means finance must be extremely proactive in searching for solutions and identifying opportunities to grow before business partners ask.

Finance is still finance. All the talk of embedding finance in the business suggests that a standalone finance function may become a thing of the past. Not so, say strategic finance professionals.

Ultimately, finance still needs to be able to talk as finance with finance (it’s a line of defense on business overoptimism, etc.).
So finance leaders need reporting lines and performance goals on the right side of the control line to keep balance in the partnership.

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Justin Jones In Banking, Cash & Working Capital, Regional

A Year of War, Sadness and Confronting Challenges Together

Finance teams come together to overcome obstacles amid sanctions, countersanctions and the exodus of banks from Russia.

By Paul Dalle Molle, NeuGroup Senior Executive Advisor

This week’s one-year anniversary of Russia’s invasion of Ukraine is a sad moment, knowing as we do that the war is raging on with no signs of ending. It also reminds us that the conflict really began in 2014 with Russia’s annexation of Crimea and the war in Donbas. It has been almost a decade of sadness over lives lost and a country being destroyed.

Finance teams come together to overcome obstacles amid sanctions, countersanctions and the exodus of banks from Russia.

By Paul Dalle Molle, NeuGroup Senior Executive Advisor

This week’s one-year anniversary of Russia’s invasion of Ukraine is a sad moment, knowing as we do that the war is raging on with no signs of ending. It also reminds us that the conflict really began in 2014 with Russia’s annexation of Crimea and the war in Donbas. It has been almost a decade of sadness over lives lost and a country being destroyed.

At NeuGroup, the anniversary presents an occasion to recall how treasury and finance teams at multinational companies adapted to the crisis, including significant obstacles around banking. And it’s an opportunity to reflect on where things stand now for corporates coping with Western sanctions and Russian countersanctions.
While the war itself grinds on, we have witnessed a significant evolution in the needs of our members. To meet those needs, a year ago we created NeuGroup for Russia-Ukraine Crisis, a community where finance practitioners could pose hard questions and openly discuss challenges and solutions on a weekly basis.
As members got more control of the situation and clarity over sanctions and business restrictions, the group moved to meeting twice a month and then monthly. Today, after some two dozen meetings, we convene on an as needed basis. The next gathering is planned for March 13. Click here for more information.

Urgent questions. Early on in the crisis, members urgently sought answers to pressing questions, including how to get money to staff in Ukraine and Russia, in some cases to help them and their families relocate. Another major issue: making sense of a slew of sanctions, that changed frequently and grew to cover more people, banks, companies and even arcane subsidiaries and affiliates.

The next phase focused on resetting institutional relationships when partners ended up on those sanctions lists or ceased their activities. One example among many was payroll. How do you pay staff if your paying bank is now a sanctioned entity? An even bigger stress came when the giant payroll supplier ADP left the country.
Fortunately, the sanctions had lead-in times that allowed members to find alternatives, even if this meant a lot of scrambling. And to be clear, every member company in our group was determined to be a good corporate citizen. We never heard the slightest hint of someone trying to flout sanctions or other rules.

Struggles with banks. The single biggest topic for members of the working group in the past year has been an almost constant search for banking partners. Banks began to tighten conditions as soon as the war began, a process that continued until most foreign banks closed or announced impending closures.

Banks frequently delayed and sometimes rejected payments after detailed sanctions compliance analysis. Most payments eventually went through, some had to be resubmitted and others routed through different countries or banks because of different interpretations of a situation; a few payments were indeed rejected, with banks thankfully offering reasons for their decisions.
The four biggest international banks, Rosbank, Raiffeisen, UniCredit Russia and Citibank Russia, had the greatest impact on multinationals. Rosbank was sold by Societe Generale to its previous Russian owner; Citibank, the largest banker to MNCs, is closing its corporate business in two phases, creating a migration of accounts to the two big remaining EU banks, a few non-US/EU international banks and a few unsanctioned Russian banks.

Ruble wrinkles. The steady reduction in RUB liquidity of companies and international banks presented more challenges. This was primarily driven by the drastic reduction or elimination of local business, of course, but also a desire to reduce risk and keep liquidity to a bare minimum.

Some companies were forced to reduce liquidity below their desired minimum operating levels because of pressure from the few remaining international banks. These banks must reduce their Russian exposure and the reserves that need to be kept against their business, so they gradually forced their corporate MNC clients to reduce balances in bank accounts.
The good news is that the banks offer local RUB brokerage accounts, which do not attract reserves, alongside the bank accounts. So corporate liquidity can be invested in the brokerage accounts and then transferred into the banks when needed.

State of play today. The spectrum of treasury responsibilities in Russia today is very broad. At one end, some members have no activities at all because their companies chose to exit completely and did so.

At the other extreme are businesses (mostly in the special sectors of medical, pharmaceutical, agricultural, mineral and hydrocarbons) which maintain substantial operations in the country. That’s because these subsectors were not sanctioned, or lightly sanctioned, by US and EU authorities, a tacit and sometimes explicit indication that the authorities want these activities to continue.
In between these two extremes are corporates that still have some modest level of treasury activity, such as payables and receivables, funds transfers, RUB liquidity, etc. These find themselves maintaining a low level of operations in the country either because they cannot sell or transfer their assets or because they have decided to maintain some functions instead of undertaking a complete withdrawal.

Looking ahead. Several months after the start of the war our working group held a special session to review best treasury practices in crisis preparedness, including how this war and the complexity of sanctions revealed strengths or weaknesses in members’ plans and playbooks.

There were many approaches outlined and specific suggestions made, but by far the most important conclusion was the need, from the outset of a crisis, to have simple and clear lines of communication and decision-making for the entire company announced from the top. That’s one of the few positives to take away from this crisis—so companies can better weather the next one.
Corporates will continue to explore ways of reducing their activity and exiting that do not endanger local employees. And companies that remain will continue to cobble together payment and funding solutions for their core needs, establish new banking relationships with the ever-dwindling number of unsanctioned banks inside Russia, and generally run their businesses on a shoestring.

Finally, in thinking about the challenges and key issues that lie ahead, I cannot escape returning to the theme of sadness where we began. There is no sign that the war will end soon; the death and destruction look set to continue. My greatest hope is, of course, that the war ends soon.

Looking more tactically at our members and their businesses in Russia, I would hope for more clarity from US and EU institutions about the businesses that they want Western companies to continue to do in Russia (such as those special sectors mentioned above) and recognize the need for a few key Western banks to accompany them on this journey.

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Justin Jones In Regional, Treasury Management

Girding for Trouble Ahead: A 2023 Crisis Management Playbook

Treasury and finance teams can better prepare for potential disruption and crises by codifying past lessons.

Over the last few years, treasuries have faced significant market and geopolitical shocks, including the onset of Covid, the war in Ukraine and extreme global financial market volatility. This year promises to be equally if not more challenging.

Respondents to NeuGroup’s 2023 Treasurers’ Agenda Survey listed an economic downturn as their No. 1 risk this year. Financial market volatility was tied with political uncertainty for second place.
On treasurers’ risk radar screens this year are an escalation in tensions between Taiwan and China, and political strife and currency devaluation in Nigeria, Peru, Chile, Brazil, India, South Africa and Turkey.

Treasury and finance teams can better prepare for potential disruption and crises by codifying past lessons.

Respondents to NeuGroup’s 2023 Treasurers’ Agenda Survey listed an economic downturn as their No. 1 risk this year. Financial market volatility was tied with political uncertainty for second place.
On treasurers’ risk radar screens this year are an escalation in tensions between Taiwan and China, and political strife and currency devaluation in Nigeria, Peru, Chile, Brazil, India, South Africa, Venezuela and Turkey.

The value of preplanning. To prepare for trouble ahead, treasurers must leverage lessons learned in past crises and develop an action plan, so they can respond immediately and proactively to unfolding events. Over these past couple of years, NeuGroup has provided members with multiple forums to address their pressing challenges and benchmark and identify crisis management best practices.

Examples include our popular Russia-Ukraine Crisis community (we often had over 100 members on these initially weekly, Monday-morning sessions); our Argentina Crisis community, as well as ongoing and targeted coverage of events as they unfolded through our flagship publication, NeuGroup Insights.

Crisis management learnings. The primary outcome from the various forms of peer exchange was the identification of key best practices in scenario planning and the development of early warning systems. Companies with significant investments in high-risk markets should review their exposures on a regular basis.

According to one member, “It’s important to have a solid playbook that outlines scenario planning as well as an effective early warning system, which need to be updated by regions two-to-three times a year.”
An effective early warning system should track indicators such as country credit ratings, credit default swap spreads, GDP, employment data, budget deficits, inflation rates and foreign currency reserves. The war in Ukraine introduced an added layer of risk, requiring careful monitoring of US and European sanctions.
By monitoring these indicators and establishing lines of communication with decision-makers, treasurers can be alerted to potential trouble ahead and take necessary precautions.

What to look out for. An early warning system should take into consideration the following key questions:

Country credit ratings: Has the sovereign been downgraded by the ratings agencies?
Credit default swap spreads: Is the sovereign at risk of default?
GDP: Are there extreme movements in either direction?
Employment data: Are there volatile shifts in labor market data?
Budget deficits: Does the sovereign have a fiscal policy with outlays that are not met by tax revenues?
Inflation rates: Is inflation at the sovereign increasing at low rate on a monthly basis, or at a rate higher than earned income percentage for long and protracted periods?
Interest rates: Are the rates steadily increasing, decreasing or are they highly volatile?
Foreign currency reserves: Does the sovereign have the necessary foreign currency reserves for trade settlement?

In case of a crisis. Our extensive conversations with members revealed the following important steps treasury should take to protect the company’s assets and operations. For example:

Establish and maintain clear lines of communication and decision-making processes with local operations and global decision-makers. Often, changes occur daily, and require an immediate action. The decision-making process should be announced by the CEO and should include a cross-functional crisis management team to ensure central coordination, communication and decisions.
Develop information channels for fact-checking and quick updates; leverage relationships with banks and risk advisors as well as local experts to make sure you keep track of new developments.
Connect with peers on a regular basis to source critical information and common approaches to solving emerging problems.
Consolidate local cash and establish local banking relationships for short-term working capital. Existing banking partners may no longer be able to support or protect corporate funds.
Maintain supply chain sustainability by ensuring continued supplier payments.
Consider long-term funding options and cash repatriation options, e.g., dividends, intercompany loans or royalties.
In extreme cases, assess the cost ramifications of exiting the market and consider different timing options.
Incorporate operational changes into financial reporting systems (TMS, ERP) as well as the enterprise risk management framework.
Build in monitoring mechanisms and automate alerts based on factors such as:
- Failed invoices
- Delayed banking payments
- Failed FX settlements

By following these steps, corporate treasurers can minimize the financial impact of a crisis and ensure business continuity.

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Justin Jones In Regional, Risk Management, Treasury Management

People, Prices, Places: Internal Auditors Question Hiring Trends

Internal audit hiring insights: India may be growing less attractive; recruiting talent from the Big Four has downsides.

Top companies in North America have looked to India as a leading location for shared services centers and to potentially place at least some internal audit (IA) staff. They have also used the Big Four accounting firms essentially as a default source of new team members. Both of those trends may be wearing thin.

One member of NeuGroup for Internal Audit Executives discussing his company’s rapid growth and accompanying challenges, noted the sky-high compensation packages in North America that prompted internal audit to look at its operations in India to locate some IA staff. Peers’ feedback, however, presented a more complicated picture.

Internal audit hiring insights: India may be growing less attractive; recruiting talent from the Big Four has downsides.

One member of NeuGroup for Internal Audit Executives discussing his company’s rapid growth and accompanying challenges, noted the sky-high compensation packages in North America that prompted internal audit to look at its operations in India to locate some IA staff. Peers’ feedback, however, presented a more complicated picture.
Tapping the Big Four as a key source of new hires also generated a range of views, with some members saying the gigantic, global firms often produce a check-the-box mentality.

India issues. One member said his company’s “P75” compensation philosophy—limiting compensation to the 75th percentile in a specific market—has prompted the need to locate IA staff outside North America, where talent is scarce and compensation through the roof. The company already has a significant shared services center in India and a recent acquisition will double the number of employees there, so stationing some IA there makes sense. But it’s not without complications.

Many tech companies in India require employees to give them 90 days’ notice when resigning. That extended period creates a risk for NeuGroup members recruiting those employees, giving competitors time to snatch the new hire.
- “It’s not surprising to see rivals offering 60% to 100% increases compared to our company’s offers,” the member said.
Another member added that turnover is every two or three years, as employees look for higher compensation elsewhere, and the compensation cost is rising 20% to 25% for each new hire.
- “There’s the initial entry cost, but there are latent costs your company will have to pay down the road,” he said.
The member who prompted the discussion has noticed, at least initially, that while prospective IA hires in India have strong technical skills, some at senior levels lack presentation or soft skills, making it “challenging to put them in front of a global team.”
One member offered this warning about going the India route: “Once you give up head count in the US, you’ll never get it back.”

Big Four qualms. The Big Four accounting firms have long been a source of talent for corporate IA, especially in the age of remote work, when the extensive training they provide employees is highly valued. However, one member, apologizing first to peers who likely started out at a Big Four firm, recalled the chief auditor from a major payments company telling him never to hire from the Big Four “because as an external auditor [they often do] a check-the-box type of audit.”

A peer noted his own lack of formal auditor training, such as a CPA certification, and said that he prioritizes interviews to ascertain whether candidates have a risk mindset, since hires can be taught to be an auditor if they are naturally curious, good observers and willing to ask the right questions.
- “I don’t really consider whether they’re from a Big Four or not,” he said.
While one member frowned on the Big Four’s strict, process-driven approach, others said it was good as long as it is balanced with real-world perspective.
- “I need the Big Four mentality to bring discipline, but I also need auditors with business backgrounds to say, ‘Yeah, that’s great, but it’s not how the real world works,’” one said. “IA should have a blend.”

The importance of presentation. Members also noted presentation and communications as important skills in the context of Big Four hiring. A member said he valued job candidates from the Big Four less for their intellectual curiosity and more for their ability to communicate to external stakeholders.

“I think we undervalue that,” he said. “For me, it’s that ability to communicate with the stakeholder who often times doesn’t want you there.”

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Justin Jones In Banking, Cash & Working Capital, Regional

Sending More Cash Out of China Using Pools in Free Trade Zones

Unpacking a member’s cash pool in China in a free trade zone where window guidance put no limit on cash outflows.

Many NeuGroup member companies face a challenge getting cash out of China—in part because of rules limiting outflows from cash pools set up under a so-called nationwide scheme to 50% of the net equity held by a company’s entities in the country. But not all multinationals have this problem.

At a recent session of NeuGroup for Global Cash and Banking, one member intrigued peers by describing how his company is taking advantage of free trade zones (FTZs) established in China that do not have specified limits on outflows, where corporates rely on unpublished “window” guidance provided by regulators.
That prompted the member’s company to set up a special cross-border, physical RMB pool, based in Shanghai, which sends cash via intercompany loans to a multicurrency notional pool based in Singapore, which is pooled under a dollar header account and sent to the US.

Unpacking a member’s cash pool in China in a free trade zone where window guidance put no limit on cash outflows.

At a recent session of NeuGroup for Global Cash and Banking, one member intrigued peers by describing how his company is taking advantage of free trade zones (FTZs) established in China that do not have specified limits on outflows, where corporates rely on unpublished “window” guidance provided by regulators.
That prompted the member’s company to set up a special cross-border, physical RMB pool, based in Shanghai, which sends cash via intercompany loans to a multicurrency notional pool based in Singapore, which is pooled under a dollar header account and sent to the US.
“China is a big entity for us, with trapped cash,” the member said. “We’d been studying this for the past year.”
One of the members who was unaware that companies could send more than 50% of equity out of China said he would immediately contact his team to look into following suit.

How it works. To benefit from the relaxed outflow rules governing free trade zones (FTZ), the member company set up a cross-border cash pool made up of three accounts (see graphic below):

A pool header operating account, onshore in China, which consolidates cash from all the corporate’s RMB subaccounts in the country.
A special cross-border account in the Shanghai FTZ that sweeps domestic cash and retrieves overseas cash. This requires an application and approval from the People’s Bank of China (PBOC), which the member said can take one to two months.
An offshore header account in Singapore that receives the cash, sent in CNY and received in CNH.

Another corporate’s liquidity director told NeuGroup Insights his company has a similar, special pooling account, also based in Shanghai. “Under the terms of this pooling structure, we can move unlimited amounts of cash, the only major requirement being that at least one time per year we have to have a zero balance for the sweep—meaning we have to repay all of the funds sent out of country for one day,” he explained.

A true team effort. The US-based member who described the structure at the meeting said setting it up was relatively complex as it required government approval and a very hands-on team in Asia, starting with a regional treasurer in Singapore.

He said the Singapore team obtained approval from the PBOC and worked with a local bank to set up the accounts. “We’re stepping in now to coordinate from the US side to make sure that we provide liquidity, interest rates, deposits, and make sure we’re fully covered,” he said.
The regional treasurer said that because China is “very paper-based,” she depended on a China-based treasury manager to propose banks for corporate approval, set up the facility’s infrastructure and get approval from regulators. The treasury manager followed guidance from the PBOC and the State Administration of Foreign Exchange.
“He is the one who is running around, talking to banks, talking to peers—this takes time and expertise,” the regional treasurer said. “If you do not have suitable people in country, it’s not easy; you wouldn’t be able to do it if you’re sitting in Singapore.”

Why not do it? Some multinationals that use the nationwide pooling scheme and have not opted to take advantage of the increased flexibility offered in China’s FTZs simply don’t have operations in the special regions necessary to set up a pool header account.

“The free trade zones are not everywhere,” one member said. “So if your company is in Shenzhou, you cannot do the free trade zone version. The FTZ is intended to attract people to concentrate imports into certain areas.”
They said in addition to having a FTZ designation, an eligible corporate considering the special pooling structure should have multiple entities in China. A corporate with only one account in the country may use repatriation via a dividend to move cash out of the country.
A NeuGroup member at a company using the nationwide structure told NeuGroup Insights: “We are aware of the other schemes, and continue to evaluate. We have had a positive partnership with regulators in developing and operating our existing structure and it has largely met our needs. We also believe this nationwide scheme offers the greatest stability and predictability, which is important to us both locally and globally as we manage liquidity.”

Words to the wise. Indeed, the regional treasurer warned corporates weighing the benefits of pools in an FTZ to be wary of ever-changing window guidance from the PBOC.

“I want to put a disclaimer that this was a chance for us to take advantage of China opening up because of how the economics have evolved,” she said. “But there is a chance that, even tomorrow, they could change the regulation—and they don’t have to give advance notice.”
And don’t expect to get parameters documented in writing. For guidance on FTZ RMB pool outflows, “even the bank won’t write an email to you, they’ll only tell you over the phone,” the team member in Shanghai said.

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