Capital MarketsRisk Management
June 17, 2021

How to Float the Interest Rate Boat When Fixed Rates Are So Low

Treasury teams making the case for floating-rate debt see commercial paper as a flexible tool to gain exposure. One of corporate treasury’s perennial challenges is determining the best ratio of fixed- to floating-rate debt, and that conundrum has been heightened by factors including record low interest rates and the significant debt companies took on last year. An assistant treasurer in a recent NeuGroup Assistant Treasurers’ Leadership Group (ATLG) meeting noted that efficient-frontier analysis suggests companies should hold a minimum 30% to…
ESGRisk Management
June 10, 2021

Want to Add Value? Get Creative

An internal auditor explains how he’s been able to not only provide assurance but also add value in other ways.Even before the onset of the pandemic, the scope of just about all corporate functions was widening. New regulations, new technology and new cultural trends (read: reputational potholes) all tended to have people doing more with less. That’s why creatively sharing the load can work best and where one function, internal audit, has found it can add extra value. This was…
FXRegionalRisk Management
June 10, 2021

Rescue Mission: Saving Trapped Cash in Depreciating Currency Markets

For projects in volatile economies, creative thinking from treasury could be critical.Profit is not a profit until it’s back in the US. That reality for many multinationals formed the backdrop at a recent NeuGroup meeting for treasurers of large-cap companies where members shared their approaches on how to react when a country’s economic environment takes a problematic turn. Emerging market nations including Argentina, Turkey and Brazil dominated the conversation, as their currencies carry risk of intense devaluation, exacerbating regulatory rules that can trap…
BankingLibor SOFRRisk Management
June 3, 2021

Deep Liquidity: Officials Backing SOFR Point to the Repo Market

ARRC Chair Tom Wipf and Nate Wuerffel of the New York Fed on the benefits of SOFR vs. other rates.Know your Libor replacement term rate inside and out. That was the message delivered to regional bank treasurers by top officials leading the effort to replace USD Libor that has led to the development of the secured overnight financing rate (SOFR). More than $200 trillion in transactions are priced over Libor, but the interbank lending market on which the floating-rate benchmark…
Cash & Working CapitalRisk Management
May 20, 2021

A Look at the Inflation Crystal Ball: Morgan Stanley’s View

Morgan Stanley economist Ellen Zentner says people are becoming “more convinced that inflation is a real thing.”The outlook for inflation and interest rates is a hot topic as the US recovery picks up steam. Here’s the view Morgan Stanley recently outlined for bank treasurers at a recent NeuGroup meeting: Inflationary pressure will almost certainly continue, but even with upwards of $2 trillion in additional capital from the Biden administration’s Build Back Better initiative likely to arrive early next year, the Federal…
FXRisk Management
May 13, 2021

A Fresh Look: Refining Financial Risk Management Programs

Streamlining a hedging portfolio can seem daunting, but there are advantages for corporates that take the plunge.There’s a growing trend among corporates to take a new look at existing financial risk management programs. Some of the triggers for review are explicit events, such as financial reporting results or restatements, or changes in key personnel. But many companies are finding that longstanding hedging programs may just no longer meet the original program objectives, or may have grown in silos and created…
Risk ManagementTalking Shop
May 13, 2021

Talking Shop: Cash Exposure in Counterparty Risk Assessment

Editor’s note: NeuGroup’s online communities give members another forum to find answers to their questions. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: insights@neugroup.com. Member question: “In counterparty risk assessment models, related to cash in bank accounts, do teams typically manage cash exposure using a percentage of the total or fixed dollar limits (or both)? If dollar-based, how are limits defined (and how much flexibility is employed)?”Peer answer 1: “We set deposit limits with our…
ESGRisk Management
April 29, 2021

Shifting Winds of ESG Policies and Regs Have Risk Managers on Alert

The prospect of increased regulation and disclosure around corporate sustainability has risk managers preparing.The likelihood of increased regulation and mandatory disclosure of ESG-related activities and risks under the Biden administration and across the globe has enterprise risk managers trying to get their ESG ducks in a row. “From a risk management perspective, we audit all facts and figures in ESG reports we’re using internally,” said one member at a recent meeting of NeuGroup for Enterprise Risk Management. “The expectation is…
ComplianceFXNeugroupRisk Management
April 15, 2021

Adding Complexity to Hedging: An Adventure in Entity Restructuring

An FX risk manager faces hedging and forecasting challenges amid changes made in response to BEPS regulations. It’s no surprise that the 15-point action plan announced by the OECD in 2015 to address base erosion and profit shifting (BEPS) would create various headaches for finance teams at multinational corporations. But a member presentation at a recent meeting of NeuGroup FX risk managers provided a fuller picture of some specific challenges facing companies as they comply with the new regulations.At issue for…
NeugroupRisk ManagementTechnology
April 15, 2021

‘Heat Maps Must Die’: Out With the Old ERM Tools, in With the New

Critics say traditional tools are inadequate for illustrating risk; one ERM member has found success modernizing them.Pity the poor risk heat map. This well-worn tool, traditionally used by ERM teams to provide a visual representation of the range of risks a corporate faces, is now an object of scorn for some risk managers, including NeuGroup members. “Heat maps must die,” one member said at a recent NeuGroup meeting for ERM heads, a sentiment echoed by a number of his peers.Also…