Capital MarketsESGRisk Management
January 14, 2021

Green Hedges: What You Need to Know About ESG Derivatives

Standard Chartered explains the potential value of “use of proceeds” and performance-linked ESG derivatives.The flood of money pouring into ESG finance—everything from green bonds to sustainability-linked revolving credit facilities—has washed up on the shores of derivatives markets. At a recent NeuGroup meeting of European treasurers, sponsor Standard Chartered dove beneath the surface to reveal what value ESG derivatives may offer. The bank described two types: “Use of proceeds” ESG derivatives that hedge FX or interest rate risks arising from ESG…
ComplianceRisk Management
January 12, 2021

Why Internal Audit Needs to Blow Its Own Horn

Like other functions, internal audit needs to publicize its value to senior executives and the broader corporation.After the completion of a lengthy process audit at a multinational company, the chief audit executive (CAE) reported results to the owner of that process. After a cursory review, the process owner, also a senior executive, asked, “What else have you done?” The CAE was somewhat taken aback. The audit took several months and ate up lots of FTE hours. But since it only…
Risk ManagementTalking Shop
January 5, 2021

Talking Shop: Remittance Verification Options for Treasury Payments

Member question: “How do others handle remittance instruction verification for treasury payments? Callback? Third-party service? Any ML or technology? “We are reviewing our verification process for remittance instructions for payments processed through treasury. Today, we require it to be on the bene’s letterhead, or bank letter, or imbedded in the contract, but have not implemented a callback. Who does the verification in your organization? Are you looking at any third-party services or ML-type models for additional controls?” Peer answer 1:…
FXRisk Management
December 17, 2020

Laddering: FX Risk Management with Less Work, Fewer Transactions

Wells Fargo explains an alternative to layering for corporates hedging cash flow exposures. Who doesn’t want to get more for less? As in less work, more efficiency and fewer transactions, all while still meeting risk management goals. To take advantage, though, you have to be willing to look closer at the shortcomings of the very common cash flow hedging approach known as layering. During a recent interim meeting of NeuGroup’s two FX managers’ peer groups, the quantitative solutions team at Wells…
Risk ManagementTalking Shop
December 17, 2020

Talking Shop: Net Investment Hedging When There Is No Underlying Income

Member question: “Do you hedge net investments where there is no underlying operating income or cash flows? “Curious what philosophy or triggers companies have around net investment hedging—and if any companies do NIH where they don’t have an underlying positive cash flow or plans to liquidate? For example, a region where you may have a lot of fixed assets but no material underlying revenues.” Peer answer 1: “At our company, we have to raise debt regularly, so our NIH program is…
ComplianceRisk ManagementTechnology
December 10, 2020

How to Engineer Complicated Engineering Audits

Recruiting engineers to join audit teams bolsters accuracy as well as credibility.Highly technical engineering audits can be among the most challenging for internal auditors. A member of NeuGroup’s Internal Auditors’ Peer Group (IAPG) queried fellow internal auditors in a recent meeting about what parts of engineering they audit and the makeup of those auditing teams. Expertise in short supply. A peer said engineering takes up more than 30% of his team’s 100-audit plan, and one of the challenges is finding sufficient…
FXRisk ManagementTalking Shop
December 10, 2020

Talking Shop: What Did Your Transition Plan to Hedge Accounting Look Like?

Member question: “What did your transition plan to hedge accounting look like? “We are planning to adopt hedge accounting in the future. In terms of transitioning a book of hedges to designated hedges, we will close all existing undesignated hedges and put on a new book that is designated at inception.“We are curious how others have put on these new hedges. How long did you take to put on hedges? Did you trade all at once, daily, weekly, etc.? Also,…
FXRisk ManagementTechnology
December 8, 2020

An Early Warning System to Flag Excessive Counterparty Credit Risk

One corporate’s proactive approach to measuring and managing FX and other counterparty exposures.Using credit ratings from S&P, Moody’s and Fitch is one way corporates establish maximum credit limits with counterparties. But at a meeting of FX risk managers sponsored by Wells Fargo this fall, one company described some shortcomings of that “classic approach” and explained an alternate method that enables it to take action before exposures reach unacceptable levels.Proactive vs. reactive The company’s director of liquidity and investment management said…
InsuranceRisk Management
December 8, 2020

Rethinking Risk: Who Needs Insurance When You Have ERM?

Relying on ERM instead of insurance is probably extreme, but robust risk management might reduce premiums. Have surging insurance premiums got you down? One answer to controlling these costs could be to resurrect your enterprise risk management program or bolster an existing one. This was one takeaway from NeuGroup’s H2 Treasurers’ Group of Thirty (T30) meeting, where one member said his company was unwilling to pay increases in premiums that in some cases have more than doubled. As has been well-documented…
ESGRisk Management
December 3, 2020

Verifying Virtue: Who’s Checking on Those ESG Promises?

Assuring ESG numbers is coming, but for now internal audit is stepping lightly.Members of NeuGroup’s Internal Auditors’ Peer Group (IAPG) agreed that their companies’ environmental, social and governance efforts (ESG) often felt like marketing campaigns. Internal audit (IA) has so far provided little assurance regarding the validity of reported ESG numbers, but that likely is about to change. One member said his technology company’s investor relations team had for the first time reported out ESG numbers according to frameworks established…