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Eye-Opening: A Tech Treasurer Embraces APIs To See Cash in Real Time

A growing tech company connects with FinLync as it juggles cash, debt and a need to improve visibility.

Real-time cash management made possible by wider adoption of APIs by banks has provided one tech treasurer the daily visibility into the company’s bank account balances that he craved for years.

  • “This has become more important to us not just since Covid, but since tax reform in 2017 when we were sitting on a couple billion dollars offshore, like most tech companies,” he told peers at a recent meeting of NeuGroup for Growth-Tech Treasurers. “We need to see our cash right away.”

A growing tech company connects with FinLync as it juggles cash, debt and a need to improve visibility.

Real-time cash management made possible by wider adoption of APIs by banks has provided one tech treasurer the daily visibility into the company’s bank account balances that he craved for years.

  • “This has become more important to us not just since Covid, but since tax reform in 2017 when we were sitting on a couple billion dollars offshore, like most tech companies,” he told peers at a recent meeting of NeuGroup for Growth-Tech Treasurers. “We need to see our cash right away.”
  • But not every company shares that need. In an informal poll, less than half the members at the meeting said they require daily cash visibility, due in part to their companies’ relatively small size and stable cash flow.

Debt, cash and FinLync. One factor that could change that: debt. Taking it on through bonds or bank loans forces growing companies to focus more on prioritizing cash. “When I started, nobody paid attention to cash. You become a different company as you lever up,” the presenting member said.

  • To get greater visibility into cash in bank accounts, he turned to FinLync, a fintech focused on API connectivity, to build a custom solution. “I can now pull up FinLync, know my balances and it cross-references in SAP with our entities,” he said. “I can see by country, by entity, by currency; it’s a bank portal for nearly all of our banks.”
  • One member wished she had access to that capability at a previous company. “We were doing a ton in repurchases, we had a lot in debt, we had a CP program,” and needed to track cash on a daily basis, she said. “That just had to happen as real-time as possible, and this would definitely help.”

How it works. The presenting member’s solution connects his company’s bank accounts to its ERP through APIs for cash balances, transaction data, and wire and AP payments. “Those, to me, are the fundamental parts of treasury,” he said.

  • One member, who agreed that APIs “sound fantastic,” asked if they have gained enough momentum to be a widespread solution.
    • In just the last six months, the member said, they have. “I’m hearing from larger companies [than ours] that are considering it. I spoke to those same companies last May, and there was hesitation there that they don’t have now,” he said.
    • “You’re getting the fintechs that are big enough and have enough of a track record that you can be confident they’re going to stay around.”
  • The member said that the company’s solution has paid off, but “it’s still a process, you can’t just hire FinLync and be online in a couple weeks. It will take a few months.”

Real-time reality check. It’s likely to take longer than a few months to convince some treasury teams they need to jump on the API and real-time treasury bandwagon. Some members said that real-time cash visibility would be convenient, but they don’t find it necessary. “You just don’t need APIs for everything,” one member said. “Nobody wants to rip out processes that work.”

  • Another said he had put the brakes on a project to move to real-time. “In the end, I don’t manage cash on a daily basis, I only manage on a weekly basis,” he said. “If I have extra resources, I want them to focus on controlling the business, improving cash forecasting, working on capital structure and financial risk management.”
  • One alternative to real-time treasury is using a TMS to access a subledger account, an approach another treasurer at the meeting said he uses and doesn’t see any reason to upgrade. The current process updates daily and adopting APIs would be starting from scratch for only a slight improvement.
  • But we’ll give the final word to the presenting member, who recommended his peers look ahead to a day when real-time treasury may make sense for them: “If you will be in a situation where you need to see your cash right away, the only chance of achieving that is through APIs. When you have an opportunity to do a project, I’d encourage you to do APIs, because I really think it’s the future.”
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Building Blocks To Mitigate Key Person Risk and Boost Resiliency

How finance teams can prepare for the departures of members with valuable knowledge in a tight labor market.

The question of how to mitigate so-called key person risk as treasury teams grapple with high turnover and difficulty filling open positions surfaced among members at a fall meeting of NeuGroup for Mid-Cap Treasurers sponsored by Chatham Financial.

  • The broader context of the conversation was a session where Chatham advisors reviewed the key components of risk management—strategy, operating model and technology—and discussed case studies of companies rethinking those areas to build resilience in corporate finance in the wake of the pandemic.

How finance teams can prepare for the departures of members with valuable knowledge in a tight labor market.

The question of how to mitigate so-called key person risk as treasury teams grapple with high turnover and difficulty filling open positions surfaced among members at a fall meeting of NeuGroup for Mid-Cap Treasurers sponsored by Chatham Financial.

  • The broader context of the conversation was a session where Chatham advisors reviewed the key components of risk management—strategy, operating model and technology—and discussed case studies of companies rethinking those areas to build resilience in corporate finance in the wake of the pandemic.
  • Among the questions Chatham suggested corporates ask in addressing operating model resiliency is, “Do I have key person risk?” The answer for some members is clearly yes.

Relentless turnover. One Chatham client saw a string of key FX personnel depart, leaving no playbook for FX balance sheet exposure gathering or hedge execution, and a system relying on multiple platforms through the hedging life cycle. The company used the experience to take a proactive stance and rethink its treasury program and avoid a Band-Aid approach in the future.

  • By using Chatham to fill in temporarily the gaps left behind, it gained a fresh set of eyes to review the program workflows and trading thresholds.
  • It established steady FX daily trading and reporting coverage, documenting key activities and recommending process improvements. Documentation of processes and controls reduced the time to onboard new team members.
  • The company established a long-term staffing plan by aligning activities with expertise and employees’ capacity, conducting interviews to vet treasury candidates and support existing staff.  

Backups. Providing further insight into the turnover issue, a treasurer recalled taking over the treasury team of his current employer and ensuring that each member has backups. This means there’s never reliance on one individual, but it also means that companies need to proactively invest in cross-training and documentation efforts.

  • Before going on vacation, staff members must identify assigned backups; perhaps someone focused on the pension side who has expressed interest in treasury operations or banking.
    • “It provides good growth opportunities for individuals to be able to cover other roles when somebody goes for a two-week trip to Europe,” he said.
  • An extension of the backup plan is providing very detailed manuals on how to do daily cash flow, FX trades and other key functions. The treasurer recalled the departure early in 2021 of his senior manager of capital markets who was instrumental in investor relations communications and a recent convertible debt offering.
    • A junior person from the operations group had been assigned as his backup and was trained in those functions, and the instructions—with screenshots from Bloomberg—bolstered his ability to take on those responsibilities.

Reconsidering strategy. In another Chatham case study, the treasurer and the FX risk director of a fast-growing company with a significant international footprint resigned in the same week. Management tapped Chatham to “keep the lights on in the risk management program” while it found the “right replacements” and strategically thought through treasury’s resiliency. Then the pandemic hit, accelerating strategic changes aimed at ramping up the staff’s capabilities. Those included:

  • Moving off Excel and implementing a new ERP and treasury-risk platform were critical to leverage data to review the real-time impact to global sales and forecasts.
  • Trend analyses across business units determined areas of likely forecasting deficiencies and challenges and prompted enhanced visibility and analytics, enabling the ability to modify execution tactics and strategy on the fly.
  • Moving away from the critical-terms-match to a long-haul-regression accounting strategy provided a much longer window in which to achieve forecasts and obtain hedge accounting.
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Talking Shop: The Status of Bloomberg Disaster Recovery Services

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


Member question: “We received a notice from Bloomberg that our Disaster Recovery (DR) service was ending on 12/31, but it seems they have kept it on for now. (I have not asked Bloomberg if they have extended due to Omicron.)

  • “We are looking at adding additional licensees with the hybrid work environment. How many Bloomberg licenses does your company have?”

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


Member question: “We received a notice from Bloomberg that our Disaster Recovery (DR) service was ending on 12/31, but it seems they have kept it on for now. (I have not asked Bloomberg if they have extended due to Omicron.)

  • “We are looking at adding additional licensees with the hybrid work environment. How many Bloomberg licenses does your company have?”

Peer answer 1: “We have five (four Anywhere and one shared). We have two analysts using DR right now and I’m having this same discussion with Bloomberg. Our rep said they temporarily extended the service because of a lot of pushback around discontinuing at calendar year-end.

  • “I told our rep that Bloomberg needs to reimagine its licensing framework given the new remote/hybrid work world we’re in. I emphasized that we would not increase our Anywhere license count and would find the service less useful if the work our DR users do has to fall on the Anywhere users.”

Peer answer 2: “We have a single shared terminal for all of treasury. Bloomberg DR has been very helpful and we would also need to investigate adding additional Bloomberg licenses should the service end prematurely.”

Peer answer 3: “We were expecting the service to discontinue, but it did not. We received a letter from Bloomberg to sign within 30 days to renew the DR service.”

NeuGroup Insights reached out to Bloomberg for an update on DR services. “Over the course of the pandemic, we have repeatedly extended use of the DR service to help our customers stay connected to Bloomberg services.

  • “In December 2021, we again extended this expanded DRS access, and it continues to be available to all active DR service subscribers.”
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Spreading Capital Like Peanut Butter: One Bank’s Allocation Method

An understandable and flexible approach supported by top executives brought business leaders on board.

Extensive analysis showed a large regional bank’s share price is highly correlated to consistent return on equity (ROE) performance, prompting its treasury team to set about developing a process to ensure the appropriate ‘E’ was assigned to business units. The treasurer described the bank’s “hybrid” capital allocation approach to peers in a recent meeting.

  • Three “guiding principles” to developing the approach were making sure the aggregated allocated equity is close to what appears in corporate financial statements; holding a minimum amount of capital in each business unit no matter the type of asset or risk; attributing additional capital for risks assumed in each line of business.

An understandable and flexible approach supported by top executives brought business leaders on board.

Extensive analysis showed a large regional bank’s share price is highly correlated to consistent return on equity (ROE) performance, prompting its treasury team to set about developing a process to ensure the appropriate ‘E’ was assigned to business units. The treasurer described the bank’s “hybrid” capital allocation approach to peers in a recent meeting.

  • Three “guiding principles” to developing the approach were making sure the aggregated allocated equity is close to what appears in corporate financial statements; holding a minimum amount of capital in each business unit no matter the type of asset or risk; attributing additional capital for risks assumed in each line of business. 

Peanut butter. The bank’s hybrid approach is broken down into two parts.

  • The first spreads or “peanut butters” the same percentage of capital across all its lines of businesses—essentially representing the regulatory capital minimum.
  • It then employs an economic capital metric for risk in each business unit—a good measure of risk if not actual capital. Most capital is for credit risk, but it can also include operational risk, liquidity risk, model risk, etc.
  • To determine the capital attribution for different risk assets, it adds up two numbers and if the sum is less or more than the bank’s common equity target, it scales the economic capital portion up or down.
  • “So the scaling really happens in the risk adjusted portion of that metric,” the member said.

The biggest challenge. Persuading the business lines to accept their capital attribution, especially if it changed significantly, required some serious politicking.

  • Support from the CEO and CFO was critical.
  • Clearly explaining the rationale eventually got everybody on board, the member said, adding, “Everyone saw the math worked and was correct.”
  • The benefit of applying an established process was the ability to gauge the adjusted returns more accurately. “It allowed us to say, this is how your business is performing,” the member said.

And then the pandemic hit. The new approach was highly beneficial in terms of more efficiently attributing capital, but the arrival of Covid-19 threw businesses’ performances out of whack.

  • One lesson learned was that capital allocation targets can’t be rigid, the member said, adding that flexibility in managing the portfolio generates buy-in from the business.
  • “It’s not just a mathematical exercise, but you’re working with the lines of business and walking them through this,” the member said.
  • The process requires cognizance of the economic environment and the need to measure performance over longer periods.

Spreading the word. A peer from another bank that had grown rapidly in recent years was seeking a more robust profitability measurement system and sought insights from the large regional bank’s treasurer.

  • “They were very generous and let me pick their brains,” the peer said, adding that his bank adopted the economic capital allocation model to replace its traditional risk weighting approach, which didn’t differentiate between types of products and risks.
  • The approach, anticipated to begin use early next year, leans on the economic capital model rather than taking the hybrid approach, attributing capital by product and risk at the individual account level.
  • Interestingly, it indicates that higher or lower allocations of capital can exist for different components of retail and commercial sectors.

Accountability. Both treasurers agreed that holding businesses accountable for achieving ROE targets on their capital allocations was the next step, and signals are clearly positive so far at the bank using the hybrid model.

  • The head of institutional banking consulted with the treasurer on the appropriateness of pursuing a deal providing a certain ROE on a blended basis, reaffirming that business unit’s buy-in to the process.
  • “That’s half the battle,” he said. “If I can get everybody thinking in those terms for every piece of marginal business they do, then we did our job.”
  • Incorporating these metrics in incentive systems will also increase accountability.
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Ripples Into Waves: Progress with ESG, D&I and Impact Investing

NeuGroup members using corporate balance sheets to help companies do good continue to up the ante.

HP treasurer Zac Nesper has a trending post on LinkedIn promoting an interview he did with Global Finance about HP’s award-winning sustainability bond framework. In the post and the interview, Zac is kind enough to cite a discussion he led in November at a NeuGroup for Tech Treasurers (aka Tech20) meeting with Joachim Wettermark, treasurer of Salesforce, the first software company to issue a sustainability bond.

NeuGroup members using corporate balance sheets to help companies do good continue to up the ante.

HP treasurer Zac Nesper has a trending post on LinkedIn promoting an interview he did with Global Finance about HP’s award-winning sustainability bond framework. In the post and the interview, Zac is kind enough to cite a discussion he led in November at a NeuGroup for Tech Treasurers (aka Tech20) meeting with Joachim Wettermark, treasurer of Salesforce, the first software company to issue a sustainability bond.

  • “We discussed using our platforms as treasurers for good,” Zac says, adding, “It is fun when you get in there and look at different ways that treasurers are using their treasury function as a platform to drive change.”

Here’s the backstory.

Creating ripples in the pond. The session with Zac and Joachim updated a NeuGroup joint session in May 2021, “Treasury as a Powerful Force for a More Equitable World,” with our Tech and Mega-Cap Treasurers groups. That featured a panel of six members, all leaders in using treasury as platforms for good, including Apple treasurer Gary Wipfler, who had announced his retirement and wanted to share how this mandate was an important part of his legacy. We dubbed this the “Ripple in the Pond” session in recognition of Apple CEO Tim Cook’s idea that each action can be a pebble in the pond that creates a ripple for change—and every ripple can build on the next to ultimately create a wave.

  • The objective of the original session was to provide examples of using treasury platforms for good that would inspire others to follow suit. Each panelist offered to serve as a mentor and help others build on what they had done. One suggested we collect these examples to help yet more NeuGroup members with treasury-for-good initiatives.
  • We released the first round of examples from our “Survey of Responsible Investing and ESG Initiatives” in October. The “Ripples Into Waves” discussion Zac led in November was a part of a series of sessions highlighting these initiatives and more. Indeed, NeuGroup has been proud to host dozens of sessions where members have shared D&I endeavors, social impact investing ideas (including in our D&I working group) and ESG/sustainability frameworks (ESG working group) in sectors including retail, manufacturing, healthcare, media and telecom, as well as oil and gas and tech.

Tremendous energy. Since so many of our members, like Zac, are making diversity and sustainability a part of their core treasury vision, we will continue to collect examples and add them to our member repository and promote them in sessions. We agree with Zac: “The energy in this space is tremendous.”

  • NeuGroup will continue to do its part to encourage members to share and learn from each other, and up the ante on leading their companies to do good with their balance sheets (in ways that are aligned with long-term enterprise value). 
  • In this way, we hope to create more ripples that turn into waves of treasurers using treasury to do good.
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Talk About SEC’s Proposed 30-Day Buyback Cooling-Off Period Heats Up

Members say the proposal for 10b5-1 plans would limit a corporate’s flexibility to execute buybacks efficiently.

The SEC’s proposal that corporates wait 30 days after the adoption of a Rule 10b5-1 share repurchase plan before buying back stock would significantly restrict the flexibility of companies to execute the plans effectively. That key takeaway emerged at a session NeuGroup convened this week at the request of treasurers examining the potential implications of several SEC proposals issued Dec. 15 regarding 10b5-1 plans, including next-day reporting of buybacks.

  • The 30-day cooling-off period for issuers (it’s 120 days for corporate officers and directors) would impede the ability of finance teams to react to quickly changing markets and effectively reduce the number of days corporates can be in the market buying back stock, members attending the session said.

Members say the proposal for 10b5-1 plans would limit a corporate’s flexibility to execute buybacks efficiently.

The SEC’s proposal that corporates wait 30 days after the adoption of a Rule 10b5-1 share repurchase plan before buying back stock would significantly restrict the flexibility of companies to execute the plans effectively. That key takeaway emerged at a session NeuGroup convened this week at the request of treasurers examining the potential implications of several SEC proposals issued Dec. 15 regarding 10b5-1 plans, including next-day reporting of buybacks.

  • The 30-day cooling-off period for issuers (it’s 120 days for corporate officers and directors) would impede the ability of finance teams to react to quickly changing markets and effectively reduce the number of days corporates can be in the market buying back stock, members attending the session said. 
  • “In addition to not being able to trade as many days because of the cooling-off period, 10b5-1 plans will become less effective,” one member said. “When we put in our plans, it’s informed by where our stock is trading. If we have to wait 30 days and our stock has moved away from that range, then the pricing grid we would have put in 30 days earlier is no longer going to be as effective. You’re always going to be chasing.”

What to do and what to ask the SEC to do. One member whose company already imposes a 30-day cooling-off period on 10b5-1 stock purchases advised peers that one way to cope with liquidity and price grid issues is to place a cap on the total amount spent in a 10b5-1 plan, “but with a grid that provides a maximum daily spend at different price points.”

  • After the session, NeuGroup Insights reached out to David Getzler, head of equity capital markets at Societe Generale, which, like all banks, is discussing responses to the SEC proposals with clients. “We would like the SEC to consider that a 10b5-1 could be adopted 30 days in advance, with the size and price grid to be confirmed while still in an open window, right up to the start date of the program,” he said. “This would not be very different from how companies in effect manage their 10b5-1 programs today.”
  • He added, “If the SEC will not be flexible on this, and requires the program size and price grid to be set 30 days in advance, then the actual grid formula could be worded so that the grid prices (for each discrete volume level) adjust to reflect the percentage change in a company’s stock price over that 30-day period before starting execution of the program.”

How companies will make their voices heard. Corporates and their advocates will have 45 days to comment after the proposed amendments are published in the Federal Register. The general consensus among members was that the SEC is not likely to be very flexible. But that won’t stop member companies from expressing their views through business lobbying groups, outside counsel, trade associations and industry associations. Here’s how one member described next steps for his company:

  1. “Develop a comprehensive understanding of the proposed rules and issues everyone sees with them (which was part of the point of the [NeuGroup] call today—to make sure I’m not missing anything).
  2. “Develop an internal consensus (along with counsel) of how the potential issues would impact the way we operate and unintended consequences to the marketplace.
  3. “Work with various groups that are planning on submitting comment letters to make sure they have a fulsome view of the issues as we see them so our concerns are captured in their submissions.”

Daily disclosure: burdensome and maybe worse. The SEC proposals include a requirement that companies report buybacks on the next business day using a new disclosure form—Form SR. Members described this and other disclosure changes as onerous, burdensome and bureaucratic.

  • “It certainly feels like the disclosure is overreaching,” one member said. “To have do so daily seems punitive when for 8-Ks you get four days for material announcements; but immaterial buybacks need to be done daily? That seems odd.”
  • Some members also fear the information furnished to the SEC falling into the wrong hands. “If we do need to disclose daily what the 10b5-1 buy looks like, the concern is that smart traders would figure out our plan and be able to front-run the market, causing some level of volatility that is good for them but not for anybody else,” one treasurer said.
  • Mr. Getzler at Societe Generale agreed, saying, “While our understanding is that the Form SRs will not be publicly available, there is still the risk that someone would be able to access the information. Then they can probably work out the grid instructions from a series of daily reports and really cause problems if a company’s stock drops and someone knows the company will be buying in size on that particular day.”

Seeking clarity. Among other issues, members discussed whether accelerated share repurchase plans (ASRs) would be subject to the same cooling-off period rules as 10b5-1 plans. Assuming the answer is yes, as some members are, one asked whether having two, alternating dealers administering ASR programs would be permitted under the SEC’s proposed amendment that “10b5-1 trading arrangements to execute a single trade are limited to one plan per 12-month period.”

  • “The jury is still out on alternating ASRs,” one member responded.
  • Another concern is a proposed amendment that “the affirmative defense under Rule 10b5-1(c)(1) does not apply to multiple overlapping Rule 10b5-1 trading arrangements for open market trades in the same class of securities.”
  • One member summed up the overall situation facing many in the room concisely: “We’re pretty heavy users of 10b5-1s, so having the cooling-off period, not being able to do overlapping plans, one single-trade plan per year? That would be problematic in terms of making companies less effective in executing buybacks, which would be detrimental to the shareholders the SEC’s proposals are meant to benefit.”
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Automating Together: The Human Side of RPA

One member’s success with automating processes prioritized getting treasury team members on board.

Most members attending a recent meeting of NeuGroup for European Treasury reported that they are at the early stages of implementing smart automation tools like AI and robotics to improve treasury operations. One member at an IT company who recently completed an intelligent process automation project emphasized that while the benefits may be significant, it will take employees time to get in the groove.

  • The member worked with his tech team to build an end-to-end process to connect the company’s bank accounts, TMS and ERP. The initiative included automating tasks such as trade reconciliation, risk outlooks for payments and processing of loan applications. According to this member, the project yielded approximately 60,000 FTE hours in annual savings.

One member’s success with automating processes prioritized getting treasury team members on board.

Most members attending a recent meeting of NeuGroup for European Treasury reported that they are at the early stages of implementing smart automation tools like AI and robotics to improve treasury operations. One member at an IT company who recently completed an intelligent process automation project emphasized that while the benefits may be significant, it will take employees time to get in the groove.

  • The member worked with his tech team to build an end-to-end process to connect the company’s bank accounts, TMS and ERP. The initiative included automating tasks such as trade reconciliation, risk outlooks for payments and processing of loan applications. According to this member, the project yielded approximately 60,000 FTE hours in annual savings.
  • Businesses leverage technologies such as RPA or AI to aid decisions, which the member said can cut around 35%-40% of the current cost of operations. “It’s about moving beyond process change to adoption of operating models.”
  • “But as you look at implementing process automation, there is a lot of people and change governance that needs to be done,” he added.

Results require adoption. One member, also at an IT company, said his treasury team has seen positive results after moving from a manual to an AI-enabled medium-term cash flow forecast. “It was costly, but immediately improved three-to-six-month forecasts, and it uses algorithms to determine if we should move or leave money in our accounts.”

  • However, this member has found it difficult to convince some team members to actually use the new tool. “The capabilities are fantastic, but they’re only good if you actually use them,” he said.
    • “I struggle with some of my staff actually using the dashboards and predictive analyses.”
  • The presenter responded that he had a similar problem at first but cracked it when he realized the return on investment of process automation is based in large part on its application by teams. “To accelerate adoption, we started forecasting the loss [of savings] based on lack of adoption,” he said.
    • His team estimated ROI based on the time savings, and then calculated any ROI losses due to lack of adoption and linked that number to the performance of the group. This approach to measuring performance builds confidence in the tools and can help teams build confidence in their skill in leveraging technology to save time.
  • The presenter’s tech team took an hour a day to educate the treasury staff to familiarize it with the new tools. This allowed team members to work out issues on a timely basis and increased buy-in. “We pushed people, but we had to hand hold a little.”

Open sourcing. The member said it’s best to start an automation initiative by soliciting suggestions from team members who perform the task in order to (1) make sure all sub-tasks are accounted for; and (2) figure out whether there are inefficiencies in the existing process that can be eliminated with the new tools.

  • By leveraging a third party or an internal tech capability, “you can use data technology to help [team members] build small automations to free up their time,” a technique called citizen development.
  • Hiring treasury employees with data and computer experience has also aided the member’s treasury team with understanding which parts of their jobs can be automated.
  • “At our company, five thousand bots have been built in the last 12 months, which to me is very exciting,” the member said. “Five years down the line, we expect to see [treasury team members] creating their own automations,” using simple, low-code or no-code solutions.

Putting in time up front. One treasurer at the meeting recently began to work with an outside vendor to leverage its automation tools. The project included upgrading treasury’s dashboards and implementing AI-assisted cash flow forecasting and predictive models. Although getting the ball rolling on the large-scale project requires a great deal of work, he expects efficiency to soar in time.

  • “It may require six months of very deep pain and long hours,” he said. “But we expect that once implemented, the new systems will require very little upkeep.”
  • “We don’t infuse technology just to make things digital,” the presenting member said, adding that technology “is there to make employees’ jobs better and faster, and that pays off.”
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Talking Shop: Hedging Cyclical Currencies

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


Member question: “When deciding on whether to hedge a currency, do you take into account whether the currency is cyclical or not?

  • “I think that there is a stronger case to hedge a monetary asset in a cyclical currency, such as the Brazilian real (BRL), that tends to appreciate when the economy is doing well and tends to depreciate more when the economy is doing poorly than if we had a liability in BRL.”

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


Member question: “When deciding on whether to hedge a currency, do you take into account whether the currency is cyclical or not?

  • “I think that there is a stronger case to hedge a monetary asset in a cyclical currency, such as the Brazilian real (BRL), that tends to appreciate when the economy is doing well and tends to depreciate more when the economy is doing poorly than if we had a liability in BRL.”

Peer answer 1: “No, my current and previous companies all hedged 100% of material net monetary asset/liability positions. I know some companies factor in hedging cost, e.g., model how much volatility reduction they get per dollar.

  • “We have not considered a currency’s beta or cyclicality in balance sheet hedging decisions. With the BRL example, USD/BRL is flat to the end of April 2020, but there has been some large volatility month-to-month that we wouldn’t have the stomach for. If you had a BRL liability, you could hedge that and get paid for hedging.”

Peer answer 2: “We don’t, as we wouldn’t want to risk an unpleasant surprise.”

NeuGroup peer group leader Anne Friberg responded that “hedging is to reduce risk and reduce volatility in either earnings, cash flows or both. Most companies do not have the stomach for the negative surprises that might ensue if they assume some sort of cyclicality.

  • “However, if they have a view on the currency’s future direction based on observed cyclicality in the past, they could potentially adjust the choice of instrument to preserve upside (with an option) vs. locking in a fixed/no-upside result with a forward,” she said. “To some extent, corporates could also adjust the hedge ratio to reflect a view—within policy flexibility.”

NeuGroup Insights reached out to Amanda Breslin, Chatham Financial’s managing director of corporate treasury advisory, for additional insight on how Chatham’s clients handle the issue.

  • In accord with Ms. Friberg’s point, she said that most of Chatham’s clients design their balance sheet hedging programs to reduce volatility “with an eye towards operational simplicity, setting hedging triggers and ratios that can be broadly applied and consistently executed, rather than isolating specific currencies.”
  • Ms. Breslin added that “exceptions are most often seen due to material transaction costs related to liquidity, companies that have a strong bias towards using forward points as a proxy for hedging costs and/or currencies that represent a relatively high or low proportion of the aggregate risk in the portfolio.”
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NeuGroup’s Top Five 2021 Insights

Reassessing finance organizations under new leadership tops the list of 2021 insights.

By Joseph Neu

Before we plunge full throttle into the new year, I wanted to distill what struck me as the key takeaways from 2021, our second year of accelerated change and pandemic-fueled challenges.

1. Questioning the way things have been done. The pandemic encouraged transformational thinking as many legacy business processes and delivery models did not perform well during lockdowns nor in a work-from-home environment. Covid-19 also sparked a new way of thinking about work, leading to what’s been called the Great Resignation and a further disruption to the status quo. But disruption inevitably creates room for positive change: As many exited the workforce, they opened the door for new finance and treasury leaders with fresh ideas, who naturally took the opportunity to question why things are being done the way they are.

Reassessing finance organizations under new leadership tops the list of 2021 insights.

By Joseph Neu

Before we plunge full throttle into the new year, I wanted to distill what struck me as the key takeaways from 2021, our second year of accelerated change and pandemic-fueled challenges.

1. Questioning the way things have been done. The pandemic encouraged transformational thinking as many legacy business processes and delivery models did not perform well during lockdowns nor in a work-from-home environment. Covid-19 also sparked a new way of thinking about work, leading to what’s been called the Great Resignation and a further disruption to the status quo. But disruption inevitably creates room for positive change: As many exited the workforce, they opened the door for new finance and treasury leaders with fresh ideas, who naturally took the opportunity to question why things are being done the way they are.

By looking beyond validated best practices, leading finance and treasury organizations have gained significant efficiencies and enhanced the value they add to the enterprise. One of our member companies has centralized the financial support model to eliminate redundancy and standardize processes for funding and cash management, as well as financial planning, analysis and reporting. As a result, staff was freed to focus on more value-creating work and engage more effectively with its stakeholders.

2. You don’t really need as much extra cash as you think, an idea that’s hard to accept. Treasurers have been going around in circles trying to determine the appropriate amount of cash to hold on their balance sheets and are torn between two extremes: Hoard cash or trust external liquidity sources (which are often boosted by post-crisis central bank intervention). In the aftermath of the eruption of the pandemic, banks and capital markets were highly receptive to corporate borrowing. Indeed, prevailing rates and spreads even made it a desirable option. Accordingly, the need to hold strategic cash has felt a bit hollow. That is especially true because the carrying cost of cash does not get better in an inflationary environment than in a zero-to-negative rate one.

  • Yet, others, or even the devil on the other shoulder, may counter that holding on to cash is paramount. According to one of our members, “Cash is a weapon. Unless you have activist shareholders, you wait, go countercyclical and buy cheap assets when others cannot. You should also invest in operations when others are not able to. Plus, if you are in expansion mode, then ‘hoarding’ is critical.” This senior finance executive added, “You can supplement cash with debt if the market is open. But having a good cash pile puts you in the driver’s seat.” Ultimately, most investors in tech or industrial corporates care more about avoiding losses than companies earning low returns on cash.
  • Furthermore, governments continue to threaten to tax distributions to shareholders via buybacks. This may persuade more CFOs to maintain cash reserves for rainy days.

3. Investing in technology to scale the finance function and support the business. Digitalization in support of remote work and new delivery models is critical. Most immediately, many CFOs signed big checks for new technology investments because of the difficulty of finding and retaining talent, and to enable transaction processing in a virtual environment. Staffing has been a particular challenge at the medium and lower ranks (e.g., senior treasury analyst).

  • The Great Resignation has therefore convinced CFOs to approve automation initiatives to plug capacity gaps (and scale up) created by staff departures. The proliferation of API-enabled and cloud-native fintech solutions has boosted levels of automation, sophistication of reporting and right-time analytics and shortened ROI generated by tech spend, reducing head count requirements. At the same time, automation is also redefining finance professionals’ roles and responsibilities, away from “grunt” work into more strategic activities.

4. Institutionalization of crypto means it’s something treasury needs to know. 2021 was the year corporate finance leaders had to start learning about crypto. Many are still taking their first steps up the learning curve, but it’s imperative that they come up to speed—and fast—because crypto is here to stay. The most mainstream use cases today are: (1) accepting “coins” as payment for NFTs being created by business experimentation with new ways of monetizing IP; and (2) sourcing cryptocurrency for ransomware payouts. In both cases, companies are not holding cryptocurrency on the balance sheet. However, inevitably, every corporate will need to decide when to move beyond such arm’s length arrangements.

  • Therefore, finance leaders should evolve their understanding beyond current practices. Crypto is either the biggest, fastest-growing Ponzi scheme ever, or a game-changer bringing on a new future of business-governance structure, finance and how the internet works. Time is running out to determine which you believe is true.

5. ESG is inescapable. ESG is now an integral part of every corporate decision, be it the still-dominant E (now gravitating toward CO2 emission targets), the increasingly relevant S (supporting diversity, equity and inclusion goals, especially), and the timeless G (which will be “governed” more and more by how intentional corporates are in managing themselves in support of E and S).

  • To remain aligned with the company’s vision, finance executives must factor ESG into every funding and investment decision. For many, the light bulb has gone off that the emphasis on ESG is not the result of a proliferation of external attention from raters and rankers. What matters is the internal stakeholders’ view of why, when, what and how ESG factors impact the value of the firm. That’s good “G”. Outsiders just need fair and measurable standards to judge performance against current and future targets.

All of these takeaways fit well into the topics we will look to distill new insight from in the year ahead. For more on what we expect in 2022, please read this outlook by Nilly Essaides.

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Moving Finance Beyond Resiliency in 2022 Amid the New New Normal

How to approach finance this year while addressing unknows and going beyond best practice, toward innovation.

By Nilly Essaides

In 2021, finance organizations focused on building their companies’ capacity to withstand shocks and bounce back. They automated existing processes so they can be executed remotely and with fewer staff. They forecasted more frequently. They continued to pile up cash (see companion piece by NeuGroup founder and CEO Joseph Neu). They integrated planning activities and embraced scenario analysis to account for a lack of relevant data and the unprecedented rate of change in health, economic and financial conditions.

How to approach finance this year while addressing unknowns and going beyond best practice, toward innovation.

By Nilly Essaides

In 2021, finance organizations focused on building their companies’ capacity to withstand shocks and bounce back. They automated existing processes so they can be executed remotely and with fewer staff. They forecasted more frequently. They continued to pile up cash (see companion piece by NeuGroup founder and CEO Joseph Neu). They integrated planning activities and embraced scenario analysis to account for a lack of relevant data and the unprecedented rate of change in health, economic and financial conditions.

  • At the start of this year, many finance and corporate leaders predicted that we would return to some semblance of normalcy by the middle of 2021. Remember the “new normal”? That term has since lost traction, as the pandemic is entering its third year. Now we hear about the “new new normal,” and who knows when or if we will find the right words to describe the continued level of economic uncertainty, market volatility and business model disruption.

How to address the unknowns. Preparing for the new year is not about having the newest crystal ball model. The velocity of change means we will face unforeseen events that will challenge the status quo in new ways. We hear a lot about finance resiliency as a critical success factor. However, being resilient no longer suffices.

  • Resiliency is the capability to withstand shocks and return to pre-crisis operations. Today, there is no going back. The way to brace for a year of ongoing challenges is to become agile, i.e., emerge stronger and better each time. It’s difficult to create KPIs for agility, but it’s possible. For example, finance can measure the data-to-insight cycle time, or how quickly it can adjust to new capacity requirements.  
  • Joseph Neu’s story shares five key takeaways from 2021. No. 1 is the need to question everything. Just doing things the way they’ve always been done is not sustainable. Finance chiefs must leverage technology to reinvent their operating models and how they deliver scalable services to the rest of the enterprise.
  • Tim Husnik, senior director of treasury at Medtronic, shared his new mantra. According to Mr. Husnik, fostering a culture of innovation has proved successful at boosting the finance function beyond proven best practice, which he considers the baseline. “Best practice is just like being average. You’re as awesome as the most average multinational corporation,” he said. “[This mindset] is not quite aligned to our company mission of being extraordinary and innovative.”
  • Becoming a first adopter of technology, novel process design or emerging best practices can be scary, and finance has always been a cautious function, often for good reason. But the function cannot afford to lag other parts of the company. “Have courage,” urged a member of our financial planning and analysis group. “You can’t just get stuck on one model of doing things. Being open to change is a huge benefit. It’s something we’ve had to get better at, and something we’re going to keep doing.”

Five ways to approach finance in 2022:

1. Leverage lessons learned. Remember that we’re not starting from scratch; we’ve now had about two years of practice in dealing with the unexpected. Lessons learned can inform how we overcome new challenges. For example, finance organizations were forced to transition to remote work almost overnight. But research from The Hackett Group showed that in Q1 2020, 80% of accounting organizations closed the books on time by leveraging existing technologies, distributing laptops and increasing bandwidth. In fact, many companies were able to shorten their close time by getting rid of manual intervention.  

2. Encourage and systematize innovation. Innovative thinking has not been a core finance skill. That’s got to change. A major way of triggering innovation in finance is adopting new technologies because they often bring fresh ideas on how to execute work. For example, AI can be layered onto an existing ERP to curate specific data to support different activities. Most ERPs now offer AI-enabled analytics modules; plus, there are stand-alone tools finance can test and deploy. It may sound counterintuitive, but successful innovation is exercised within a defined framework. And the top consideration is focusing on areas where there’s a significant opportunity to improve business performance.

3. Build a “composable” fintech architecture. A single system sitting atop a single data repository has been the holy grail for years. Many tried and most failed, not only because of massive and costly customization requirements. In a customer-centric, agile finance organization, different stakeholders have different needs. Finance must build a scalable platform that enables a bespoke UI in a cost-effective manner.

  • Plus, a single solution, no matter how advanced, cannot compete with the plethora of best-of-breed automations. That means selecting the best tool for the job and connecting it to the ERP and other point solutions via intelligent APIs. These applets not only exchange information in real time but also leverage connectivity to orchestrate cross-process/cross departmental workflows. On the data side, new data management technologies permit process leaders to curate the information that’s relevant to them from the general ledger and other validated source systems.

4. Break down silos. Finance and treasury organizations must dismantle intra-functional barriers to end-to-end processes and data flow, as well as open their activities and systems to other SG&A functions and the business. For example, the line between financial planning and analysis and account-to-report is blurring, as the accounting organization can use AI-enabled analytics to extract valuable insights. Increasingly, finance is called upon to become the analytics engine of the company. Its mandate is to partner with other functions and front-line leadership to make critical decisions about capital and resource allocation.

  • For example, finance is now helping HR in head count planning and advising management about the financial consequences of operational decisions. For instance, establishing a legal entity in an emerging market may lead to trapped cash. Or a business case for a new investment may not pass scrutiny when finance runs scenario analysis that reveals an ROI below hurdle rates.

5. Benchmark with other companies. Thriving in the “new new normal” while keeping costs in check requires thoughtful prioritization. Finance budgets are not expanding but demands are. The key is to choose where to invest, in the immediate and medium term. One of the most effective approaches to identifying improvement opportunities is benchmarking against other organizations. That exercise should go beyond collecting data on others’ performance. The data needs to be interpreted within the context of comparable functions. So, peer-to-peer exchanges, rich with practical examples and context narratives, are also crucial.

The surge in Covid cases may be temporary, but many states and countries are reporting record high cases. The current administration is pushing forward with impactful regulatory change and inflation may not be temporary. These and other risks mean finance executives will be challenged to continue to adapt their organizations to not only confront uncertainty but take advantage of disruption to become better, faster.

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Talking Shop: Use a TMS for Audit and Confirmation of Bank Accounts?

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


Member question: “Has anyone had success using their TMS for audit and confirmation of bank accounts? We are in the midst of our annual audit process. We have a number of accounts confirmed by Confirmation [a platform that’s part of Thomson Reuters] and the remaining have to be confirmed by treasury providing bank statements from bank portals.

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


Member question: “Has anyone had success using their TMS for audit and confirmation of bank accounts? We are in the midst of our annual audit process. We have a number of accounts confirmed by Confirmation [a platform that’s part of Thomson Reuters] and the remaining have to be confirmed by treasury providing bank statements from bank portals.

  • “We are attempting to argue with our auditor that the electronic banking statement files delivered to our TMS (and reported from the TMS) should be sufficient for this requirement. Does anyone else have this issue or leverage their TMS statements for their audit confirmations?”

Peer answer 1: “We globally import statements in various formats into our TMS. Completeness and accuracy is verified by a self-developed algorithm which is audited every year by external auditors by taking a sample of bank external bank statements to validate methodology.

  • “As a result, no further external statements are needed for the management of accounts globally. Local statutory audits might require additional Confirmation or bank statement proof.”

Peer answer 2: “We use Confirmation as well, and for the banks where that’s not possible, we have to send a scanned wet-signed letter for the respective bank to disclose the balance. The (external) auditors won’t even accept any statements retrieved by us, irrespective of portal or TMS.

  • “If you currently have to confirm all accounts, you could ask to only confirm those with balances of a certain size and above.”

NeuGroup Insights reached out to the questioner to ask if treasury had resolved the issue with its auditor. He said there has been no real outcome and that he expects to “have to go down the path” of getting the statements from bank portals. “It was good to hear from other peers that they are facing he same standards we are,” he wrote.

  • He added: “I think the auditing standards would have to change for there to be any improvement in the process. Auditors would have to better understand how the data is coming into and presented in these internal treasury management systems. Currently, they are taking the most conservative approach possible in wanting the information directly from or sourced from the banking counterparty.”
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Best of NeuGroup Insights, Second Half of 2021

Stories that stood out included posts on cryptocurrency, the effect of ESG on credit ratings, Google’s innovation with SAP, an in-house fintech and a pair of video interviews.

Review and reflect. Our final email of 2021 is a baker’s dozen of best posts from the last few months—selected for their topicality (ESG, cryptocurrency, NFTs), detailed descriptions of finance teams meeting challenges (complex spin-offs, post-merger integration, recruiting talent) and focus on key trends in treasury and beyond (right-time finance for FP&A, automating FX hedges, better connectivity).

Stories that stood out included posts on cryptocurrency, the effect of ESG on credit ratings, Google’s innovation with SAP, an in-house fintech and a pair of video interviews.

Review and reflect. Our final email of 2021 is a baker’s dozen of best posts from the last few months—selected for their topicality (ESG, cryptocurrency, NFTs), detailed descriptions of finance teams meeting challenges (complex spin-offs, post-merger integration, recruiting talent) and focus on key trends in treasury and beyond (right-time finance for FP&A, automating FX hedges, better connectivity).

  • To read the email, please click here.
  • Among the offerings are two video interviews, one on how to hire people with grit, the other on questions treasury must ask when evaluating new tech solutions. (We’ll bring you more video—and a podcast—next year.)

NeuGroup wants to thank each of you—our readers, members, sponsors and partners—for your invaluable support in 2021. We wish you a very happy and safe new year.

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Milestones of Automation on the Road to a Brighter Treasury Future

New technology such as RPA and data analytics help free up treasury staff to help the business meet strategic goals.

Assistant treasurers (ATs) highlighted their teams’ milestones over the previous year at a recent NeuGroup meeting, with several citing the development of skills and capabilities that helped automate time-consuming tasks inside and outside treasury.

  • Massive debt deals and prolonged adoptions of SAP systems ranked high on the list of major accomplishments for several ATs, whose hard work brought the projects to fruition.
  • But the initiatives drawing the most interest from peers involved innovative ways to automate operational activities, often using new technology, as treasury teams seek a greater role in their companies’ strategic decision-making.

New technology such as RPA and data analytics help free up treasury staff to help the business meet strategic goals.

Assistant treasurers (ATs) highlighted their teams’ milestones over the previous year at a recent NeuGroup meeting, with several citing the development of skills and capabilities that helped automate time-consuming tasks inside and outside treasury.

  • Massive debt deals and prolonged adoptions of SAP systems ranked high on the list of major accomplishments for several ATs, whose hard work brought the projects to fruition.
  • But the initiatives drawing the most interest from peers involved innovative ways to automate operational activities, often using new technology, as treasury teams seek a greater role in their companies’ strategic decision-making.

Emphasizing data analytics. The AT of a technology firm said an emphasis for treasury staff at his company has been data analytics and process automation, “the skills of the future for our team.”

  • So treasury partnered with the company’s internal analytics team, and data scientists and programmers conducted a series of training sessions for treasury staff, who proceeded to implement projects that have since gone live.
  • They automated the entry of time deposits going into SAP as well as confirmations for time deposits and FX transactions, “particularly [non-deliverable swaps], which were always painful for us,” he said.
  • He added that the treasury team members gaining an appreciation for the new technology and actually applying it was “invaluable for them personally.” It will enable them to better design bigger future projects that the data science team is working on, “and that’s going to feed into some of the other initiatives for us, like cash forecasting.”

Intelligent tools. The AT of a business-services firm listed an “intelligent cash tool,” as one of her team’s significant accomplishments. The tool automates cash forecasts by country and builds a cash inventory model that ensures the company has optimal cash in each country for operational purposes.

  • “It’s a data analytics as well as predictive analytics tool that allowed us to significantly improve our cash flow forecasting processes, as well as really look at making sure we have the right cash in the right place at the right time, in automated way,” the AT said.
  • A peer said his team’s director of cash operations developed a robotic process automation (RPA) tool tied to the SAP system that reviews bank signatories weekly across the company and provides reports on changes that need to be made.
  • “It’s an automated process that’s been a huge win,” the AT said. “And as you can imagine, it reduces a lot of pain points and keeps us up to date.”

Helping the business. Noting that the “first pillar” of treasury’s strategy is to be a “trusted business partner,” one AT said his team partnered with Citi to leverage its payment-exchange platform.

  • Previously, most claims payments were paid via paper check, a slow process for customers in which errors may not have been recognized for weeks. The Citi platform’s more dynamic payment capabilities include services such as Zelle and PayPal, which enables prepaid cards.
  • It’s still in the pilot phase, the AT said, adding, “We’re excited to add value to the business through that initiative.”
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The Path to Treasury Value Creation: Automation as an Ally

Technology holds the key to treasury transformation. So how can people on treasury teams add value in the future?

The strategic value that treasury teams provide to corporations depends in large part on the ability of finance leaders to adopt and adapt to technology that is transforming treasury while at the same time developing the skills and expanding the roles of the people on those teams.

Technology holds the key to treasury transformation. So how can people on treasury teams add value in the future?

The strategic value that treasury teams provide to corporations depends in large part on the ability of finance leaders to adopt and adapt to technology that is transforming treasury while at the same time developing the skills and expanding the roles of the people on those teams.

People, technology and road maps. The interplay of people with technology that is automating, streamlining and eliminating tactical, routine tasks presents treasurers with an enormous challenge as they look ahead. One member called talent planning “massive” in terms of leading to value-added, strategic work. “Doing more than just KYC compliance tasks is definitely the way forward,” he said. But he is finding it difficult to manage that on a large scale.

  • Mr. Furter suggests making a road map for “human capital” guided by developing trends. He said it is critical to start by benchmarking with peers and monitoring developments in technology. Then, he said, research and develop possible scenarios and quantify what the potential benefits and costs would be for each scenario.
  • After researching and analyzing the scenarios, create functional road maps to embrace opportunities, which includes regular course corrections to employees’ job descriptions and skill set requirements—but only if the research proves the changes will justify the cost.
  • In his case, Mr. Furter converted middle-management positions to technology and planning specialists, as well as turning broad “analyst” roles into specific IT security and TMS experts (see below).


Treasury’s future size.
What’s impossible to know precisely is how this ongoing transformation will alter the size of treasury teams. Mr. Neu believes there’s a good chance that treasurers will have half as many employees undertaking current tasks within a few years, with the other half “now doing much more that adds tremendously more value.”

  • He added, “That justifies not only the head count spend but the technology and resource spend. It’s not about doing less, but adding to the resource base as we roll into the future.”
  • Mr. Furter, meanwhile, said that while treasury team members working in Power BI and writing Python scripts or Excel macros are useful now, he believes that in the future AI will become better and faster than people, even at putting together the programs in the first place. Employees will need to adapt their skills to maintaining these systems, rather than building them.
  • Even so, he estimates that 90% of current treasury jobs will ultimately be eliminated, and many current skill sets will become obsolete. Mr. Neu emphasized that he believes the need is not to eliminate roles—it’s to expand and enhance them by freeing up time to create value.
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Year-End Deadline for New Libor Deals Focuses Minds on Alternatives

Gazing into 2022, SOFR remains the first choice among borrowers, but may still require “mathematical gymnastics.”

The year-end deadline for pricing new floating-rate transactions over Libor replacement rates and a steepening but uncertain yield curve prompted assistant treasurers from large-cap companies to tap the insights of rate and hedging experts from Chatham Financial at a recent meeting.

  • Companies are looking to increase their floating-rate exposure compared to a year ago, generally because they are at the higher end of their fixed/floating mix, according to Amol Dhargalkar, managing partner and global head of corporates at Chatham. Some investment-grade companies primarily funding through the bond market have considered swapping to floating, he said, although that’s a tough sell to CFOs as rate increase appear highly likely.
  • The requirement to price new debt and derivatives over an alternative to Libor starting in January raises a host of issues.

Gazing into 2022, SOFR remains the first choice among borrowers, but may still require “mathematical gymnastics.”

The year-end deadline for pricing new floating-rate transactions over Libor replacement rates and a steepening but uncertain yield curve prompted assistant treasurers from large-cap companies to tap the insights of rate and hedging experts from Chatham Financial at a recent meeting.

  • Companies are looking to increase their floating-rate exposure compared to a year ago, generally because they are at the higher end of their fixed/floating mix, according to Amol Dhargalkar, managing partner and global head of corporates at Chatham. Some investment-grade companies primarily funding through the bond market have considered swapping to floating, he said, although that’s a tough sell to CFOs as rate increase appear highly likely.
  • The requirement to price new debt and derivatives over an alternative to Libor starting in January raises a host of issues.

Pre-issuance hedging. Market volatility has increased the importance of pre-issuance hedges, but how to structure them?

  • “For companies using swaps to hedge future issuance, Libor is no longer an option so companies are using compounded SOFR trades,” said Kevin Jones, treasury advisory, corporates, at Chatham.

Waiting on term SOFR. Chatham has received numerous inquiries from corporate clients about term SOFR, published by the CME and echoing Libor’s term structure.

  • “The problem is that there’s not a lot of liquidity in term SOFR just yet,” Mr. Jones said. “I think this is going to change starting next year, but we’re not there yet.”
  • Consequently, most derivatives have been priced over SOFR compounded in arrears, which requires some “mathematical gymnastics to get the rate right.”
  • Chatham has also seen some derivative trades price over daily simple SOFR and SOFR compounded in advance.
  • Those opting for term SOFR on a derivative trade will likely face additional charges or premiums, since bank counterparties will be less able to lay off that risk.

On the ground. Few members acknowledged having used a Libor-replacement rate. One who priced a hedge over SOFR said they paid a premium, adding that “based on the fixed conversion from Libor to SOFR, we expect to get the value on the back end.”

  • He added that the biggest challenge was making sure the company’s accounting system supported the transaction.

On the debt side. The revolver of one member’s company allows borrowing in three currencies. He said the reference rate for borrowings over pound-sterling Libor is mandated to be replaced by the UK’s Sonia by year-end, and the transaction will soon be amended. No change was necessary for euro borrowings, which are not priced over Libor to begin with.

  • Another member said her company doesn’t borrow in other currencies, but the administration agent of its revolver nevertheless insisted on making that restriction formal.

SOFR alternatives? Some regional banks criticize SOFR’s lack of credit sensitivity and prefer the American Financial Exchange’s Ameribor or the Bloomberg Short-Term Bank Yield Index (BSBY), but the biggest financial institutions are now leaning toward SOFR. A member noted one large global bank still expresses support for BSBY and asked whether that was likely to continue.

  • Mr. Dhargalkar said that criticism of BSBY by regulators, including SEC Chair Gary Gensler saying it echoes Libor’s weaknesses, bring its widespread usage into question.
  • A member noted that the recent renewal of his company’s five-year revolver includes language enabling the use of Libor as long as it is available, and hardwire fallback language switching it to term SOFR plus the official spread adjustment.
  • “We also negotiated being able to adopt another reference rate, in the event BSBY or another rate ends up becoming predominant, with negative consent from our bank group,” he said.
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Treasury’s ESG Angst Over Auditors and Credit Rating Agencies

Upper management wants ESG audits to be merged with overall financial audit, to some members’ dismay.

Assistant treasurers (ATs) mulling renewals of their companies’ revolving credit lines next year compared notes in a recent meeting session on ESG-related issues, as those factors increasingly play a role in credit decisions—even if it’s unclear precisely how.

  • One concern: There’s a push to merge ESG-related auditing with the overall financial auditing typically done by a Big Four accounting firm, a move the ATs frowned upon.
  • And just what is up with the credit rating agencies ESG scores? Members expressed surprise at their methodologies’ lack of clarity.

Upper management wants ESG audits to be merged with overall financial audit, to some members’ dismay.

Assistant treasurers (ATs) mulling renewals of their companies’ revolving credit lines next year compared notes in a recent meeting session on ESG-related issues, as those factors increasingly play a role in credit decisions—even if it’s unclear precisely how.

  • One concern: There’s a push to merge ESG-related auditing with the overall financial auditing typically done by a Big Four accounting firm, a move the ATs frowned upon.
  • And just what is up with the credit rating agencies ESG scores? Members expressed surprise at their methodologies’ lack of clarity.

Audit consolidation. One member noted his team’s satisfaction with Dun & Bradstreet as the auditor of the company’s sustainability report, but there’s a push from above to align the business with its financial auditor.

  • “It’s just having a single face and a single focus for all the auditing work,” and reducing complexity, he said.
  • A few other members acknowledged a similar push, with one peer predicting a general shift in that direction if the SEC requires ESG-related auditing. 
  • Scott Flieger, director, peer groups, at NeuGroup, drew attention to the SEC’s Asset Management Advisory Committee adopting on July 7 the recommendations of its ESG subcommittee regarding ESG disclosures by issuers.
    • “Issuers will have their day in court, and this is just an advisory committee making suggestions to the SEC,” Mr. Flieger said. “But I think everybody would benefit from having clearer rules.”

Smaller auditors kaput? If the SEC requires more ESG disclosures, then the push to move ESG auditing under a company’s main financial auditor will only increase.

  • “They’re already doing that body of work for all the company’s financial statements,” said one member. “Plus, the board will probably push for that as well.”
  • Added another, “It’s just that you have to pay a premium to use the Big Four.”

ESG credit confusion. The rating agencies’ progress integrating ESG factors into their ratings has been in fits and starts, frustrating ATs looking for clarity about the impact on their companies’ credit—especially since the agencies say they’ve long incorporated ESG into ratings.

  • One member noted recently receiving a report from Moody’s Investors Service on her company’s ESG rating. “From my perspective, it’s not very detailed,” she said, adding that surprisingly contrasts with the in-depth discussion on the topic her team had with Moody’s credit analysts a year ago.

Lowest common denominator. The AT added that the agency provides scores for each of the E, S and G categories, with a few subcategories for each.

  • “And whatever your lowest score is the score for the category, so you could be excellent in all the subcategories except one, and that one will be your category score,” she said.
  • Furthermore, there was little scoring differentiation between companies in the same sector. After a peer in a different industry acknowledged receiving the same feedback, she said, “It begs the questions: What’s the value in this? And how it going to be used?”
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Connecting to Data to Drive Insights: Ed Barrie on Tech and Finance

The former treasurer of Tableau Software on what questions today’s treasurers need to ask before investing in tech solutions.

In a treasury career that includes positions at Microsoft, Itron and Tableau Software—where he built treasury from scratch—Ed Barrie has made it his mission to dive deep into how corporate finance teams can better leverage technology to connect to data, analyze it and extract insights that drive strategic decisions.

  • In the interview below with NeuGroup CEO Joseph Neu, Mr. Barrie does what he did for years as a NeuGroup member: shares his valuable knowledge of systems and data analytics with other finance professionals, recommending several key questions treasurers need to ask themselves when evaluating tech solutions.
  • You’ll also hear Mr. Barrie’s insights on the challenges facing legacy treasury management systems going up against cloud-based solutions as well as his thoughts on why internal IT departments don’t—and perhaps shouldn’t—prioritize treasury projects and internal financial systems.

The former treasurer of Tableau Software on what questions today’s treasurers need to ask before investing in tech solutions.

In a treasury career that includes positions at Microsoft, Itron and Tableau Software—where he built treasury from scratch—Ed Barrie has made it his mission to dive deep into how corporate finance teams can better leverage technology to connect to data, analyze it and extract insights that drive strategic decisions.

  • In the interview below with NeuGroup CEO Joseph Neu, Mr. Barrie does what he did for years as a NeuGroup member: shares his valuable knowledge of systems and data analytics with other finance professionals, recommending several key questions treasurers need to ask themselves when evaluating tech solutions.
  • You’ll also hear Mr. Barrie’s insights on the challenges facing legacy treasury management systems going up against cloud-based solutions as well as his thoughts on why internal IT departments don’t—and perhaps shouldn’t—prioritize treasury projects and internal financial systems.

Please be on the lookout for future portions of Mr. Barrie’s interview, including details of his latest tech endeavor: Treasury4, a fintech he cofounded where he serves as chief product officer and treasurer.

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Pain You Can Manage and Pain You Can’t: Separately Managed Accounts

SMAs mean accepting KYC and legal dept. pain, but clear communication can save plenty of heartache with managers.

Members joined forces for a panel discussion on the pain points associated with setting up, maintaining and reporting for separately managed accounts (SMAs) at a recent meeting of NeuGroup for Cash Investment. Not surprisingly, the most painful parts are the know-your-customer (KYC) obligations and the legal agreement tug-of-war needed for account setup.

  • The encouraging, somewhat unexpected takeaway: Effective communication and a strong relationship with your asset manager go a long way toward easing the pain of misalignment with the manager.
  • Clear definitions of terms, well-understood parameters and monitoring of execution and performance, along with regular and open communication with asset managers, are critical elements of the SMA relationship.

SMAs mean accepting KYC and legal dept. pain, but clear communication can save plenty of heartache with managers.
 
Members joined forces for a panel discussion on the pain points associated with setting up, maintaining and reporting for separately managed accounts (SMAs) at a recent meeting of NeuGroup for Cash Investment. Not surprisingly, the most painful parts are the know-your-customer (KYC) obligations and the legal agreement tug-of-war needed for account setup.

  • The encouraging, somewhat unexpected takeaway: Effective communication and a strong relationship with your asset manager go a long way toward easing the pain of misalignment with the manager.
  • Clear definitions of terms, well-understood parameters and monitoring of execution and performance, along with regular and open communication with asset managers, are critical elements of the SMA relationship.

Prioritize clarity and dialogue. All members stressed that SMA guidelines shouldn’t be subject to interpretation and warned peers against learning the hard way that managers may have different definitions or understandings than what treasury expects.

  • Avoiding misinterpretations of instructions requires precise language describing types of securities, duration, credit ratings and, for some corporates, ESG ratings.
  • One member said different managers have different styles and recommended using more than one manager in a space to better understand differences and recognize what works best for your organization.
  • Regular, open communication is essential and valuable. One member said the biggest benefit they get from SMAs flows from the relationships with portfolio managers and the intelligence those managers provide.

Lay the groundwork. Don’t get stuck being the net in the frequent ping pong matches between the legal departments of your company and the asset manager. Sometimes it’s a disagreement on boilerplate language that may be resolved by the lawyers communicating directly. Scheduling a conference call is your best and fastest option for legal resolutions.

  • Communicate needs and expectations with both your asset manager and custodial team from the start, beginning with accounting and reporting requirements. Agree to cadence and deadlines for data so month- and quarter-end reporting will be received quickly and without a lot of back-and-forth with managers and custodians.
  • One panelist in the midst of an SMA RFP is using a scorecard to evaluate the operational efficiencies of different managers. For his company, there must be clean connectivity with the trustee, Clearwater, and key treasury technology systems to avoid headaches down the line.
  • Buyer beware: members noted that using different systems for valuations requires reconciliations. One member flagged that it’s often an issue on structured products: “Our SMA managers use Bloomberg, we use Clearwater.” Numbers don’t always match, and minor discrepancies are found that need follow-up.

Time-consuming KYC and legal agreements. Unfortunately, to realize the benefits of separately managed accounts, you must buckle up for the frustrating tasks associated with KYC requirements. Keep in mind that you are tending to two relationships: the asset manager and custodial team; each one has nuances and different areas may mean different requirements.

  • It is pretty rewarding to check off items on your to-do list. However, even when you think you’ve completed everything, banks usually come back and need more. Their requirements change over time.
    • You may have filled out something a year ago, but additional requirements may come into play, or changes have occurred with authorized signers or those allowed to direct or redeem funds. Once you get an SMA in place, assume that it requires constant maintenance.
  • In a perfect world, account opening times with custodians range from 10 days to 15 days before connections, accounting, privilege and cash and trading authorities may be applied. One panelist said, there is a lot more paperwork today than 10 years ago.

Is there an ideal time to shop for SMA managers? Not necessarily, but just make sure they aren’t distracted by M&A, one member said. Looking at the track record of the investing team and leadership helps. And remember that sometimes the large size of a given firm doesn’t get you the attention you want.

  • One member said that with SMAs, you are ultimately betting on people and whether they will they be incentivized to work their best for you. There has been a huge compression across the board, which is a benefit for the buy side: 2021 is better than 2011.
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Cashing in on AI to Boost Accuracy in Forecasting Receivables

Danone North America took an overly manual process, added artificial intelligence, and now gets close to 100% accuracy.

Cash collection during the pandemic has been a big issue for corporates, with many facing uncertainty and lower cash flows. That’s why cash forecasting, and one of its main components, receivables calculations, have become more important than ever. And it’s also why more companies are turning to automation and artificial intelligence (AI) to improve the accuracy of those forecasts.

Fewer lumps and errors. At a recent NeuGroup meeting sponsored by cloud-based autonomous software company HighRadius, Jacob Whetstone, director of invoice to cash for Danone North America, described his company’s journey from a labor-intensive collection forecasting process to a more accurate, automated approach (see graphic).

Danone North America took an overly manual process, added artificial intelligence, and now gets close to 100% accuracy.
 
Cash collection during the pandemic has been a big issue for corporates, with many facing uncertainty and lower cash flows. That’s why cash forecasting, and one of its main components, receivables calculations, have become more important than ever. And it’s also why more companies are turning to automation and artificial intelligence (AI) to improve the accuracy of those forecasts.
 
Fewer lumps and errors. At a recent NeuGroup meeting sponsored by cloud-based autonomous software company HighRadius, Jacob Whetstone, director of invoice to cash for Danone North America, described his company’s journey from a labor-intensive collection forecasting process to a more accurate, automated approach (see graphic).

  • After years of tracking lumpy and error-prone payments from customers, it improved its accounts receivables forecasting to 96% accuracy.
  • “It was a very manual process,” Mr. Whetstone said about the previous AR process. “Sometimes it looked like were accurate, but a lot of the time we were really off.”
  • One issue that contributed to inaccuracy was that it was so time-consuming that the company only forecasted AR twice a year. “June and December,” Mr. Whetstone said, “and not much more than that.”

Putting the focus where it belongs. Savvy companies for years have realized there is cash to be had in some formerly untapped areas and processes and have been slowly incorporating them into their working capital management programs.

  • Nonetheless, companies still are sitting on billions of cash, according to research by The Hackett Group, which calculated companies “were sitting on $1.3 trillion in unused working capital at the end of 2019, including nearly $4 billion” in AR.
  • But instead of collecting that cash, companies are often bogged down collecting the data and doing calculations manually. Mr. Whetstone said this was true at his company. “We spent all this time pulling data together” instead of working with customers to get paid sooner. “We were spending too much time on non-value add activities.” 

Too many variables. One of the issues of trying to accurately predict payments from customers is that there are too many variables to figure out.

  • For instance, one transaction can have more than 60 invoice and customer-level variables to contend with, like invoice dates, customer-specific days payable, and invoice amounts among others. Accounting for all these in a spreadsheet would be nearly impossible or at least take a very long time.

Success through streamlining. After partnering with HighRadius and its AI-based automated cloud cash forecasting tool, the company was able to streamline the process.

  • This meant it was able to take those 60-plus variables, correlate them to reduce that number to about 30, and create more than a dozen algorithms to come up with a predictable payment date. This can then be uploaded into the company’s automated cash forecasting tool.
  • With the automation, Danone has more time to work on the algorithms and tweak them when necessary. And to work with the collections team in its dealings with customers. The automation also allows the company to do monthly forecasts instead of just twice a year.
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Trading with Real Money: Good Schooling for Future Finance Talent

Corporates give high marks to a University of Idaho program where students learn real-world lessons by trading.

Treasury and finance teams searching for talent with the right stuff—and an edge in this tight labor market—might want to take a page from Starbucks and Micron Technology by strengthening their ties to colleges and universities that are finding innovative ways to teach students financial decision-making skills.

  • Micron treasurer Greg Routin and Melanie Canto, a former Starbucks treasurer who is now a senior business transformation leader at the company, spoke at a recent meeting of NeuGroup for Tech Treasurers where they described the value of a program at the University of Idaho where students are given real money to trade.
  • With the dual objectives of capital appreciation and financial education, the Barker Capital Management and Trading Program teaches students high-level academic risk management and trading theory to develop their own strategy for trading individual, funded accounts.

Corporates give high marks to a University of Idaho program where students learn real-world lessons by trading.

Treasury and finance teams searching for talent with the right stuff—and an edge in this tight labor market—might want to take a page from Starbucks and Micron Technology by strengthening their ties to colleges and universities that are finding innovative ways to teach students financial decision-making skills.

  • Micron treasurer Greg Routin and Melanie Canto, a former Starbucks treasurer who is now a senior business transformation leader at the company, spoke at a recent meeting of NeuGroup for Tech Treasurers where they described the value of a program at the University of Idaho where students are given real money to trade.
  • With the dual objectives of capital appreciation and financial education, the Barker Capital Management and Trading Program teaches students high-level academic risk management and trading theory to develop their own strategy for trading individual, funded accounts.

Getting real. “It takes a lot of time to learn the fundamentals of treasury, like market sentiment and money flows,” said Dr. Darek Nalle, the program’s director, who also attended the virtual meeting. “But I believe in learning through real money, in real markets, in real time.”

  • Dr. Nalle said “trading is the hook and the shiny thing” that attracts students to the sought-after program, which has grown from 20 enrollees two years ago to 100 this year from the College of Business and Economics and the College of Agriculture.
  • Equities, foreign exchange, commodities, futures, junk bonds—everything is on the table, but the focus is on learning decision-making. Speculation is discouraged.
  • Students participate in group accounts, each led by an industry professional, which execute about 500 trades per semester; individual accounts start with $15,000.
  • The program takes the “training wheels” off to teach students to “be more comfortable being uncomfortable” and make decisions with “imperfect information,” Dr. Nalle said. In addition, students need to get Bloomberg certified, another helpful tool in the belt for new treasury recruits.

Developing a world view. “I’ve never seen anything like the Barker program,” said Ms. Canto, a University of Idaho alumnus who recruits from the program. Students are “very actively looking outside at what’s going on in the world just by the nature of trading. This isn’t normally taught in schools.”

  • She added, “They’re reading news all day, they know what the trends are, they see them coming down the pipe; that’s unique in early talent. They’re also learning to make decisions with the right amount of information, and that’s usually a gap you see [with recent graduates].”
  • A bonus benefit: Because the program is co-sponsored by the agriculture college, some students possess very real knowledge of the factors influencing the value of certain commodities like dairy, which is a significant risk to manage for a company like Starbucks.

On the map. The program also helps fill talent gaps for companies that lie outside the nation’s major tech and finance hubs, including Micron Technologies, based in Boise, Idaho. Mr. Routin at Micron has employed “roughly a half-dozen” Barker grads, has two on staff now and plans to continue recruiting them. “I have been proactive in developing deep relationships with local universities,” he said

  • “The University of Idaho has differentiated itself in terms of the caliber of students and their willingness to work,” he told peers. “I encourage everyone to develop strategic relationships with a select group of universities to expand your talent pipeline, if you’re not doing so already.”
  • Dr. Nalle added another reason treasurers may want to connect with “real-world” programs like his: cost savings. He said it typically “takes 18-24 months and $300,000 to bring a diploma to usefulness,” but hands-on training can cut that down significantly.

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