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Justin Jones In Compliance, Insurance, Risk Management

Rewriting the Insurance Playbook: ERM’s Strategic View of Risk

Using an ERM framework for insurance transformed one company’s decision-making and coverage strategies.

Faced with rising premiums and pressure to optimize costs, one NeuGroup member refocused his team’s insurance strategy around the company’s framework for enterprise risk management (ERM). That enabled more thoughtful, data-driven decisions about spending and coverage. The key objective, the member said, shifted from “Do we need this policy?” to “Is it worth the cost?”

“ERM helped us understand where to allocate resources,” the member said in a recent meeting of NeuGroup for Insurance and Risk. “Now we can calculate the return on investment for decisions like buying property insurance or installing sprinklers, run a sensitivity analysis, and figure out where these actions should rank compared to other investments in the company.”

Using an ERM framework for insurance transformed one company’s decision-making and coverage strategies.

“ERM helped us understand where to allocate resources,” the member said in a recent meeting of NeuGroup for Insurance and Risk. “Now we can calculate the return on investment for decisions like buying property insurance or installing sprinklers, run a sensitivity analysis, and figure out where these actions should rank compared to other investments in the company.”

Data-driven reprioritization. The ERM framework brought insurance decisions and discussions into focus at the highest levels, including the board and senior management. This data-driven reprioritization had quick impacts on coverage strategies.

The team discovered they were overinsured on property and product risks and adjusted deductibles and limits. This enabled them to pull back and “retain” (i.e., self-insure) the risk of some property damage.
Meanwhile, the board’s growing concern over cyber threats led to an increase in cyber insurance. The member said this wouldn’t have been possible without “trimming back” coverage for property and product risks, “allowing us to focus our premium spend on the program with the highest return.”
He said one of the most significant benefits of an approach rooted in ERM principles is the development of a consistent methodology for evaluating insurance programs, making it easy to replicate for future risks and ensuring more efficient resource allocation. “The conversation is now more about how much risk we’re willing to retain—should we buy insurance if the impact is insignificant or minor?”

Benefits: The member said the major benefits of the strategy shift so far include an ability to:

“Rank, in order, the insurance programs that have the highest ROI, allowing us to focus our premium spend on the programs with the highest return.
“Determine which mix of deductibles/limits are most cost-effective.
“Deliver on my commitment to tie our insurance strategy into our ERM framework and create a consistent methodology for evaluating insurance programs.”

A strategic rethink. This process began with an expansion and reorganization of the company’s risk department, bringing a number of controls functions—including insurance—under the broader ERM banner.

Other insurance leaders in the NeuGroup session said they have been seeking a more systematic assessment of the risks they face. The member said his team started by leveraging the ERM team’s risk register—a tool that lists, updates and organizes potential threats.
The company hired consultants and actuarial experts to quantify potential exposures and make informed decisions on risk retention versus risk transfer. A financial services firm ran actuarial modeling on property insurance, and the team worked with consultants from the Decision Empowerment Institute (DEI) to assess risks where they lacked large datasets.
“We’re using our ERM risk register to effectively create a discounted cash flow analysis out of the risks we’re reporting,” the member said. This means the team assigns a financial value to risk exposures and evaluates whether to transfer risks through insurance or manage them internally.
DEI’s models were especially useful for risks like product liability, where industry-specific data was sparse. This helped the company gain a deeper understanding of the financial exposure to rare but significant risks, shaping smarter insurance purchases.
“They can apply some modeling that’s way over my head to help us understand what we think the cost of risk will be,” he said. “A lot of that just comes through from time spent interviewing panels of experts, people who really sit close to the risk and understand the risk: How likely do we think this event is going to occur, and if it occurs, what type of cost will it be?”

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Justin Jones In Cash & Working Capital, Talking Shop, Technology

Talking Shop: Which Tech Tools for Cash Flow Forecasting?

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].

Context: Better cash flow forecasting is a goal shared by nearly every treasury team. That’s true no matter how far along they are on the seemingly endless journey to automate processes, access and analyze quality data, and leverage advanced technology—including machine learning (ML) and AI—to reach higher levels of accuracy and efficiency.

Some NeuGroup members are clearly benefiting from advances in tech. A year ago, we brought you the story of one corporate transforming cash forecasting thanks to “data scientist wizards” from the company’s global finance organization who built statistical models and ML forecasts.
Last month, we ran an article quoting Bristol Myers Squibb treasurer Sandra Ramos-Alves describing how her treasury team is making forecasting strides by using a tool called CashOptix offered by TIS. And in a session this week, a treasury team member from GE Vernova detailed why they implemented the TIS solution.
In a video running in next week’s newsletter, Bechtel Assistant Treasurer Dan Degagne will explain why he was surprised by the performance of a ML cash forecasting model the company developed. The video is from an upcoming Strategic Finance Lab podcast featuring Mr. Degagne and Shayly Nguyen, a Bechtel treasury fintech specialist.

Some NeuGroup members are clearly benefiting from advances in tech. A year ago, we brought you the story of one corporate transforming cash forecasting thanks to “data scientist wizards” from the company’s global finance organization who built statistical models and ML forecasts.
Last month, we ran an article quoting Bristol Myers Squibb treasurer Sandra Ramos-Alves describing how her treasury team is making forecasting strides by using a tool called CashOptix offered by TIS. And in a session this week, a treasury team member from GE Vernova detailed why they implemented the TIS solution.
In a video running in next week’s newsletter, Bechtel Assistant Treasurer Dan Degagne will explain why he was surprised by the performance of a ML cash forecasting model the company developed. The video is from an upcoming Strategic Finance Lab podcast featuring Mr. Degagne and Shayly Nguyen, a Bechtel treasury fintech specialist.

However, NeuGroup’s 2022 Cash Forecasting Survey makes clear that most members have not yet made significant cash forecasting improvements. The survey found their biggest obstacle is a lack of visibility or predictability of future cash flows, cited by 88% of respondents. Many blame lack of access to cash data. And like the member posing the question below, many treasury professionals still rely exclusively on Excel spreadsheets.

Member question: “We are looking into ways to modernize our cash flow forecasting process. Currently we use Excel. What technology tools are you using for cash flow forecasting? Would you recommend them to others? Has anyone ever relied on Power BI for this?”

Peer answer 1: “Oh, how I remember the days of spreadsheets! Not fun and too much room for error! I would highly encourage a treasury management system (TMS). Although all systems have opportunities for improvement, our TMS has helped us improve our forecasting significantly.

“It’s more beneficial to us in terms of short-term forecasting, but I think it has the capacity to improve long-term forecasting as well.”

The member who posed the question told NeuGroup Insights their treasury team is implementing a TMS but has found its cash flow modeling tool underwhelming. “There is also a difference between direct (usually short-term) and indirect (longer-term) modeling, which require different processes. The TMS tool seemed more focused on direct projections,” they said.

Surprise: Excel believers. The member communicated on this topic with about 15 other treasury practitioners and came away with an unexpected perspective. “I was surprised to learn that many companies do still use Excel very successfully for their cash flow modeling. I estimated that it could be 50% or even more,” they said.

“People cited the ability to maintain full control over the modeling process and all the underlying assumptions, as well as the ease of running scenarios and sensitizing outputs. Some highlighted the challenge of getting buy-in around implementing new technology.”
They added, “For the companies that have adopted a cash flow modeling platform, there was no one solution that seemed to be a leader in this space. Some were leveraging their TMS, some were using tools from banks, and some were using dedicated platforms.
- “My key takeaway is that no one tool dominates the market for cash flow forecasting for corporates—it’s still fragmented—which is not discussed extensively. I am not sure why this isn’t a hotter topic. I think it’s because Excel is still a perfectly good tool to fall back on (and essentially free).”

NeuGroup wants to know your views on how to transform and modernize cash flow forecasting and hear about your experiences with technology designed to improve accuracy and efficiency. Our goal is to share insights and help connect you directly with peers. Please send your thoughts, questions and comments to [email protected].

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Justin Jones In Compliance, Technology

Bots and SOX: IT Auditors Tap RPA To Reduce Repetitive Work

One member’s IT audit team blazes the automation trail for the broader finance organization to use time-saving bots.

The job of IT auditors at many NeuGroup companies includes testing and auditing automated controls and compliance related to the Sarbanes-Oxley Act (SOX). Auditing those controls manually is often a painstaking and repetitive process, so implementing robotic process automation (RPA) to get the job done makes a lot of sense.

That was among the takeaways from a recent monthly session of NeuGroup for IT Auditors where one member shared that they worked with the IT team to adopt RPA, developing bots to perform what some members in other sessions have called “dumb” work.
That has proven to be a smart move that saves time in completing SOX audits and has paved the way for other automation in the broader finance function at the company.

One member’s IT audit team blazes the automation trail for the broader finance organization to use time-saving bots.

That was among the takeaways from a recent monthly session of NeuGroup for IT Auditors where one member shared that they worked with the IT team to adopt RPA, developing bots to perform what some members in other sessions have called “dumb” work.
That has proven to be a smart move that saves time in completing SOX audits and has paved the way for other automation in the broader finance function at the company.

Bots, humans and tickets. A manual IT audit of systems with SOX controls previously required auditors to pick random electronic tickets submitted by employees using software programs—including those used for IT service requests and project management. Selecting the tickets is a task that requires no judgment—hence the “dumb” label.

One person on the member’s team who presented at the session said, “We had 20-plus SOX controls for which we were spending time pulling tickets throughout the year. There is no judgment in it at all.” That made the job perfect for bots that use no judgment in selecting tickets, freeing up humans to do more value-added work.
The team presented a demo of a bot pulling tickets from a large pool of samples and performing the SOX testing. The process includes extracting key information such as ticket numbers, approval details and a PDF screenshot of the ticket.

Bot best practices and alerts. Selecting the right software systems to automate is critical. You don’t want to unleash bots in programs where user interfaces are likely to change frequently, requiring the bot to be updated constantly.

The member’s team also noted that the IT team needs to consider the potential impact on the bot of changes to “upstream” systems that feed information into the software being audited.
Build alerts into your bots. The IT audit team at the member company is notified if a bot encounters a problem. “If a bot fails, it sends a chat to all of us,” the member said.
Reports need to be generated showing how well the bots are performing. “We have monthly evidence that says the bot ran so many times and there weren’t any issues with the bot,” they said.
A chat channel also alerts qualified users when the bot is being used and identifies who initiated the process.

External auditors and access management. That last point highlights the importance of thinking through access—an issue you can expect outside auditors to pay a lot of attention to, according to members.

“Our external auditors are looking for all kinds of controls around these bots around change management and security,” a member from a different company said. “Not only in terms of quarterly access reviews of who has access to the bot, but also reviewing access the bots have to the applications themselves.
- “There’s a whole host of controls they are suggesting,” they added. “You would think automations would make things easier, but it also it adds a lot of controls on the back end.”
That’s in part because a bot often requires privileged access to the general ledger or data related to AR or AP. You have to create a separate ID for the bot to gain access, and that has to be shared with the team managing it.
The presenting member suggested integrating RPA with a credential management tool. Their team is in the process of doing this as they identify more bot use cases.
- “There are certain bots that are in our pipeline that we have put on hold because we have not yet answered all of the security questions there,” they said.

Pushing back. The presenting member made a distinction about controls and coming to an agreement with outside auditors about processes where there is no judgment.

“Look at things where you get irrefutable evidence—screenshots, downloads, and PDFs of tickets—where there’s no judgment involved, no decision-making on the part of the bot. If the bot is just performing that function, then we have been able to not do additional controls on our bots,” they said.
The member noted that if bots were being used by the business in their execution of controls, rather than by the IT audit team doing SOX testing, additional controls may be required.

The benefit of being first. Being the first team to adopt RPA for what senior management considered a strategic advantage meant IT audit at the presenting company did not have to produce a return on investment within two years, the company’s normal requirement for tech investments.

The leeway reflected management’s belief that the work IT audit did with IT to develop the bots would be a sort of force multiplier to pave the way for other functions inside and outside of finance. That is proving accurate, and new investments will require a ROI projection.
“We have a cadence now, where we have a spreadsheet where you can input your ideas. Then you can use a ROI calculator and if it passes muster, then we’ll make the decision from there,” the member said.
“Being the first ones to do it, we ran into some challenges that we didn’t plan for—some infrastructure and connections for integration. Those were not envisioned in our effort. But once that’s done—it only has to be done once. Our investment was a little bit greater, but we felt pretty good about making that investment.”

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Justin Jones In Risk Management, Talking Shop

Talking Shop: Is Geopolitical Risk Its Own ERM Category?

Context: Wars in Eastern Europe and the Middle East as well as increasingly strained ties between the U.S. and China are key reasons geopolitical risks rank high on the list of threats facing multinational corporations. In the NeuGroup 2024 Finance and Treasury Agenda Survey, respondents named geopolitical conditions their fourth biggest risk, behind interest rates, cyber risk and the economy. Few of us will be surprised if geopolitics jumps a spot or two in the 2025 survey—depending, in part, on the outcome of the U.S. presidential election in November.

A recent article by consultants at WTW addressed the value of applying an enterprise risk management (ERM) framework that brings an adaptive and resilient strategy to geopolitical risks. Contrast that with what the authors say has traditionally been a siloed and reactive approach that does not adequately consider long-term strategic implications. Managing geopolitical risk through an ERM lens allows companies “to view potential threats holistically, ensuring your response is coordinated across your entire organization,” they write.

The question below is from a member of NeuGroup for Enterprise Risk Management, led by NeuGroup director Ted Howard. The topic of geopolitical risk has come up regularly in group discussions as the frequency and severity of those risks has risen in recent years, going beyond supply chain disruptions, Mr. Howard said.

“Companies have started to analyze more of their global operations and their exposures,” he added. “They’re looking more closely at how all the emerging risks could merge and cause chaos.”

Member question: “Is geopolitical risk an ERM risk for your company? Historically, we have incorporated it into our other ERM risks. During our annual ERM program review with the executive team, we were asked to break out geopolitical risk into its own risk category. I’m curious how others handle this risk within their programs.

“Is geopolitical risk a separate ERM risk?
“How do you structure it to avoid overlap of risks such as public policy?”

The member told NeuGroup Insights that part of the discussion about whether to break out geopolitical risk involved “how we would monitor and manage the mitigations processes for geopolitical; this is still being discussed.”

She also provided this context: “We have 20 ERM risks and we work to ensure the definition of each risk has minimal overlap. Overlap can easily occur if you are not cognizant of it. For example, trade sanctions are often thought of when discussing geopolitical risks. In our program, they are in public policy risk along with other regulatory/policy risks.”

Peer answer 1: “Yes, we have had geopolitical risk as a separate risk for a couple of years now. It focuses on things like political relations at the government level, impact of global elections, impact of political polarization, security concerns, etc. We have a separate regulation risk that focuses on public policy topics such as federal and state legislation, judicial rulings, impact of regulatory bodies, etc.”

Peer answer 2: “Here’s how we have approached it: Annually, we do a ‘macro risk scan’ where we assess top broad risk trends, by analyzing thought leader reports. One of those trends has been geopolitical risk. So in that report we list geopolitical risk as a risk trend, and we outline the implications for our business and how we are managing them.

“However, for us, it is not listed as a formal enterprise risk. Those tend to be more squarely linked to our strategy, competitive environment, specific regulatory issues for our industry, and critical internal initiatives.”

Follow-up question: “Thanks for sharing. Do you align your formal enterprise risks under the macro risks/trends or are they just addressed in parallel with each other?”

Follow-up answer: “I would say in parallel, but in sequence. We do the macro risk analysis at the front end of the strategy process to lay out trends, but the formal enterprise risks stand on their own at the end of the strategic planning process.”

Peer answer 3: “Geopolitical risks (as a category) are front and center of our risk universe. We have two major risks/threats: changes to export regulations that would cut us off from our major markets; and, as a consequence, fragmentation of our global industry.

“Our risk review committee (RRC) reviews the former quarterly, and the latter as part of a quarterly horizon-scan on the basis it hasn’t happened yet and we are trying to spot the signs.”

Follow-up question: “Thanks for sharing how you use geopolitical risk as a category. Under your two majority risks/categories, do you have a defined subset of risks or do you focus specifically on those top two?”

Follow-up answer: “We don’t use ‘risk categories’ as, for us, it wouldn’t add value. We have a relatively small number of what we call ‘Class-1’ risks that the RRC monitors. We describe each risk using bowtie methodology, listing causes and impacts. The causes are usually uncertain, but we don’t drill down to make those into full risks.”

NeuGroup Insights asked the member who posed the question what value the peer answers provided. “Hearing from others helped to confirm that we would be aligned with other corporations in breaking out geopolitical risk as an individual risk,” they said.

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Justin Jones In Capital Allocation, Capital Markets, Sponsored Content

M&A Drives Healthcare Firms’ Debt Targets and Liquidity Policies

NeuGroup Peer Research finds that maintaining excess debt capacity is key to funding a growth strategy dependent on acquisitions.

Mergers and acquisitions and strategic investments are a driving force in how finance teams at healthcare companies develop a capital structure and determine debt targets and liquidity policies. That insight is among the key takeaways from NeuGroup’s 2024 Capital Structure Survey conducted by Senior Director of Research Joseph Bertran and sponsored by Standard Chartered Bank.

As the chart below shows, maintaining excess debt capacity for potential investments and acquisitions was a top driver of debt targets for 64% of survey respondents in the healthcare space—the highest percentage of any of the answers chosen. Stable operating cash flows for working capital ranked a distant second at 45%.

NeuGroup Peer Research finds that maintaining excess debt capacity is key to funding a growth strategy dependent on acquisitions.

As the chart below shows, maintaining excess debt capacity for potential investments and acquisitions was a top driver of debt targets for 64% of survey respondents in the healthcare space—the highest percentage of any of the answers chosen. Stable operating cash flows for working capital ranked a distant second at 45%.

Let’s make a deal. “An investment driven strategy driven primarily by acquisitions has led to a greater, more efficient use of balance sheets,” said Shoaib Yaqub, Global Head, Capital Structure & Rating Advisory Corporate & Investment Banking at Standard Chartered. “This will likely continue as long as there are meaningful investment opportunities. It is the perfect model.”

The numbers suggest healthcare companies agree: After two years of lackluster deal volume, healthcare M&A rebounded sharply in 2023, bringing the five-year total spent by 20 top companies to $450 billion, according to Standard Chartered. “M&A remains core to the growth story of the sector, and we expect this to continue over the medium term,” the bank wrote in a recent report, “Unlocking Growth Through Investments.”

NeuGroup’s survey revealed an interesting if not hugely influential factor in healthcare M&A: many companies reported a lower cost of equity used to compute investment hurdle rates—the return a business needs to achieve from an investment—than other industries.
Over 70% of healthcare firms reported a cost of equity of 10% or less, with a third in the 6% to 8% range. One member explained, “Healthcare’s lower cost of equity is a function of the lower [stock] betas as healthcare tends to be a less volatile/cyclical sector and therefore is something of a safe haven in a risk-off market.”
Indeed, more than half of the respondents reported a beta of under 0.8 used in the Capital Asset Pricing Model. While a lower cost of equity results in a lower discount rate for potential investments, strong forecasted cash flows are more important. As one member stated, “whether we will see a positive NPV on the investment” remains the key factor.

Debt and credit ratings. The acquisition boom has been fueled by debt. The survey shows healthcare firms have higher average leverage than other industries, in part reflecting the sector’s relatively stable cash flows. Survey respondents reported a debt/EBITDA ratio of 2.4x, compared to an average of 2.2x across all sectors.

The decision by healthcare companies to increase the use of debt in their capital structures helps explain the industry’s lower-than-average credit ratings. The survey reveals just 32% of the companies surveyed are rated A or higher, compared to 40% for tech firms and 41% of all 129 respondents to the survey. Another 36% of the healthcare companies are rated BBB and a relatively high 29% are unrated.
Standard Chartered’s report notes that “the sector has steadily moved down the investment grade rating spectrum over the past decade, with most of the downgrades driven by debt-funded M&A and a clear strategy to better utilize surplus balance sheet capacity.”
Debt dependence ideally comes with the discipline to reduce leverage. “If you issue a lot of debt like this, the next question becomes how quickly can you delever,” one member said. “That’s where we get into capital planning of what levers do we have to pull to delever at a reasonable rate and get back to those debt to EBITDA metrics the rating agencies would expect us to be at.”

Dry powder liquidity policies. Liquidity policies further highlight the focus on M&A across the healthcare sector. While planning for crisis scenarios was the top priority, mirroring the all-industry results, stashing dry powder for investments and acquisitions was not far behind, with 63% of all healthcare firms prioritizing it, compared to 55% for other sectors (see chart). This focus was even more pronounced among medical device companies, where it was the top priority for 88% of respondents.

Cashing in on R&D. The survey shows that healthcare companies tend to maintain cash and equivalents that exceed their cash targets. Well over half (60%) reported cash balances exceeding their cash target by more than 25%.

Because spending on R&D is a major component of capital structure for pharmaceutical manufacturers that depend on intellectual property, it figures prominently in how they and medical device makers set cash levels.
One member said in a focus group that his team uses Monte Carlo simulations at a 99% confidence level to “fund all R&D and expenses.” Others mentioned using:
- Cash/R&D
- Cash/R&D & Expenses.
- Cash/OPEX
Mr. Yaqub at Standard Chartered said the bank helps clients determine appropriate levels of cash and liquidity. “We created a proprietary model around liquidity to press all of these together–everything you mentioned here, all together to get to a liquidity threshold,” he noted.
- “How much do you need in the next year, downside, working capital, also taking into account dimensions in the market and some minimum requirements that you might want to keep in mind.”

Looking ahead. A key question for pharma and other healthcare companies that are fueling much of their growth through debt-financed acquisitions is what happens if drugs go off patent at the same time investment opportunities shrink. Indeed, the “perfect model” Mr. Yaqub described above depends, he said, on three factors:

Good acquisitions of a number of promising drugs, some of which are, in simple terms, hits.
Relatively cheap debt, which is no longer as available as before but is still cheaper than equity.
Debt capacity, which has diminished but remains robust. Standard Chartered estimated in April that balance sheet debt capacity for the 20 top companies stood at $250 billion within current ratings.

“Some corporates are worried about an eventuality where one of their main patents expires, along with it a huge cash flow stream, and there is no new product to take its place,” Mr. Yaqub said. “Without new patent pipelines, the whole investment story changes. Lower cash flow cannot sustain the same dividends or share buybacks and so the whole capital allocation agenda will need a rethink.”

The good news is that for most companies surveyed by NeuGroup and tracked in Standard Chartered’s report, rethinking is not yet necessary. The report found no companies with high patent exposures have a weak pipeline, indicating a resilient outlook for the sector.
So for now, the job of capital markets teams at many healthcare companies is devoted in large part to figuring out how potential deals would be financed. That means managing what one NeuGroup member at a mega-cap pharma company said is “everything related to funding and what we call firepower as it relates to deal capacity.
- “So that is start to finish, through the whole process, cash flow, forecasting, capital structure, working capital, financial policy and ultimately what the company might look like.”

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Andrew Weber In Capital Markets, Technology

An AI Tool That Yields Bond Pricing Data Without Signaling Banks

A new tool from Bondway.ai offers treasury teams an AI-driven solution for real-time bond market analytics.

Treasury leaders who need quick access to up-to-date market data before launching a bond deal often rely on information provided by their bankers. Or they have to search for info themselves using solutions that may not provide the pricing insights they want. In a recent session of NeuGroup for Capital Markets, members discussed a new, AI-powered tool called Bondway.ai that some users said offers fast, accurate bond pricing and analytics in a user-friendly system.

“Bond market data can be tricky to access and interpret,” one member noted. “Bondway has been a great solution for providing transparency in bond pricing and market movements.”
Bondway’s founder and CEO Jeremy Sisselman, alongside head of business development Brad Visokey, explained how the platform works and its benefits. Mr. Sisselman said Bondway was initially developed for banks and the buy-side but emphasized its benefits for corporate treasury.
He said the tool’s ability to provide a comprehensive view of the bond market, showing price, yield and spread changes over different time periods enables issuers to interpret market movements rapidly and make informed decisions about funding and liability management.

“Bond market data can be tricky to access and interpret,” one member noted. “Bondway has been a great solution for providing transparency in bond pricing and market movements.”
Bondway’s founder and CEO Jeremy Sisselman, alongside head of business development Brad Visokey, explained how the platform works and its benefits. Mr. Sisselman said Bondway was initially developed for banks and the buy-side but emphasized its benefits for corporate treasury.
He said the tool’s ability to provide a comprehensive view of the bond market, showing price, yield and spread changes over different time periods enables issuers to interpret market movements rapidly and make informed decisions about funding and liability management.

Navigating bond market hurdles. A poll taken during the session found that 89% of respondents regularly attempt to track bond trading levels themselves, preferring this over solely relying on bank-provided bond pricing. The poll also revealed two key challenges faced by treasury teams:

While most members do contact bankers for information, 77% expressed some amount of caution due to risks including creating expectations among the bankers of a pending mandate for a new deal.
Banks provide members with extensive bond market information, but 85% of those polled said the data can be frustrating to digest because of varying formats and sources.

Bondway benefits. Bondway aims to directly address these challenges by providing corporates with access to real-time bond pricing. One NeuGroup member who discussed the difficulties of obtaining up-to-date data praised Bondway’s capabilities, which allowed him to monitor live trading activities and support informed go/no-go and pricing decisions during a recent bond issuance.

“Sure, you can use Bloomberg, but it’s expensive,” he said. “And you can rely on your debt capital markets desk, but it can be kind of tricky to know how bonds are performing without opening a can of worms, and even then you can’t do that very often.”
Another member likes the platform’s intuitive interface, which they said requires minimal expertise and is faster and simpler than alternatives. This ease of use enables treasury teams to gather insights independently, without extensive training or signaling to banks.
“The platform is intuitive and only took about 15-20 minutes to figure out,” he added. “It provides DIY access to the bond market without impacting expectations for our banks. And with the real-time and accurate bond pricing provided, we now have a tool at our disposal to challenge [bankers] during pricing calls and aggregate all the information. We see a lot of potential in where this is going.”

How Bondway works. Bondway’s proprietary AI-powered pricing engine replicates the process of a trading professional, incorporating observable market data points to provide pricing for over 17,000 corporate bonds. Each AI-generated price is updated in real-time and comes with a so-called AI Confidence Rating using a scale of 1-10. Bondway allows filtering, so users can focus on the most accurate pricing information.

Bondway features analytical visualizations, which are based on its AI pricing, with real-time charts of market activity. It also offers views for the new issue bond markets, all of which is powered by data from partner firm Credit Flow Research.
The Bondway team showcased this through a live analysis of a member company’s debt portfolio, producing insights on potential funding and liability management opportunities, as well as secondary trading patterns that would be nearly impossible to see elsewhere, according to Bondway.
Bondway’s executives also discussed plans for further product development, having built the technologies from scratch in less than 18 months. More features are in the works, offering treasury leaders a front-seat view of an expanding set of AI-powered bond market tools over time.

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Andrew Weber In Banking, Regional, Talking Shop

Talking Shop: Demat Accounts in India—Details and Deadlines

Context: Multinational companies with subsidiaries in India face a deadline to convert shares of the subs they own that were issued as physical certificates into an electronic format, a process known as dematerialization. The deadline is Sept. 30 for companies with fiscal years ending March 31, 2023. Corporates with a Dec. 31 year-end have until June 30, 2025.

Until last fall, the digitalization rules only applied to companies in India with publicly-traded stock. Now they also apply to privately-held companies that are not considered small—which includes most of the subsidiaries in India owned by MNCs.
Dematerialization of shares requires opening a so-called demat account at an authorized depository institution. Opening a demat account may involve some “burdensome” steps, including know-your-customer requirements, board resolutions and notarizing documents, according to attorney Shejal Verma.
- “It may take a few months to open a demat account and even to prepare an application of opening of the demat account; and the dematerialization process itself may take some time,” she wrote in an analysis last year.
One NeuGroup member has been told that “without a demat account with equity ownership in this format, no transactions may be permitted between the shareholder and owned company, like borrowings or capital injections. Because this is a relatively new ask (as far as how broad the scope is) it seems many companies are forced to go down this road.”

Member question: “For India demat accounts, did you have to open an operating account as well? We are currently working on dematerializing the shares of our entities in India and are being told that to support this we need to open one demat and one operating account for each of the entities’ shareholders.”

Until last fall, the digitalization rules only applied to companies in India with publicly-traded stock. Now they also apply to privately-held companies that are not considered small—which includes most of the subsidiaries in India owned by MNCs.
Dematerialization of shares requires opening a so-called demat account at an authorized depository institution. Opening a demat account may involve some “burdensome” steps, including know-your-customer requirements, board resolutions and notarizing documents, according to attorney Shejal Verma.
- “It may take a few months to open a demat account and even to prepare an application of opening of the demat account; and the dematerialization process itself may take some time,” she wrote in an analysis last year.
One NeuGroup member has been told that “without a demat account with equity ownership in this format, no transactions may be permitted between the shareholder and owned company, like borrowings or capital injections. Because this is a relatively new ask (as far as how broad the scope is) it seems many companies are forced to go down this road.”

“I would very much appreciate if you had any information you could share about how you are handling this process and whether you are required to maintain operating accounts in India for each of the shareholders in addition to the demat accounts.”
In an email, the member explained that “the demat accounts are essentially brokerage accounts to hold the shares; the operating accounts would be for any financial transactions related to changes in the shareholding structure.”

Peer answer 1: “Ahh, another sufferer of having to open demat accounts in India! We have struggled with these, and to negotiate a custody agreement that would work for us. We have also had banks insist that we open an operating account with every demat account, because they want to see the cash that may be related to any activity going on with the holdings in the demat account.

“But we have always pushed back. If they insist, ask them to show you the regulation requiring this. Very bureaucratic requirements, it’s not easy!”
This member told NeuGroup Insights, “I believe local banks used to offer just a demat account, but these days it seems that banks are offering a broader custody account which would include the ability to hold demat holdings. This posed problems for us because a bank’s custody agreement may demand things that might make sense for holding marketable securities but don’t make sense when it comes to an equity ownership.
- “So our legal team had quite a challenge negotiating with the bank, and we ultimately had to escalate with our global relationship managers to arrive at a solution for a negotiated agreement. We don’t tend to take off-the-shelf agreements for any bank, and this one almost got derailed because the local bank was being intransigent.”

Peer answer 2: “We are just working through this process, so your question is very timely. We are working with our legal team, opening up a custodial account. So far, we do not see a need for an operational bank account, or at least that is what we are being told. As we learn more, I will be happy to share our pain points. Right now our pain point is trying not to take the lead on something that we believe belongs to legal.”

Peer answer 3: “The demat account is accompanied by a bank account. The demat is for the security and the bank account is for the monetary transfers associated with the security. When we dividend out, each dividend requires its own bank account that must be left open for seven years; so nothing surprises me in India on maintaining operating accounts as we have a lot.”

Peer answer 4: “We are currently doing the same. [There are ] similar KYC requirements for the demat account as the cash management account. We have a demat account for each shareholder, but only an operating account for resident entities.”

Peer answer 5: “I spoke to our India legal counsel. Our Indian entity is set up as a private limited company and therefore we were able to open a demat account only, no operating account.”

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Justin Jones In Cash & Working Capital, Technology

A Tool Helping Bristol Myers Squibb Transform Cash Forecasting

TIS helped BMS treasury standardize and automate forecasting. The treasurer wants AI to make the tool even better.

Bristol Myers Squibb treasurer Sandra Ramos-Alves loves automation and is a self-described “strong believer” in tapping the expertise of fintechs whose solutions can help BMS transform treasury. TIS is one of those fintechs and its CashOptix tool—which includes cash forecasting capabilities—has enabled BMS to produce an aligned view of cash flow from one source of truth used by everyone across the globe.

Ms. Ramos-Alves says the TIS implementation is a fundamental part of a broader transformation that began in 2021 focusing on people, processes and technology during which the BMS treasury team has embraced automation and tackled more than 50 projects.
“This is just one of the many things that we’re working on in terms of the evolution of treasury and building a treasury of the future—TIS is just part of the solution for us,” she said at a recent session of NeuGroup for Life Sciences Treasurers.

Ms. Ramos-Alves says the TIS implementation is a fundamental part of a broader transformation that began in 2021 focusing on people, processes and technology during which the BMS treasury team has embraced automation and tackled more than 50 projects.
“This is just one of the many things that we’re working on in terms of the evolution of treasury and building a treasury of the future—TIS is just part of the solution for us,” she said at a recent session of NeuGroup for Life Sciences Treasurers.

Eager for AI. The BMS cash forecasting and liquidity management journey—described in a detailed deck presented during the session and available to members upon request—is not complete. Ms. Ramos-Alves is eager for TIS to roll out improvements built with AI as treasury focuses on one of its key objectives: working capital management. “We launched our cash leadership office last year so we’re working really hard to optimize our working capital,” she said.

“We’re working to see when we take this tool to the next step and how we’re going to really use the working capital module,” she added. “We’re excited to see how we can take cash forecasting to the next level with the addition of [generative] AI.”
The good news is that TIS is working closely with its customers to identify ways that AI and ML can bring value to cash forecasting and working capital management processes, according to Chief Product Officer Jon Paquette.
He said the company recently held a customer workshop to discuss various AI application concepts for treasury. These include both AI enhancements to forecasting logic as well as simplifying the overall platform configuration through the use of generative AI chatbots.

The data challenge. Tanya Lurye, associate director of US Cash Management at BMS, is looking forward to the arrival of the TIS AI chatbot because, in part, “the most challenging piece of the implementation is understanding the data sources and defining the business rules,” she said. “What do you want to do with all this forecast data that’s coming in?”

One member at the session said data from his TMS gave the treasury team a good sense of regular cash balances. The next step, he said, is following BMS’s example and leveraging data from its ERP. However, “The biggest challenge we have is wading through the data to understand what data is relevant to our forecast.”
Ms. Lurye agreed. “That is definitely challenging. We had to sift through the data to understand what components of it we were going to use to build the logic. We also spent a lot of time understanding how our data flows in the current process and how we want to design the future state.”
- She added, “We’ve had a lot of guidance from the TIS team in terms of understanding the possibilities of the system and defining how we want to derive the cash forecast.”
- The embedded AI chatbot that TIS is developing should simplify this process, enabling treasury to define business rules and forecasting logic much more easily, Mr. Paquette said.
“We’re working on a way to simplify that business logic, those rules, where through natural language, you could type what you want to create for a business rule and then the chatbot would give you the programming piece of it that you plug into the platform. Improvement is coming.”

Nuts and bolts. The deck Ms. Lurye presented explains the background, objectives and approach of the BMS cash transformation journey. Here are some key takeaways and insights from the presentation:

BMS stressed the importance of taking the time to engage in “blueprinting” to understand your current process and envision the future state. Before, forecast methodologies were not consistent across the globe and relied on consolidating multiple Excel models, which risked making the forecast obsolete.
BMS uses the TIS forecasting tool for daily forecasting of the next 12 months, drawing on data from the TMS, the ERP and a budget and planning tool. Actuals are updated daily on a one-day lag.
Ms. Lurye said, “One of the biggest wins we have achieved so far is that we have visibility into legal entity forecasts, and the line items of that forecast are consistent across the board. We also have visibility into liquid and invested cash by legal entity.”
BMS is working with TIS to enhance forecasting logic to incorporate daily actuals. “‘For example, if we are forecasting trade collections for one of our markets at the end-of-month, we could take into account the actuals that have come through and reduce the remaining forecast.”
BMS also sees opportunities in a forthcoming liquidity module within the TIS tool; wants to explore monthly reporting to fully leverage forecast variance analysis in the tool; and is partnering with TIS to identify additional enhancements.

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Justin Jones In Compliance, Internal Audit Executives

The Rising Role of Advisory Work in Internal Audit

More IA teams are providing benefits to the business and themselves through advisory work.

Internal auditors are increasing their roles as advisors as businesses transform and adapt to new technologies like generative AI and navigate emerging risks such as climate change and reporting on ESG initiatives. That’s forcing some internal audit (IA) teams to grapple with how they define and report advisory work, communicate about it effectively with the audit committee (AC) of the board of directors, and combine advisory with traditional audits.

Members of NeuGroup for Internal Audit Executives discussed these issues and benchmarked how much advisory work they are doing at their H1 meeting and in a recent monthly session. Most agreed that while advisory work is good for both the business and IA, it comes with challenges.
“We spend a lot of time finding different areas where we can partner with the business,” one member said. “The challenge when looking at the organization is there’s so many places where you can have assurance work as well as advisory, and making sure you have that balance.”

More IA teams are providing benefits to the business and themselves through advisory work.

Members of NeuGroup for Internal Audit Executives discussed these issues and benchmarked how much advisory work they are doing at their H1 meeting and in a recent monthly session. Most agreed that while advisory work is good for both the business and IA, it comes with challenges.
“We spend a lot of time finding different areas where we can partner with the business,” one member said. “The challenge when looking at the organization is there’s so many places where you can have assurance work as well as advisory, and making sure you have that balance.”

When and why auditors are advisors. “Forty-five percent of our plan is advisory projects this year; normally it’s more like fifteen percent,” one member said. Technology and digital transformation are fueling the increase for this member and others, several of whom reported doing AI security control reviews and AI governance advisory work. The cloud is another catalyst.

“When we transitioned to the cloud, we were embedded on the project as it went,” one member said. “We would provide recommendations as the process was going. We issued health-checks. Once a quarter we’d say here are some things we uncovered during this part of the project.”
Tech also plays a role in some advisory work focused on ESG. “ESG is a perfect area where the company was deploying software but didn’t have maturity to understand risk controls, etc. We spent a lot of time in areas like that,” another member said.
New businesses or those getting shaken up are advisory targets for IA. “If it’s an area we’ve never looked at and it’s just being stood up then that’s the most common type of advisory we do,” one member said. “There is something this year that we’ve always audited but it’s getting a complete overhaul so we’re doing it as an advisory.”
Another member said, “Part of how we define [advisory] projects is maturity of process or program. When it’s new, we go in and get a preliminary feeling. If there isn’t maturity there, this is where we can provide value. That way there is some more time passed before we can do an actual audit.”

The SOX factor. When new processes or systems are being implemented, it’s important for IA to weigh in. The team can ensure that the proper controls are in place and that the new process or system is less likely to be subject to a serious audit finding in the future.

That’s especially important with processes involving financial reporting related to the Sarbanes-Oxley Act (SOX). If internal audit can influence the design of controls for SOX related systems, new initiatives are much more likely to be successful.
“We are certainly doing advisory—typically in new areas of SOX,” one member said, “We had a whole new order to cash process.” Another said, “I see a challenge here—every time there is a project like that, the project managers don’t properly build in time to establish their controls.”

Communication and credit. Internal audit teams report their standard audit findings to the AC with audit ratings and opinions on their findings, with some variance depending on the shop. How teams report advisory to the AC is less established, raising concerns that it is fully acknowledged.

With many member IA teams seeing their advisory workload increase, some members worry that the AC “doesn’t understand all the things we’re doing,” one member said. “I feel like we’re not getting credit in a sense.”
They asked how peers present non-audit work to the committee. Some build advisory work into annual audit plans presented to the AC. One said, “Recently, I started including audit and advisory work on the same page so the committee could see everything we’re doing.” This member’s advisory engagements weren’t being considered in the total work effort for the department. But after talking to some fellow members, they decided to include it for visibility.

Reporting on and tracking completed advisory work. Standard audits require formal reporting and tracking of management action plans, whereas the process for advisory work is less formal. That’s why the majority of members don’t provide an overall rating or opinion in advisory engagements. They make recommendations that they can follow up on when the area is audited in the future, but they typically don’t formally track those recommendations.

“We have so much of formal ops audit tracking that we don’t necessarily want to track it all,” said one member. Another added, “It’s a nightmare to track issues already.”
However, several members said that their work “isn’t free,” meaning if they find an issue, they will come back to check, via a formal audit or otherwise, that issue has been rectified or mitigated.

An ad for internal audit. There was broad consensus that not only does advisory help the business, but it also works as an advertisement for the IA function and leads to more cooperation internally down the road.

One member talked about how valuable it is to spread the word about the function’s ability to provide value to the business. Their company has a guest auditor rotation plan. When speaking about embedded advisory work, this member said, “Those tend to get highlighted a lot because of the rotational aspect, and with AI advisory, we’ll get a lot of attention.”
And while most advisory jobs are initiated by IA itself or senior management, business units occasionally seek IA’s guidance. “It’s always nice when our phone rings—when people start reaching out, instead of the other way,” one member said.

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Justin Jones In Cash Investments, FX, Technology

Gems: The Best of NeuGroup Insights, First Half of 2024

Managing currency and interest rate risk, trapped cash in Argentina, tech stack slimming, the challenges of tapping the power of AI and one treasurer’s hunt for a successor are among the topics of these top-10 posts.

First-half hits. The 10 best NeuGroup Insights posts from the first half of 2024 speak clearly to the value of individual treasury and finance professionals connecting with peers to share insights about their successes in a variety of areas. The posts also showcase the power of practitioners banding together to discuss and confront common challenges and pain points (involving banks, tech, trapped cash, etc.) and compare notes on possible solutions.

In other words, the stories in many ways embody the value proposition of the NeuGroup Network itself.

In the articles, you’ll meet members explaining how they devised a net investment hedging program, established an in-house investment management operation, implemented SAP’s risk module, and transformed treasury by reducing the size of the tech stack.

One of the top-most viewed stories this year features members of NeuGroup for Global Cash and Banking joining forces to pressure banks to make more progress on digital signer portals. Their shared goal: to relieve the extreme pain of dealing with the inefficiencies of tracking and updating signers on bank accounts.
We also offer up a very personal account (told in a video and Strategic Finance Lab podcast) of one treasurer’s decision to step away from a job he loved to spend more time with his daughters. Finding a successor he believed in made it possible.
Finally, there’s no escaping AI—so we include a tale of IT auditors sharing learnings as they hunt for use cases.

Please click here to read the email newsletter with the 10 posts that we deem the cream of the crop based on popularity (page views) and, in a few cases, our informed perspective on what matters most now.

In other words, the stories in many ways embody the value proposition of the NeuGroup Network itself.

One of the top-most viewed stories this year features members of NeuGroup for Global Cash and Banking joining forces to pressure banks to make more progress on digital signer portals. Their shared goal: to relieve the extreme pain of dealing with the inefficiencies of tracking and updating signers on bank accounts.
We also offer up a very personal account (told in a video and Strategic Finance Lab podcast) of one treasurer’s decision to step away from a job he loved to spend more time with his daughters. Finding a successor he believed in made it possible.
Finally, there’s no escaping AI—so we include a tale of IT auditors sharing learnings as they hunt for use cases.

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Justin Jones In Risk Management, Technology

CrowdStrike’s Mess: Minor Issues, Some Opportunity for Treasury

Vendors were affected but most members had few problems and some used the outage to test continuity plans.

The major blow to global technology systems inflicted by cybersecurity firm CrowdStrike’s botched update last Friday had little or no effect on the treasury, finance and risk management teams run by NeuGroup members who responded to inquiries by NeuGroup Insights this week.

“We were not impacted in a material way,” one treasurer said. “It did not impact treasury or the financial close—preparation for our quarterly earnings announcement and 10-Q filing.”
In addition, some teams used the tech outage to test their business continuity plans (BCPs), taking advantage of what turned out to be a nonevent for many into an opportunity to review how prepared they are for more serious crises.

“We were not impacted in a material way,” one treasurer said. “It did not impact treasury or the financial close—preparation for our quarterly earnings announcement and 10-Q filing.”
In addition, some teams used the tech outage to test their business continuity plans (BCPs), taking advantage of what turned out to be a nonevent for many into an opportunity to review how prepared they are for more serious crises.
“The issues were minor and BCPs largely kept things flowing,” said one treasurer of a mega-cap corporate. “Our prior experiences with Covid, 9/11, financial crises, etc., continue to pay dividends as we anticipate these unexpected challenges.”

Vendor problems. Most issues members experienced involved vendors, including banks. But these problems didn’t last long. For example, a FX risk manager whose team uses a tech solution to confirm FX trade details with counterparties said, “There was a brief impact to our third-party confirmations system which was restored around 9 a.m.”

Also, one bank told this member it had “turned auto-pricing off.” The member explained that the computer models of bank counterparties auto-populate pricing within a FX trading platform for short-dated trades, streamlining pricing on simple, low-risk trades. Longer-dated, more complex trades are priced manually.
“The bank didn’t give a reason for why they turned it off, but said they did because of the outage,” the member said. “But it did not impact our trading. So overall for us, the impact was quite limited and did not affect our ability to hedge.”
One treasurer said, “We got a message from one of our primary FX banks mentioning that some of the aggregator multi-bank platforms were having issues early in the day, but the trading desks were operating.” She said the bank did not name the vendors having issues. Regardless, “We were not super active in the FX markets last Friday and all banking and external service providers operated as expected.”
Said another treasurer: “There was some friction with our FX banks but we were able to manage many of our FX exposures internally with our in-house bank while our FX banks were getting back to business as usual.”
One treasury team member was locked out of a bank portal. “Their portal was actually out for quite some time,” they said. “And then a lot of our overnight file transmissions were interrupted. So I would say everything’s kind of back to normal now, but we had some minor inconveniences.”

Banks wait a bit longer. Bank treasurers who are members of NeuGroup for Regional Bank Treasury also described manageable issues that were resolved relatively quickly, if not as fast as what corporate treasurers reported. “We had limited internal and vendor issues in the morning, including our wire system. They were all up and running by 10:30 a.m.,” one bank treasurer said.

However, he added, “Our core provider had more issues, including their teller system. While online banking, mobile and ATMs were all functioning with no issues, we did have to pivot to manual processing in the branches for any teller transactions. That was cleared and all systems were fully online by 1:30 p.m. No customer related issues were reported.”
Another bank treasurer said in an email, “A number of our systems/vendors were impacted, but minimal issues with all customer-impacting items cleared before noon on Friday. No lingering impact.”

Business continuity and contingency funding plans. Some treasury and risk management teams at corporates and banks put the CrowdStrike debacle to good use by evaluating their preparedness for a crisis. “As the news came out, we lit up aspects of our business continuity plan to make contacts, assess activities and stay on alert,” said one AT responsible for FX risk management. “But ultimately it all passed fairly quickly and by noon it was mostly forgotten.”

One head of internal audit and enterprise risk management said his company’s IT team proved its prowess. “We have both function-specific BCPs as well as a corporate crisis management team that is activated for major incidents. The IT team dealt with the issues so effectively via their BCP processes that it was deemed unnecessary to activate the corporate crisis management process. While there were certainly pockets of problems, it was not widespread.”
One bank used the tech outage to test its funding resiliency. “In an abundance of caution, we did launch our contingency funding plan (CFP) first thing on Friday morning,” the treasurer said. “We don’t get to exercise that plan very often, so we tend to lean toward activating it, partly to demonstrate to our regulators that it works and we are thoughtful about it, and partly to build muscle memory for the treasury and executive team.”
He added, “Even though we talked with our key funding partners early on, we did a small draw from the Federal Reserve’s Discount Window just to make sure that they were functioning with no issues. We exited from CFP mode on Monday morning after affirming that no further system issues arose over the weekend and no other banks were having any issues that could cause risk of contagion.”

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Justin Jones In Technology

A Journey to Strategic Treasury Starting With the Right TMS

EY says aligning a TMS with a technology strategy is key to transforming treasury into a strategic force.

Elevating treasury’s profile to a strategic function is essential for organizations seeking to enhance financial agility and resilience. The preeminence of this priority permeated NeuGroup’s 2024 Treasurers Summit, where treasurers from companies of various sizes from diverse sectors expressed commitments to making treasury a strategic business partner. However, an in-session poll revealed that few believe they have fully achieved this goal.

In a presentation by EY, the Summit sponsor, the firm’s managing director of global treasury services Ari Morris and senior manager of global treasury advisory Martha Grant emphasized that aligning a treasury management system (TMS) with an overall tech strategy is crucial for transforming treasury into a strategic player.
“The importance of the journey of treasury technology is that it’s never-ending,” Ms. Grant said. “Just like your journey within the organization will always change, so does the technology.” By linking the TMS with the broader technology strategy, she said organizations can better support their strategic goals and create significant value in the long run.

EY says aligning a TMS with a technology strategy is key to transforming treasury into a strategic force.

In a presentation by EY, the Summit sponsor, the firm’s managing director of global treasury services Ari Morris and senior manager of global treasury advisory Martha Grant emphasized that aligning a treasury management system (TMS) with an overall tech strategy is crucial for transforming treasury into a strategic player.
“The importance of the journey of treasury technology is that it’s never-ending,” Ms. Grant said. “Just like your journey within the organization will always change, so does the technology.” By linking the TMS with the broader technology strategy, she said organizations can better support their strategic goals and create significant value in the long run.

Stages of the treasury technology journey. Mr. Morris and Ms. Grant laid out what they consider the stages of a treasury technology journey—from foundational treasury with bank portals and Excel, to operational excellence with a TMS and complementary systems and finally to strategic treasury, featuring what they call an “integrated ecosystem” built around a TMS (see chart above).

The in-session poll also showed that most members consider their treasury to be in the second stage—operational excellence—with a handful placing themselves in the foundational stage, and few saying they’ve completed the journey to being a partner to the business.
The EY experts stressed that understanding and navigating these stages is key to transforming treasury into a strategic function that can support the company’s growth initiatives, inform business decisions beyond treasury and optimize global liquidity.
Companies often start with basic transaction management and eventually graduate to more robust TMS solutions; the ultimate goal, they said, should be moving beyond day-to-day operations and leveraging the TMS for strategic insights. “Organizations that have achieved this transition are ahead of the curve, but delivering strategic value is challenging and requires a solid foundation,” Mr. Morris said.

Start by identifying specific needs. He emphasized that the success of a TMS hinges on ensuring the system meets the specific needs of the organization. “If you don’t tune your tools to your needs, it won’t be successful.”

He highlighted the importance of starting a treasury transformation with a thorough self-assessment. This involves evaluating current operations, identifying areas for improvement, and defining strategic goals. “Whether you’re minimizing cost, becoming more efficient, or optimizing your balance sheet, understanding your starting point is crucial,” he said.
A lack of preparation when vetting options for a TMS caught up with one member once they started implementing the platform. By the time the treasurer realized the solution wouldn’t live up to treasury’s strategic goals, “my team was already some percentage into the project and had spent years working on it. It was hard for me to kill it, so I learned to live with it.
- “It’s not my favorite, but it’s enough. We’re not strategic because of the tool, but we’re still able to be strategic despite the tool.”

Continuous improvement and adaptation. Ms. Grant highlighted the importance of viewing the implementation of a TMS as an ongoing process rather than a one-time project. In the never-ending treasury tech journey, she said, “effective data management and strategic decision-making require ongoing adjustments and collaboration with stakeholders.”

One key aspect of a successful TMS implementation is integration with other systems and ensuring a robust data strategy—which involves collaborating with internal IT, FP&A and other stakeholders to bring treasury out of its traditional silo.
The ultimate goal of achieving a strategic treasury, Mr. Morris noted, requires enhancing data capabilities and analytics—some of which can be done in the TMS, if the right system is chosen. While members agree with that ideal, some said that TMS limitations can get in the way.
“If you ask many companies that implemented a TMS, their objective was a single, core system,” said one member. “What you find most times is, as you build out a TMS, cash management works well, but forecasting, hedge accounting, etc., have hiccups. So they revert to what they know, like Bloomberg.”
He added this would leave a team in the operational excellence stage of treasury growth. “You might end up with a core TMS, and various systems that do things for you. Maybe it’s due to implementation, or maybe due to the ineffectiveness of the tool.”
Mr. Morris said companies that find themselves in this position don’t necessarily need to abandon their TMS, recommending careful consideration for which additional solutions fit. “Don’t grab tools for their own sake, but plan out where they make sense, identify what you’ve got, what’s not ideal, and solve that problem.”

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Justin Jones In Cash & Working Capital, Risk Management

Contingency Planning Tops Drivers of 2024 Liquidity Policies

New NeuGroup Peer Research shows that preparing for crises drives corporate liquidity strategies, followed by debt management and acquisition agility.

“In a financial crisis, the focus on treasury is quick and intense.” An experienced treasurer made that incisive declaration at NeuGroup’s 2024 Treasurers Summit this spring. It neatly captures the heightened urgency surrounding liquidity management—a cornerstone of treasury’s mission—sparked most recently by the pandemic, bank failures and wars.

That backdrop and ongoing uncertainty about interest rates, inflation and the U.S. presidential election help explain why contingency planning for crises emerged as the most commonly cited driver of liquidity policies in NeuGroup’s 2024 Capital Structure Survey. As the chart below shows, 70% of respondents selected it as one of their top four drivers from 15 possible answers.

New NeuGroup Peer Research shows that preparing for crises drives corporate liquidity strategies, followed by debt management and acquisition agility.

That backdrop and ongoing uncertainty about interest rates, inflation and the U.S. presidential election help explain why contingency planning for crises emerged as the most commonly cited driver of liquidity policies in NeuGroup’s 2024 Capital Structure Survey. As the chart below shows, 70% of respondents selected it as one of their top four drivers from 15 possible answers.

Conducted in partnership with Standard Chartered, the survey yielded benchmarking data on capital structure related to debt, working capital, dividends, buybacks and more. It’s based on responses from about 130 corporates across various sectors, and full results will be available later this summer.

Context and contrasts. The 70% figure makes perfect sense in the wake of widespread fears about counterparty credit risk sparked by the 2023 collapse of Silicon Valley Bank. In a meeting earlier this year, one treasurer put the banking crisis of confidence in context, calling it a “catalyst for treasury organizations to say, ‘This isn’t just a moment in time. Crisis planning is always a priority.'”

But it’s also fair to wonder why even more respondents didn’t select contingency planning for liquidity needed in a crisis. NeuGroup’s Roger Heine, who helped conduct the survey, said, “It’s gratifying to see that 70% do this kind of planning, but kind of surprising that the remaining 30% do not.”
Surprising, perhaps, but not inexplicable when you consider the other answers selected and speak to members who are not among the 70%. The survey shows corporates also prioritize rating agency criteria (No. 4), which place a high value on robust liquidity; and the No. 5 answer, preparation for working capital uncertainties, includes planning for the short-term fallout of a crisis.
- Combining the members who chose those two answers but not contingency planning with the members who did choose it adds up to 90% of respondents.

What they say. A treasurer at a tech company who selected No. 4, No. 5 and debt maturing in a few years (No. 3) told NeuGroup Insights he didn’t select No. 1 in part because his company has relatively high margins and cash balances, and cash flows that are less volatile than industries where most cash is tied to working capital.

“I prepare contingency scenarios that will allow me to widen my access to investment-grade capital markets to minimize refinancing risk and reduce the refinancing cost, which typically goes up in crises,” he said.
Another treasurer at a high-margin enterprise elaborated on why he didn’t choose contingency planning for a crisis. “The structure of the company results in almost every subsidiary having positive cash flow,” he said. “As a result, I don’t need to focus on the daily liquidity needs of 50-plus subsidiaries. A crisis for us does not happen without notice.”

The dealmakers. The second most common driver of policies is maintaining liquidity for potential acquisitions, at 57%. The context here is pent-up demand for deals and improvement in M&A volume in 2024 after a severe slump last year as interest rates remained high.

One notable insight from the survey results: corporates with relatively higher price-to-earnings (P/E) ratios are more likely to prioritize a need for dry powder. That’s a sign they expect to leverage their high valuation to pursue growth opportunities through strategic acquisitions.
For members with a forward P/E ratio over 25, acquisitions are the most common liquidity driver. For members with a PE below 10, it drops to fifth place.

Stay tuned to NeuGroup Peer Research for the full survey report, including more in-depth insights and analysis of members’ capital structures.

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Justin Jones In Accounting & Disclosure, Cash Investments

When the Accounting Tail Wags the Cash Investment Dog

The juice is not always worth the squeeze when cash investment managers weigh accounting considerations.

The steady climb in interest rates that began in 2022 opened doors long closed to cash investment managers seeking attractive short-term yields on cash. But as markets look toward rate cuts, the question of whether extending duration is the right call is bringing to the fore an issue that may limit the appeal of an investment: the accounting implications.

At a recent session, members of NeuGroup for Cash Investments offered examples of where accounting issues come into play, including the assessment of whether the added yield or “juice” offered by an investment, such as time deposits, is worth the “squeeze” of obstacles or extra work introduced by accounting teams and auditors.
“We keep all deposits under three months just because of accounting, to be frank,” one member said during a discussion of the maturity of deposits. Another responded, “I’ll echo that our accounting team has driven some of our investment policies.”

At a recent session, members of NeuGroup for Cash Investments offered examples of where accounting issues come into play, including the assessment of whether the added yield or “juice” offered by an investment, such as time deposits, is worth the “squeeze” of obstacles or extra work introduced by accounting teams and auditors.
“We keep all deposits under three months just because of accounting, to be frank,” one member said during a discussion of the maturity of deposits. Another responded, “I’ll echo that our accounting team has driven some of our investment policies.”

Accounting 101: cash equivalents. The context of the discussion includes whether or not an investment is accounted for on the balance sheet under cash and cash equivalents, typically assets with maturities of 90 days or less that are highly liquid and don’t directly affect a company’s income statement. “The preference from the accounting side is that we mark it as cash equivalent,” one member said.

At their company, while accounting is one reason the investing team keeps most deposit maturities at three months or less, there are exceptions, some in overseas markets. In those cases, treasury needs to persuade other functions that the instrument should be treated as a cash equivalent and not a short-term investment.
“There are discussions we have had to see if a deposit more than three months can be a possibility,” they said. “If there’s a significant yield, then we will have to work with our accounting team and controllership team and make a case for that, understanding the juice is in fact worth the squeeze.”

Not worth the squeeze. That’s not always the case. The accounting team at a different member’s company decided certain investments would be classified on the balance sheet under “other assets,” meaning they would affect the company’s operating cash flow and metrics tied to it.

“Their interpretation is that if it doesn’t have a CUSIP and it’s longer than 90 days, it’s an other asset. I disagreed but we decided, all right, we’re just going to move on and do something else,” the member said. “It’s not worth it if it’s going to affect our metrics.” A peer agreed: “The juice isn’t worth the squeeze sometimes.”
The first member later said that the decision not to use deposits longer than 90 days is not part of the company’s investment policy statement (IPS). “We put that restriction on ourselves,” he said. Time deposits are a standard, eligible asset option in corporate IPSs.

ABS and a CECL obstacle. The extra work required to meet accounting team requirements has made investing in certain asset-backed securities (ABS) not worth it for one member. The accounting team at his company imposes a higher threshold for reserves that must be held for current expected credit losses (CECL) for ABS with credit ratings less than triple-A.

The extra monitoring which would be required to make accounting comfortable with ABS without triple-A ratings isn’t worth the effort, the member said. “Because of all the additional work and the possibility of reserves on the P&L, we just said we’re going to throw that out the window.”
He explained to a peer that the position of the internal accountants stemmed directly from the company’s outside auditors. “They were the ones that told our accounting team that they would want to see this reserve should we go below triple-A on securitized products.”
“Wow, that’s wild,” said the peer, who found that stance fairly conservative given that buying a bond with a triple-B rating would not require putting aside reserves. He voiced support for his peer’s decision against investing in ABS below triple-A given the circumstances.
“It’s something that’s going to come back to you because you’re going to be the one to make estimates of credit losses—accounting is probably not going to be able to do that,” he said. “Do you want to sign up for that extra work—is it worth a couple of basis points, worth the hours and auditors coming in and looking at your workbooks?”

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Justin Jones In Banking, Capital Markets

How One Treasurer Got a Credit Rating Upgrade Without Asking

One NeuGroup member’s subtle but direct campaign to enable an analyst to see the necessity of an upgrade pays off.

Frustration over a split credit rating prompted one treasurer to seek guidance from several bankers who said tech sector weakness, rising inflation and widespread counterparty credit risk concerns made the timing of seeking an upgrade poor. They said the company would therefore have to directly request that the rating agency raise the investment-grade credit rating one notch to the same level of the other major agency. But the treasurer did not want to ask for an upgrade.

So instead, he launched an unabashed yet unaggressive campaign of persuasion where he let the company’s record of conservative financial policy, key metrics relative to peers and other data-driven arguments do the talking and convince the analyst an upgrade was the only logical move.
“This campaign was about digging into details and presenting them in a way that the analyst would realize by himself that an upgrade was justified. I wanted him to recognize that on his own,” the treasurer said. He shared his insights and success at getting the upgrade on his terms at the spring meeting of NeuGroup for Tech Treasurers sponsored by Societe Generale.

One NeuGroup member’s subtle but direct campaign to enable an analyst to see the necessity of an upgrade pays off.

So instead, he launched an unabashed yet unaggressive campaign of persuasion where he let the company’s record of conservative financial policy, key metrics relative to peers and other data-driven arguments do the talking and convince the analyst an upgrade was the only logical move.
“This campaign was about digging into details and presenting them in a way that the analyst would realize by himself that an upgrade was justified. I wanted him to recognize that on his own,” the treasurer said. He shared his insights and success at getting the upgrade on his terms at the spring meeting of NeuGroup for Tech Treasurers sponsored by Societe Generale.

Why not ask? A banker who encouraged the treasurer’s approach told NeuGroup Insights that although asking directly is at times necessary and effective, getting an upgrade without requesting it is the smartest way—especially in cases like this where the company has a track record that argues in favor of the upgrade.

One advantage of not asking is avoiding the risk of damaging the credibility of the treasurer or CFO if they request and receive an upgrade but, later, the company needs to deviate from its financial policies and commitment to the higher rating to pursue, say, a large acquisition that pushes its leverage ratio higher.
“Asking can be potentially harmful to the relationship with the agencies, even though it is supported by a strong credit narrative, including a financial policy commitment,” said Jacques Ouazana, head of US Ratings Advisory at Societe Generale. “You can gain credibility over a number of years, but you can lose it extremely quickly, so this is something to always bear in mind.”
- Treasurers and CFOs also risk losing credibility within the company if a rating agency denies their request for an upgrade.
There is also a perception among some treasurers that in receiving an upgrade after asking, they give up leverage in their relationship with the rating agency, potentially restraining to some degree how the company allocates capital and crimping its financial flexibility.

Accelerating an overdue upgrade. The treasurer’s strategy of persuasion to convince the agency to raise a rating that had stood for more than a decade came down to both tactics and timing. On the latter, he decided to move up an annual meeting with the analyst from the fall to the spring—months before the ratings committee met. “I wanted to get there before they did their review,” he said.

Tactically, the treasurer’s campaign featured questioning and challenging the analyst’s conclusions as well as providing his own analysis of the company’s data and performance. “I started questioning more and more,” he said. A key element was highlighting specifics about how the company compared to competitors that already had the rating the company desired.
This fact-based approach sped up what Mr. Ouazana at Societe Generale anticipated would happen eventually—an upgrade. “What we did well and effectively here was giving the right arguments to accelerate something that I believed was coming,” he said.
- “There was no need to go with a formal ask here, because the analytical arguments were themselves strong enough to communicate, to convey the message that the company was actually a high triple-B credit.”

Leveraging success. At the end of their meeting, the analyst told the treasurer he was feeling the pressure to upgrade the rating, which is exactly what the agency did following the ratings committee meeting. The member’s satisfaction at achieving his goal was magnified by the circumstances and timing of the accomplishment.

“If you get upgraded at a risk-averse, scary time when it’s less likely because of the economy and inflation, that means that an agency is seeing your credit as very good, very stable and resilient,” the treasurer said. “It’s more impactful.”
The treasurer said the benefits of the agency recognizing that the company deserved the higher rating showed up in the CP market as well as the bond market—where the corporate’s spreads relative to a key competitor narrowed—and the insurance market, where its renewal rates improved.
“That was a palpable message that I leveraged everywhere I went for six months,” the treasurer said with a smile. “It really paid off.”

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Justin Jones In Compliance, Risk Management

Spread Risk Awareness by Spreading the Wealth

Using financial incentives to drive a culture shift in risk management across all levels of a company.

Legendary investor and Warren Buffett’s late partner Charlie Munger once said, “show me the incentive and I’ll show you the outcome.” In the business world, monetary incentives drive better decisions, behaviors and outcomes—at least in theory. But can all behaviors be incentivized? What about those involving risk?

Discussions at a recent meeting of NeuGroup for Enterprise Risk Management revealed that, as you might expect, enterprise risk managers themselves are rewarded for achieving goals that include meeting targets around starting, completing and summarizing annual risk assessments. But that’s the relatively low-hanging fruit.

Using financial incentives to drive a culture shift in risk management across all levels of a company.

Discussions at a recent meeting of NeuGroup for Enterprise Risk Management revealed that, as you might expect, enterprise risk managers themselves are rewarded for achieving goals that include meeting targets around starting, completing and summarizing annual risk assessments. But that’s the relatively low-hanging fruit.
The biggest challenge for many companies is creating a culture—and compensation structure—where risk awareness and management are prioritized and incentivized at all levels. The few corporates that have achieved a risk culture transformation rely on financial incentives like bonuses for completing mitigation plans addressing high-profile risks flagged by ERM.
“The way to create interest and appetite for better risk management is to put incentives into the pay structure, which is exactly how we’re doing a risk culture shift,” one member said. “Employees want recognition, but they also want payment.”

Leading by example. Several members highlighted transformative approaches where top leadership’s commitment to risk management catalyzed significant shifts in organizational culture. One described tying bonuses to critical actions, such as implementing two-factor authentication for treasury payments above a threshold.

This initiative, extended to all executives including business unit CFOs and CAOs, emphasized the importance of proactive risk management. Successes were celebrated company-wide, reinforcing the value of risk mitigation efforts and fostering a culture of vigilance.
At another member’s company, the CEO’s bonus goals included requiring mitigation plans for what the company considers tier 1 risks. The member acknowledged that there is a level of subjectivity when finding the causes of risk, and measuring how well risks are mitigated. It’s a bit of a “leap of faith,” he said.

Keeping score. At one member company, ERM does a yearly assessment on risk culture by sending out surveys to individuals. This is then converted into a risk-culture scorecard for individuals, and for the company. The company’s director of risk management said the most recent edition of the exercise revealed “we are still at stage of growing to maturity” when it comes to risk.

To tailor the performance criteria according to the roles of individuals in risk management, the company has categorized employees into three groups:

Management: Performance is evaluated based on their oversight function, specifically in setting the direction and sponsorship for risk management.
Risk management champions: These individuals are designated representatives within various teams or departments of the company, tasked with driving risk management initiatives including distributing messages from the ERM team. Their performance is measured by the level of communication, initiatives, programs and overall involvement in risk management activities.
General employees: The rest of the company is evaluated on effectiveness in mitigating risks, with expectations communicated by management or risk management champions.

A plan coming together. Another member says his team also identifies risk champions, who are then mandated to create a risk treatment plan—a type of standardized template to deal with specific risks published by the International Organization for Standardization.

“We ensured that each risk champion, including their risk owners and action owners, has their treatment plans specifically built into their quarterly bonus goals,” said the member. Each quarter, “we confirm treatment plan results.” These results are measured against overall company results.
- “So for example, for intellectual property risk, we add in the goals the completion of an external and internal self-assessment, and an improvement road map,” one member said.
The team can now assess whether business unit margin and growth metrics are met—one way to ensure that a risk has been mitigated well enough to achieve growth.
Another way is tying risk mitigation to new products brought to market smoothly. “Product development risk mitigation is incentivized based on the timeliness and cost achievement of a new product introduction,” one member said.

Key to success: A well-planned strategy. Incentivizing risk leaders is a crucial component of building a risk-aware culture, but not all companies within the ERM group have a specific structure—and even for those who do, it still seems to be a work in progress.

Following the discussion, NeuGroup’s Ted Howard, who leads the ERM group, said, “Any plan that does get initiated must be supported by a comprehensive strategy that includes leadership commitment, clear processes, training, open communication and a supportive environment.”

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Justin Jones In Investment Management, Technology, Uncategorized

Freeing the Potential of Data: The Right People and Technology

HSBC dives into unleashing the power of data, emphasizing the need for the right tools and individuals who know how to use them.

Corporate treasury teams are increasingly embracing data, but not everyone has the technology and analytic skills to draw insights from oceans of info. Some members are embracing the idea that it’s easier to teach finance to employees with tech expertise than teaching treasury teams high-level computer programming—a concept that drove a number of conversations at a recent meeting of NeuGroup for Payments Strategy sponsored by HSBC.

In the meeting, one member company’s fintech lead—who had an IT background before joining treasury—impressed members and HSBC by sharing the process behind developing an innovative dashboard that delivers treasury and market insights.
Experts from HSBC dove into the growing importance of having a data strategy and offered a framework for finance teams to replicate this member’s success, emphasizing the need for employees with technical skills, the right technology, high-quality data and more.
“We are finding data more available than ever before, between file sharing, host-to-host connections, and a disproportionate amount of customers accessing APIs,” shared Mark Evans, HSBC’s head of cross-border and cross-currency payments. “This elevates the role of treasurers to be more than just treasurers—they have insight into the past and present, and can have foresight into what’s next.”

HSBC dives into unleashing the power of data, emphasizing the need for the right tools and individuals who know how to use them.

In the meeting, one member company’s fintech lead—who had an IT background before joining treasury—impressed members and HSBC by sharing the process behind developing an innovative dashboard that delivers treasury and market insights.
Experts from HSBC dove into the growing importance of having a data strategy and offered a framework for finance teams to replicate this member’s success, emphasizing the need for employees with technical skills, the right technology, high-quality data and more.
“We are finding data more available than ever before, between file sharing, host-to-host connections, and a disproportionate amount of customers accessing APIs,” shared Mark Evans, HSBC’s head of cross-border and cross-currency payments. “This elevates the role of treasurers to be more than just treasurers—they have insight into the past and present, and can have foresight into what’s next.”

Technical know-how. In a breakout session, the fintech lead shared her process behind building the real-time markets dashboard, alongside an assistant treasurer. The AT said he found that “finance can be easier to learn than the hardcore technical side,” so instead of teaching analytics skills to treasury, the treasury team onboarded employees from IT.

The dashboard tracks market fluctuations and regulatory changes that could impact the company’s cash investments—similar to negative news alerts, but for more than just reputational risks. It also features visibility into the investment portfolio, including FX and economic data, credit rating updates of counterparties, cash balances and more.
The dashboard is built in Power BI and pulls from various sources: two data lakes, a SQL database in Quantum (the company’s TMS) and market data from Bloomberg pulled via an API.

A holistic approach. The fintech lead said the tool allows treasury team members, as well as any executive with access to the suite of dashboards, to be quick-thinking and agile by connecting them to all relevant information—especially during strategic meetings with management and banks. “The AT gives presentations to all senior management in investment meetings, and if they have questions, he needs to be able to answer them on the fly, in the meeting,” she said.

Another example: In a recent meeting, someone from a bank said the company had not made a deposit. “The AT just pulled up his phone to confirm, and showed them,” she said. “He was able to say, ‘No, we made that deposit here on x day.’ It allows us to work better with all the information readily available.”
By combining external market data with internal financial metrics, she said the setup ensures a holistic approach to monitoring and analyzing treasury activities, enhancing resilience. “When information is at your fingertips, and it’s readily available, you can respond right away.”
- The CFO’s near real-time visibility to treasury info has been an immediate advantage, according to the AT. “There are virtually no ad hoc data requests,” he said. “It’s all available to him whenever he needs it.”

Laying the groundwork. Having the right employees and the best possible technology, as this member did, should be two of the highest priorities for treasury teams looking to kickstart analytics programs, according to HSBC’s Mr. Evans. But some preparation will be required before teams begin drawing insights from the data.

One of the first steps toward building a successful data strategy is to ensure the numbers being analyzed are high-quality data that accurately reflect the most up-to-date information at treasury’s fingertips. This is often achieved through strict controls, ensuring that individuals without expertise cannot touch and potentially poison the data, as well as preventing leaks and fraud. He added that updates to various payment standards, including ISO 20022, are already providing corporates with richer, better-structured data.
It is also critical, Mr. Evans said, to break down data silos in which various figures are buried in different solutions. One member shared that this is an issue for his treasury team, with some numbers only accessible in a TMS and others scattered among multiple ERPs. He is aiming to establish a data lake to function as a single source of truth for all of treasury’s systems.
Some members said the ever-increasing quantity of data can be difficult to parse, and Mr. Evans responded that in some cases, insights can be better drawn through analyzing the right data, not necessarily the most. “The amount of data we push around is amazing, but we’re learning that less is sometimes more.”

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Justin Jones In Cash & Working Capital, Talking Shop

Talking Shop: Extend Payment Terms to Optimize Working Capital?

Context: Improving working capital management remains a high priority for many treasury teams coping with elevated inflation, concerns about recession and the opportunity to earn better returns on cash amid higher interest rates. Just this week, one treasurer asked if peers have “something akin” to a working capital policy.

“This may cover things such as standards for payment terms, owned inventory levels, use of the balance sheet to extend customer financing, etc.,” they explained on one of NeuGroup’s members-only online communities. “I’m just trying to get a sense for how common it is to have a formal policy around this.”
- If you have an answer that NeuGroup can pass on anonymously, please send an email to [email protected].

“This may cover things such as standards for payment terms, owned inventory levels, use of the balance sheet to extend customer financing, etc.,” they explained on one of NeuGroup’s members-only online communities. “I’m just trying to get a sense for how common it is to have a formal policy around this.”
- If you have an answer that NeuGroup can pass on anonymously, please send an email to [email protected].

As the questions above and below indicate, extending payment terms with suppliers is a reliable arrow in the working capital quiver of corporations that want to hold on to their cash longer. One option for extending those terms is a supply chain finance program where a third party, usually a bank, pays the supplier early in exchange for a discount. The corporate, meanwhile, can pay the bank (in full) on the extended terms the buyer negotiates with the supplier.

Member question: “What are your standard payment terms (30, 60, 90, 120 days) for suppliers? This excludes any early payment discount programs. Is anyone using supply chain financing programs? And if you are comfortable sharing, what banks?”

NeuGroup Insights reached out to this questioner for context. They said their company inherited payment terms of 60 days when it was spun off. “In an effort to optimize working capital solutions, we have an existing supply chain financing program and have had multiple banking partners suggest we could or should consider stretching our standard payment terms to hold on to our cash longer before paying suppliers,” they explained.

“The benchmarking exercise was to ‘fact check’ our banks as they have suggested many peers are in the 90–120-day standard payment terms with suppliers.”

Peer answer 1: “Our payment terms vary based on merchandise category and how long we typically hold merchandise before it sells (so no overall standard). We do have supply chain finance programs covering both domestic and import purchases. The banks we work with include J.P. Morgan, Citi, HSBC, Wells Fargo, Standard Chartered and Bank of America.”

Peer answer 2: “Similar to [the first response], we don’t have a standard, but instead try to match the terms with the inventory turns, with the goal of zero owned inventory. We have a supply chain finance program with Citi and we have a dynamic discounting program with C2FO.”

Peer answer 3: “Most payments of ours are run through third-party distribution centers; we pay those centers very quickly, usually under 15 days. They work the float. Other vendors will vary in the 30- to 60-day range. [Due to the nature of our business], we are accounts receivable and inventory ‘lite.’”

NeuGroup Insights asked the questioner whether they might extend payment terms through a supply chain finance program. “Potentially, yes,” they said. “But like some responders, it may not be across the board as some supplier relationships may not align with cookie-cutter terms.”

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Justin Jones In Senior Executive, Technology

Crafting a Compelling Business Case for Investing in Payments

How one NeuGroup member created the “ultimate road map” to get buy-in for building out a payments factory.

Large-scale initiatives, such as the build-out of a payments factory, are major undertakings that require significant investments of both financial and human capital. At the first-half meeting of NeuGroup for Payments Strategy sponsored by HSBC, members explored the keys to building a successful, comprehensive business case to justify the allocation of resources and get buy-in from management.

One member, who helped lead the session, walked through his process to implement a payments factory to address fragmented and inefficient systems, with disparate platforms creating complexities in payment validation and processing, creating the need for standardized controls.
But to overcome that burden and build a robust, scalable and secure infrastructure, the first stop had to be winning the support of leadership with facts and figures. “Having senior management advocate for the project is key; if you don’t have that, it’s not going to be approved,” he said.

How one NeuGroup member created the “ultimate road map” to get buy-in for building out a payments factory.

One member, who helped lead the session, walked through his process to implement a payments factory to address fragmented and inefficient systems, with disparate platforms creating complexities in payment validation and processing, creating the need for standardized controls.
But to overcome that burden and build a robust, scalable and secure infrastructure, the first stop had to be winning the support of leadership with facts and figures. “Having senior management advocate for the project is key; if you don’t have that, it’s not going to be approved,” he said.

Costs and the budget battle. Getting that support is especially critical for finance functions. The member works at a company with dozens of subsidiaries and limited budget for internal projects, with customer-facing initiatives taking the highest priority. “Everybody fights for the remaining allocation, with finance at the bottom of the chain,” he said. “It’s unfortunately been a challenge.”

It’s a pain point shared by many NeuGroup members vying for IT support—services billed to treasury—just one of several costs the member had to justify. Others include:
1. The price of the payments hub software.
2. The vendor’s professional services team, which provides consulting services to assist with the implementation.
3. Additional modules to add to the software.
4. Contracting with a SWIFT Service Bureau.

An ultimate road map. The member recommends starting by crafting an “ultimate road map” that breaks the process into manageable pieces, clearly articulating the economic benefits to each step. “The more you can show return on investment and what’s providing value, the better,” he said. “Is it going to do anything for customer retention, or dollars and cents?”

But don’t exaggerate. “Have realistic benefits, and a realistic timeline.” He added, “I’ve seen lots of unrealistic goals. If you say six months, but really it’s a year or a year and a half, you start to lose credibility. But if you’re able to deliver and capture ROI, you develop goodwill in the company. Then it just gets easier and easier.”
That resonated with another member, who led a similar infrastructure overhaul. She too emphasized the need to start by laying out the tangible benefits of a payments project. “If the benefits don’t outweigh the effort, the project might be dead on arrival,” she said. “For us, the client is the most important stakeholder. If the project benefits them, our CEO will consider it.”
In her experience, one of the best additions to building the business case came from the company’s banking partners. “Our objectives are the same as a lot of our banks, and through conversations with them, we were able to make sure that we showed this would give us what we needed.”

More allies, more success. Cast a wide net when looking for advocates in leadership roles. For the member’s payments hub, they included the treasurer, IT senior leaders and other senior business leaders. Part of the case to IT leaders included enabling them to retire legacy systems; other leaders saw value in the improved controls. Here is some of what the member has achieved:

Focusing initially on the highest-value transactions, the platform now processes 80% of the value of the company’s payments, despite only handling about 40% of the overall transaction volume.
Another critical component is the payments gateway, which consolidates payee banking information from legacy systems into a single secure repository. This database stores payee payment preferences and allows for API access to pull banking information as needed.
- Additional controls include connections to the company’s delegation of authority system, and account validation services.
Also planned: A migration from checks to electronic payments, with an aim to reduce reliance on checks to improve efficiency and security.

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Justin Jones In Treasury Management

Developing Future Finance Leaders: What Top Performers Want

High potentials want more leader input and guidance on intertwining goals and individual development plans.

What do high-performers on treasury teams need from senior managers today to develop into tomorrow’s finance leaders? Discussions between members of NeuGroup for High Potentials reveal that many up-and-comers want more formal, documented development plans tied to specific goals, among other wish-list items. And the talent development shortcomings that some cite include inadequate connection of individual goals to a company’s broader strategy and infrequent communication with leadership on these topics.

Two members of the high potentials (HiPo) group compiled and distilled those and other takeaways from discussions facilitated by NeuGroup associate director Kyle Bockus into an informative and eye-opening presentation for leaders who are members of NeuGroup for Mega-Cap Treasurers at that group’s spring meeting.
The topic resonated with the treasurers, who are also confronting skills gaps as they prepare for a future of finance driven by data and advanced technologies like AI. Many are also spending time on succession planning.

Two members of the high potentials (HiPo) group compiled and distilled those and other takeaways from discussions facilitated by NeuGroup associate director Kyle Bockus into an informative and eye-opening presentation for leaders who are members of NeuGroup for Mega-Cap Treasurers at that group’s spring meeting.
The topic resonated with the treasurers, who are also confronting skills gaps as they prepare for a future of finance driven by data and advanced technologies like AI. Many are also spending time on succession planning.

Features of strong development efforts. The presenters from the HiPo group listed several features of ideal approaches to talent development as well as these strengths of initiatives that have high impact:

Formalized and documented development plans. One of the presenters said development plans at her company are employee driven and management supported, a practice that struck a chord with other members who create plans which are then reviewed and tweaked by managers. At a minimum, leaders and their reports should discuss progress and make adjustments to these documented plans quarterly, according to the presentation.
Tying development items to specific goals. One best practice is using a goal plan model that is management driven and employee supported. At the presenter’s company, so-called SMART goals cascade from the executive office to treasurers, assistant treasurers and their direct reports.
- The goals are tied to compensation, making this a powerful tool, she said. The development plan is tied to these goals to drive success at both the employee and corporate level.
Mentorships inside and outside of treasury. Mentorships can be formal or informal; mentoring by leaders outside of treasury is seen as more impactful, according to the discussions among HiPo members.
Networking across the organization. Supportive leaders who help team members expand their networks and make connections throughout the company are highly valued by members.
The chance to participate, and ideally lead, cross-functional teams and projects. This is prized by members. It provides opportunities to work with people across the organization to meet deadlines while managing a cross section of colleagues who don’t report to you.
- “Any time you can lead a project or facilitate or be in charge of it, that’s really stretched me and gotten me out of my comfort zone and been very beneficial,” one member said.
Including people in meetings that are outside their specific work areas. This provides future leaders with exposure to a wider range of experiences and subjects. Earlier in her career, a manager let one presenter sit in on another team’s meeting; attending this capital markets group having a bank call helped her realize what she wanted to do next at the company.

Room for improvement. Members of the HiPo group identified a dearth of opportunities for US-based team members to take positions overseas as one development gap. In response to a question from the presenter, many of the mega-cap treasurers acknowledged that taking on international assignments earlier in their careers was, as she put it in a follow-up call, “very highly developmental.”

In response, she told the treasurers, “If you realize that now, give those same opportunities to your people. And make sure your people want to take on those opportunities—have those open and honest and transparent conversations with them when having career discussions.”
Finance leaders should also prepare high performers for leadership roles by helping them diversify their skills by taking on roles outside of treasury; the presenter recommends documenting and sharing so-called pipeline roles across treasury.
Also, finance planning committees need to introduce high-caliber treasury candidates to other planning committees so those individuals are “on their radar to move back and forth between teams to give them broader experience and diversify.”
Another area for improvement: HiPo members at larger companies experience challenges connecting their individual goals to the company’s overall strategy. One of the presenters said, “It can be really difficult to translate my day-to-day into the broad organization goals.”

A proactive approach to development. Addressing that difficulty “really requires vision and effective communication up and down the chain,” the presenter said. “So managers should be thinking about what they want their teams to accomplish and how that is connected to the executive office goals.” Effective approaches will also identify and mitigate resource constraints that may stand in the way of success.

Confronting those issues head-on is part of a framework for development the presenter called “proactive growth” consisting of the high-impact features listed above and includes 360 feedback. “To create this culture of proactive growth, everyone needs to be held accountable,” he said.
- “And the only way to do that is to create a culture of effective feedback. So managers are accountable for development as well as the employee.”
To turn that ideal of shared responsibility into reality, the key is drawing a clear line connecting the employee’s development plan and goal plan and having ongoing discussions with leaders about those, the presenter said.
- “When those three items are tied together, they’re maximizing the candidate’s growth, they’re identifying avenues that benefit both the company and them in terms of what they want and what the organization’s needs are.”

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Spread Risk Awareness by Spreading the Wealth

Freeing the Potential of Data: The Right People and Technology

Talking Shop: Extend Payment Terms to Optimize Working Capital?

Crafting a Compelling Business Case for Investing in Payments

Developing Future Finance Leaders: What Top Performers Want

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