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Spotlight Features

Teaming Up with Tech Firms: Deutsche Bank’s Multifaceted Approach to Cash Management Solutions

Money Is Time: How TIS Simplified One Treasurer’s Bank Connectivity

Rough Road: Overcoming Post-Merger Integration Hurdles and Headaches

Insights and lessons from two ATs who confronted challenges including culture and tight deadlines.

Low interest rates and plenty of cash on their balance sheets suggest large multinational companies will continue growing through M&A, challenging even experienced assistant treasurers (ATs) who tend to handle many finance-related integration issues.

  • Two ATs of companies at the tail end of mergers each recounted at a recent meeting the long list of projects they faced to integrate elements of the merging businesses, including treasury management systems (TMSs), funding sources, investment assets, and derivative and FX exposures.

Insights and lessons from two ATs who confronted challenges including culture and tight deadlines.
 
Low interest rates and plenty of cash on their balance sheets suggest large multinational companies will continue growing through M&A, challenging even experienced assistant treasurers (ATs) who tend to handle many finance-related integration issues.

  • Two ATs of companies at the tail end of mergers each recounted at a recent meeting the long list of projects they faced to integrate elements of the merging businesses, including treasury management systems (TMSs), funding sources, investment assets, and derivative and FX exposures.
  • ATs can lay the groundwork in some instances to facilitate such integrations in anticipation of future mergers, but the ATs presenting at the meeting noted the difficult-to-foresee hurdles that exacerbated the challenges.

Culture clash. In one merger, the acquiring company’s risk-averse culture contrasted sharply with the acquired firm’s lean, risk-taking, entrepreneurial approach. The acquirer’s resistance to change meant little review took place of which overlapping elements would be best to retain.

  • On day one, the acquired firm’s treasury team had to adopt all the acquirer’s policies and procedures. “We did not look at best-in-class,” the member said.
  • The few acquiree’s parts that were adopted by the merged company, such as the foreign exchange technology and the money market provider, took months to get approved and implemented.
  • “Never underestimate the power of different cultures,” the AT said. A peer echoed the AT’s culture insight, noting the contrast between his company’s “dictatorial” and centralized approach to the back office and a recent acquisition’s culture that gave more local autonomy.

Bank benefits. One bright spot: The acquiring company’s bank group included all of the acquiree’s banks, except for one, which it added to a new facility. From the perspective of overlapping banking relationships between the two companies the AT said the merger was a “marriage made in heaven.”

  • In many cases the companies were covered by the same bank teams, and when they weren’t the treasurer requested those relationship bankers be added to the account.
  • “So it was essentially seamless from a bank perspective,” the treasurer said.

Shotgun wedding. The other presenting AT’s company had to close a cross-border merger within literally weeks, due to regulations in the acquired company’s country, placing a significant burden on treasury.

  • The AT noted that most acquisitions provide teams on both sides with a “nice getting to know each other period” to accomplish significant planning before the deal closes.
    •  “But we weren’t able to speak to them, get any data, or do any of the really hardcore due diligence, besides what was publicly available,” the AT said.
  • Besides some quick changes, such as replacing the acquired company’s revolving credit facility with intercompany funding, many functions remain separate, such as their TMSs and enterprise resource planning (ERP) systems.
  • “One thing we did move forward with was notional pooling,” which neither company had in place, the AT said, adding that its rollout is still in progress but so far has provided “significant visibility and access to cash stored in pockets around the world.”

Lessons learned. NeuGroup’s Scott Flieger asked whether the ATs would have done things differently in hindsight. The AT who highlighted cultural differences said many of the acquired company’s treasury team had left; that might have been different if the acquirer made more effort to assess how both companies did things and then adopted the best of each.

  • Despite the short deadline to close the other merger, certain integration decisions probably could have been more deliberate, the AT said, so policy and accounting issues the treasury team now faces in areas such as the intercompany-funding structure may have been less onerous.
  • “Looking back that’s something to consider a lot more closely,” the member said.      
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Closing Loops: Connecting FX Hedging and Cash Forecasts

How one member uses Cashforce to save time and money on FX trades—and helped create an automated hedging process.

One assistant treasurer at a recent NeuGroup virtual interactive session said that her primary project for 2021 is “to make treasury as no-touch as possible.” This is a common theme for treasurers recently, though it’s not always clear where to start. Her first step was to seek potential connections in existing processes and platforms—which led to an overhauled and streamlined process for foreign exchange hedging.

  • The member already was using Cashforce, a fintech that allows deeper analysis of cash flow, to assist in cash flow forecasting, and saw potential in connecting it to Citibank’s CitiFX Pulse platform through the company’s TMS.

How one member uses Cashforce to save time and money on FX trades—and helped create an automated hedging process.

One assistant treasurer at a recent NeuGroup virtual interactive session said that her primary project for 2021 is “to make treasury as no-touch as possible.” This is a common theme for treasurers recently, though it’s not always clear where to start. Her first step was to seek potential connections in existing processes and platforms—which led to an overhauled and streamlined process for foreign exchange hedging.

  • The member already was using Cashforce, a fintech that allows deeper analysis of cash flow, to assist in cash flow forecasting, and saw potential in connecting it to Citibank’s CitiFX Pulse platform through the company’s TMS.
  • Through collaboration with Cashforce, Citi and her TMS, she was essentially able to turn the company’s hedging policy into an algorithm that reads the forecast and will potentially execute or propose trades all on its own.

From forecasts to forex. The member said this is only possible because Cashforce can forecast at a high level of granularity. The AT said she was “really lucky” that the tools work together so well.

  • “The forecast at that level of detail is a forecast in document currency,” she said. “And because I can have forecasting at nearly an invoice level, I know what that currency is going to be.”
  • Through the forecast, she said, the company is able to see what its FX position is going to be. “Then if I layer over what hedge I might already have in place, it will be able to tell me what are my gaps,” she said.
  • “The idea is to send it out so that we could auto-trade to fill the gaps below a certain threshold, let’s say 100 grand or less, and review above that just to check the data before we trade.”

A closed loop. Nicolas Christiaen, Cashforce’s CEO, said that, before this project, the member’s process was “very disconnected,” but all it took was connecting the dots.

  • “On the data input side, the ERP, TMS, P&L and bank statements are now put through [Cashforce’s] transformation layer, which results in a cash flow forecast,” he said. “As is very specific in this case, it’s a forecast by currency, by month.”
  • Currently, the company then uploads this forecast back into its TMS for review, and manually executes FX trades based on the company’s hedging policy.
  • “When these hedges are executed, the hedge amounts will pass back into Cashforce via the TMS, closing the loop,” Mr. Christiaen said.

A step further. With the proposed system that the member has designed with Citi, the company could include its hedging policies as a rules-based program in CitiFX Pulse that can read this forecast.

  • It would then “put in place the instruments used for the hedges for the thresholds that need to be taken into account,” Mr. Christiaen said. “Which ultimately results in a proposal.”
  • The chart below demonstrates the vision: As the data feeds into Cashforce, which outputs a forecast, that forecast is reviewed by the member and uploaded to CitiFX Pulse, which can automatically execute or propose FX hedges.

Constant change. Automation is “an awful lot to bite off,” the member said, and recommends starting slow on this kind of process:

  • The first step is to test what systems you already have. “A lot of us have pockets in the organization of different systems that can be leveraged. Some of them can’t do what they say they can or aren’t quite what you need—but sometimes you get lucky, as we did.”
    • She said it is also an opportunity for treasury to work with fintech partners to build exactly what it needs.
  • Collaboration and clear communication with IT is “super important,” which she learned the hard way. “Despite really clear instructions from Cashforce on the size of server we would need, [IT] gave us a quarter of that size and we now need a bigger size,” the AT said.
  • She warns that, although automation opportunities are promising, it’s not always smooth sailing. “Be aware of the opportunities, but also be aware of the work: automation is doable but takes an awful lot of time.”
  • “As the business changes, the structure changes as well,” she said. “The only constant within treasury is change.”
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Work in Progress: Finance Teams Strive to Make Hybrid Models Work

The gradual and partial return to offices in a hybrid work world presents challenges and some potential opportunities.

The hybrid work model many corporates were leaning toward last spring as the vaccine rollout began and infection rates dropped appears to have solidified as companies confronted the curveball sent by the Delta Covid-19 variant.

  • Some treasury team members are itching to return while others are lobbying to stay home; with staff turnover reaching all-time highs at some companies, it’s critical to find solutions that satisfy as many people as possible.

The gradual and partial return to offices in a hybrid work world presents challenges and some potential opportunities.
 
The hybrid work model many corporates were leaning toward last spring as the vaccine rollout began and infection rates dropped appears to have solidified as companies confronted the curveball sent by the Delta Covid-19 variant.

  • Some treasury team members are itching to return while others are lobbying to stay home; with staff turnover reaching all-time highs at some companies, it’s critical to find solutions that satisfy as many people as possible.
  • As many corporates adapt to hybrid work, some are trying to take advantage of potential opportunities presented by the new reality.
  • Those takeaways emerged at a recent meeting of NeuGroup for Mega-Cap Assistant Treasurers.

Remote synergies. Noting that the Delta variant resulted in a new set of work-from-home mandates just days before his company’s scheduled return to the office, an industrial company’s assistant treasurer (AT) said his treasury team is considering how to take advantage of remote work.

  • “We support a captive finance company that’s hundreds of miles away from us, so could we have more cross-sharing of talent and positions between treasury and the captive, without having to move or even source talent from there?” he said.
    • “So we’re thinking about how that may change in a more virtual environment and about employee engagement in general.”
  • A peer acknowledged exploring similar synergies with his company’s captive.

Hybrid in flux. For global companies, different jurisdictions have different and changing rules and recommendations around returning to work. One member noted that the company’s team in Singapore had briefly returned to the office full-time, but the recent outbreak has everybody working remotely again. 

  • Echoing ideas discussed last spring, one company’s AT said employees have returned to the office in small groups on a voluntary basis, and a hybrid model involving two or three days in the office is in the works.
    • But the CEO is “very keen” on no management mandates and leaving the return to employees’ discretion, complicating the setup of in-person meetings and other events.
  • A peer at a major technology firm said the current expectation is that employees will return to the office just one day a week, so now his team is working on optimizing the remote connection and how to keep employees performing at a high level and maintain team cohesiveness around the world.
  • “There’s lots of company support for wireless events, just to make sure people are getting away from their desks,” he said.

Vaccination push. Two ATs said their companies anticipate employees returning the office in November, at least to some degree. But while some workers are eager to get back, others prefer working from home, an issue still to be worked through.

  • One motivator may be requiring everyone to be vaccinated. All US employees of a business services firm must be vaccinated by November 15, said the AT, adding that date was supported by 90% of employees in a recent survey. “That is a part of their longer-term vision of how we get back to the office.”

Staying remote. Only one AT said remote work was the future at her company.

  • “We’re not going back to the office; most of our employees will remain remote,” she said, adding that has been very well received by employees overall and the treasury team.
  • Well, maybe not entirely remote. The company will retain some flagship offices to be used to “drive culture and collaboration,” she said, where employees go for project work or career discussions, “maybe a team meeting here or there.”
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Talking Shop: Using APIs or Host-to-Host for Bank Connectivity

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


Member question: “Does anyone use host-to-host or API for bank connectivity? We are exploring those solutions and would be great to have your input.”

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


Member question: “Does anyone use host-to-host or API for bank connectivity? We are exploring those solutions and would be great to have your input.”

Peer answer 1: “We use APIs for bank connectivity, from giving payment instruction to monitoring payment status to getting real-time balance and transaction details.”

Peer answer 2: “We do not use APIs for bank connectivity today. We use host-to-host and we are currently looking into SWIFT.”

Peer answer 3: “I asked my colleagues your question, and they told me the following:

  • ‘We have a few host-to-host solutions, though I would recommend APIs if they are starting from scratch.’”
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Teaming Up with Tech Firms: Deutsche Bank’s Multifaceted Approach to Cash Management Solutions

Deutsche Bank veteran Suman Chaki explains a strategy of developing bank-agnostic solutions with tech partners like TIS while continuing to invest in proprietary tools to solve problems faced by corporate clients.

Deutsche Bank managing director Suman Chaki has an impressive and extensive record of advising corporate clients and helping them solve a variety of cash management challenges. So it’s no surprise that his insights and perspective on what treasury teams at multinational corporations want and need from banks, and how Deutsche Bank is responding with bank-agnostic solutions co-developed with tech partners like TIS—as well as the bank’s own proprietary solutions—are compelling.

Deutsche Bank veteran Suman Chaki explains a strategy of developing bank-agnostic solutions with tech partners like TIS while continuing to invest in proprietary tools to solve problems faced by corporate clients.

Deutsche Bank managing director Suman Chaki has an impressive and extensive record of advising corporate clients and helping them solve a variety of cash management challenges. So it’s no surprise that his insights and perspective on what treasury teams at multinational corporations want and need from banks, and how Deutsche Bank is responding with bank-agnostic solutions co-developed with tech partners like TIS—as well as the bank’s own proprietary solutions—are compelling.

Mr. Chaki’s views are informed by deep experience in corporate banking at Deutsche Bank, where he has worked since the beginning of his career. He joined the bank in 1997, straight out of business school in India, and helped build what is now one of Deutsche Bank’s strongest cash management franchises globally. (Mr. Chaki studied electrical engineering as an undergraduate and worked as an engineer before deciding an MBA would open new doors.) Today, he’s global head of cash management structuring—an advisory function—and head of cash management sales in America.

His resume includes a decade of running various Deutsche Bank units in the Asia-Pacific region from the bank’s Singapore hub, including supply chain finance, working capital advisory and cash management. In 2020, he left Asia and moved to New York—a boon for US-based multinationals that can now tap Mr. Chaki’s wealth of knowledge about Asian markets where Deutsche Bank is an industry leader. His move exemplifies how Deutsche Bank provides executives with opportunities for professional growth, benefiting the individual and helping the bank retain top talent across the globe.

The two hats Mr. Chaki wears—one tailored to sales, the other designed first and foremost around understanding and solving client problems—allow him to paint a complete and nuanced picture of Deutsche Bank’s commitment to serving corporates on multiple levels. Mr. Chaki sat down recently with NeuGroup Insights for two virtual interviews to explain the cash management strategy. The interview has been edited for space and clarity.

Suman Chaki, Managing Director, Deutsche Bank
Global Head of Cash Management Structuring and Americas Head of Cash Management Sales

NeuGroup Insights: Suman, let’s start with Deutsche Bank creating a cash management ‘structuring’ business. What is it and what’s the mission?

Suman Chaki: We set this up two years ago, while I was still in Singapore, as a critical global function—primarily to help our treasurers at large, global, complex multinationals through their transformation journey, the treasury 4.0 transformation. We’ve continued to increase the focus on how we can help their businesses around the world, which is why cash management has become so much more the focus of the corporate bank.

Through this advisory approach, we began hearing our treasurers a bit differently. We are trying to understand and appreciate the treasurer’s challenge a bit deeper rather than—and this is a big difference—immediately starting to think of product.

When I put on my structuring hat, my advisory hat, in front of clients, they are more open to sharing because I generally don’t want to sell them anything. I want to bring to them what we see other corporates doing, how we benchmark vis-à-vis the industry, how we understand what they’re doing, how we can guide them through the transformation process, including technology solutions that can help them.

To do that, we’ve started leveraging our client advisory board more proactively, in a way we haven’t in the past. Now, we often approach client board members on a bilateral basis and I’m very impressed with the way dozens of corporate treasury teams have made themselves available to share treasury challenges and current gaps.

That’s one of the reasons we set this team up. It’s not just about positioning Deutsche Bank products and solutions. At the end of this, we really want to approach the treasurer as an advisor who sees us as a trusted partner in the entire treasury transformation journey.

NGI: You say that treasurers are viewing that transformation journey—and the role of banks in it—differently these days, in part because of the pandemic. What do you mean?

SC: I think during the Covid phase, treasurers got a bit of time to sit back and withdraw from the day-to-day, and look at the real challenges that they’re facing in the current world and in the future. Weaknesses and inefficiencies in systems, processes and technology were exposed.

Now they’re looking and asking, ‘Do I have the right platforms and solutions, am I future-proof?’ They have to look internally and figure out what are their pain points. Then they have to figure out, ‘Can a bank help, can a technology company help me with that future-proofing journey over the next five to 10 years? Can I do it internally? Or is it a combination of all of that?’ My view is that’s what a lot of treasury organizations are doing today.

As a result, I have the feeling that that large, traditional and legacy RFP volumes will start coming down because the treasurers will start thinking, ‘Will changing a bank necessarily solve those problems? Or does the problem lie somewhere else?’ Just changing banks without addressing inherent challenges is not going to give them the biggest bang for the buck.

Rather than the standard cash management topics, we will see more inquiries from corporates on topics related to their rapidly evolving business models and the shifting technology landscape. It’s about banks helping clients identify and solve pain points. So banks will continue to be an important partner to corporate treasury organizations. It’s just that the role they play will increasingly look different.

The other thing that’s evolving very fast in my view is that as corporates focus less on traditional banking topics, they will start looking at more bank-neutral and bank-agnostic solutions. They’ll also start looking for ‘best-of-breed’ solutions for specific problem statements that are not necessarily being addressed by their existing ERP or TMS platforms.

NGI: That brings us to Deutsche Bank partnering with TIS, which operates a payment platform, on a bank-agnostic fraud solution—the first part of a broader initiative to develop and distribute multibank services for treasury and finance teams. But you’re doing this while continuing to offer proprietary solutions?

SC: This is going to be a journey, don’t get me wrong. For the foreseeable future, banks will need to continue to invest as much as they are now in their own proprietary offerings. So we will keep investing in proprietary solutions—like our NextGen cash manager, our Digital Service Manager, digitizing all interactions with the bank. So we keep doing that and offering it to our clients.

But as technology at corporate treasuries gets more mature, as companies start investing in their own data lakes and their own platforms, they will want to have more bank-neutral solutions. So in parallel, we want to start looking at offering bank-agnostic, bank-neutral treasury technology solutions co-developed with and offered through tech partners.

We think of it as treasury technology as a service—best-of-breed technology solutions. These products are being built on the back of feedback, of ideas coming from those large, global, multinational complex treasuries we’re talking to in our client advisory board and every day. We want to solve their problems through the co-development of solutions.

This is where the fraud tool with TIS comes in as an example. Clients have a payment fraud problem and they need a solution for it. But they need it across all banks. Also, the various bank account validation solutions available from third parties in different markets around the world do not fully protect against sophisticated vendor payment fraud often referred to as business email compromise, or BEC.

NGI: What payment fraud pain point does the tool address that isn’t already covered by Deutsche Bank’s robust security technology that flags potentially fraudulent payments before they’re made by the bank?

SC: All proprietary bank fraud management solutions have the limitation of working only with client data that’s available in a payment file, without having access to the client’s contextual data. But if we could provide the client a utility, for example, that operates in his environment and checks the file before it’s sent to any bank, then the program could access a lot more rich client data to flag a potential fraudulent transaction—before anything leaves his premises. Additionally, the client would get the benefit of the ‘community effect’ of such a cloud-based solution.

NGI: Can you explain how this community effect and ‘swarm intelligence’ benefit multiple clients, regardless of what bank or systems they use?

SC: Yes—as the software is used by more and more clients, there is a network effect. The more the software gets used—and that’s the benefit of the cloud—the more it learns and the more everyone benefits from the community. effect. That is not possible with a pure banking solution or if the client does it themselves.

NGI: But is this model of partnerships with tech companies like TIS really different from the white labeling that banks have been doing for a long time

SC: We’re saying this is different. We want to offer this product to a client not through Deutsche Bank but through an independent entity in which we may or may not have a direct interest, a third party. It could be a tech company, could be a JV, could be something else. And that product is offered as a pure technology product to the client, not as a banking value-added solution.

It’s not about a product built by a tech company and we’re white labeling it. And it’s not that we’ve made an investment and we are a passive player. Here, we are collaborating to co-build and co-develop a product with a tech company that’s a stand-alone, bootstrap solution that has its own life that we should be able to charge a fee for. It’s something we could have built ourselves. But the reason we’re not building it ourselves is that it is less useful for treasurers to use a bank proprietary product. Then he or she will need it from every other bank.

I don’t think there are too many with that specific approach that have been out there in the market; we want the treasurers to understand why this is different from the traditional white labeling.

NGI: How do the tech companies—that you need to partner with to build bank-agnostic solutions—benefit from collaborating with you, the bank?

SC: For DB, it starts with 150 years of experience and world-class IP. It’s about bringing to the tech partner the bank’s knowledge repository around payment, around liquidity, around regulation; how can we bring that into the platform of the tech company? Since in many cases we are already building solutions for our portal—like in the fraud case—we can also use some of that knowledge to further help build out the bank-agnostic tools, leveraging the value of our expertise.

The idea is finding where the bank’s expertise and the tech company’s programming, agility and flexibility come together to create multibank solutions that address widespread problems for clients. Those are the winning cases.

The bank has to have something so unique that a tech company by itself will not have easily. A simple example is the knowledge of what it takes to open a bank account in a rapidly evolving global market: What it takes to update signatories, nobody will ever know as well as a bank will know.

NGI: Speaking of that, do you expect bank account management could be an area of possible bank-agnostic treasury technology solutions?

SC: In our journey to create bank-agnostic or multibank treasury technology as a solution, bank account management is another use case, where there are significant challenges corporates face, for example, when they have to make an alteration or modification around signatories, where what the bank needs varies from market to market, bank to bank.

Clients are asking, ‘Can we have a database of what we need in markets where we are present, where can we update signatory information based on our knowledge into that system?’ None of the bank account systems have that level of intelligence today, based on client feedback. If I need to do a signatory change in Korea, what exactly do I need to do if it is with bank A or bank B and in market C?

When you talk to treasurers, which is what I do in my day job in my treasury advisory role, I find the more complex and global and challenging the client’s business and operations get, the less the standard functionalities of a TMS or ERP are able to meet their unique needs. Many corporates say they want a best-of-breed solution because their needs are unique, and implementation and extraction of data are difficult. That’s what we’re addressing.

NGI: Any other bank-neutral products in the works that you can tell us about?

SC: We’re in the advanced stages of working on a proof of concept, in collaboration with technology partners, for solutions on data-driven treasury for large, global and complex multinational corporates, focusing initially on tools like intraday liquidity and cash flow forecasting. There are many companies for whom an active management of global treasury liquidity positions, across multiple bank providers, is essential. Not just cash but also payments, collections, vis-à-vis, ‘How am I performing [versus] what was forecasted on a real-time basis?’ If that’s what is important for you, that’s what we’re trying to work on.

NGI: Thanks so much, Suman. Please keep us posted on these bank-neutral solutions for treasurers.

SC: Thank you very much. We will—this is the beginning of many more to come. You will see more.

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Treasury’s Need for an ESG Filter to Keep the Focus Where It Belongs

Tech treasurers in Asia discuss ESG priorities with Goldman Sachs Asset Management. 

Members of NeuGroup for Asia Tech Treasurers heard insights on treasury’s growing role in the accelerating efforts of corporates to promote sustainability through environmental, social and governance (ESG) initiatives at a recent meeting sponsored by Goldman Sachs Asset Management (GSAM).

  • Among the key takeaways: Figuring out what matters and what doesn’t to investors and other stakeholders diving into the ESG pool is critical for treasurers facing pressure to innovate and manage complex projects.

Tech treasurers in Asia discuss ESG priorities with Goldman Sachs Asset Management. 

Members of NeuGroup for Asia Tech Treasurers heard insights on treasury’s growing role in the accelerating efforts of corporates to promote sustainability through environmental, social and governance (ESG) initiatives at a recent meeting sponsored by Goldman Sachs Asset Management (GSAM).

  • Among the key takeaways: Figuring out what matters and what doesn’t to investors and other stakeholders diving into the ESG pool is critical for treasurers facing pressure to innovate and manage complex projects.
  • In addition to examining where ESG fits in treasury’s investment and issuance responsibilities, the meeting featured panel discussions between members and subject matter experts on the rise of digital assets and the search for yield by investment managers.
  • You can see a video synopsis of the meeting’s takeaways by clicking here. Below are takeaways from the ESG session. Please watch for takeaways from other sessions in future posts.

Make treasury an ESG center of excellence. In response to questions from Queenie Siu, head of Greater China liquidity solutions sales at GSAM, John Goldstein, head of sustainable finance at Goldman, said that because ESG “is important and it’s often about money, treasurers often become a center of excellence within the firm.”

  • To do that, in addition to figuring out ESG’s role in cash management and investment as well as capital markets issuance, treasurers are increasingly playing a strategic role in helping C-suite executives explain to investors where ESG fits in the company’s story, Mr. Goldstein said.
  • “You could see it as an opportunity for treasurers to be central to that dialog or a growing requirement,” he said. “Treasurers have really started to better appreciate the full range of tools they have to express the ESG views, advance the ESG mission, tell the ESG story within their organizations.”

Figure out what matters. The opportunities ESG presents to treasury teams to help shape their companies’ sustainability narrative come with some challenging responsibilities, Mr. Goldstein noted. He recalled talking to one treasurer who had been asked in the last year for more than two thousand different ESG data points.

  • Amid all the requests for data, metrics and other reporting, “It’s easy to get lost and figure out what matters and what doesn’t,” he said. “It’s almost as important to know what doesn’t matter so as to not waste time so you can focus on the stuff that does.”
  • To assist treasury teams make those distinctions and focus their efforts, Goldman spends lots of time gathering intelligence by talking to investors, helping treasurers stay “close to the market” and “make good decisions based on new, fresh, clear understanding.”
  • Treasurers are learning fast that, like other areas of responsibility, ESG issuance and investing involves both innovation and project management.
    • “Innovation is hard; project management is hard,” Mr. Goldstein said. “As you get more things to do and more innovation,” it becomes more important for treasury to grapple with “how you keep up with it all.”

Investments or issuance first? Corporates face lots of options as they survey the ESG landscape, starting with whether to focus first on investments or issuance. This prompted one NeuGroup member to ask, “How can we most effectively evaluate the priorities among these ESG-related activities?”

  • Mr. Goldstein’s answer: “Starting with investing is often easier, it takes less time, you can lean much more heavily on outsourcing to other people, so that has real advantages.”
  •  Investing with ESG principles allows treasury to learn “what metrics are other people using” and to better understand the data, he added. “For some people it’s learning, for some people they’re not ready to issue.”
  • That said, if senior leadership is intent on telling the company’s ESG story to the market, “that may mean it’s time to get working on an issuance framework,” something that takes plenty of time and planning, he said.
  • Asked by the member about the trade-offs regarding yield and risk in investing with an ESG lens, Mr. Goldstein said that in designing portfolios with a client, “We’ll say, ‘If you get this level of carbon reduction, this looks great. If you want to get to this point, you’re changing your universe, it may be hard to get the yield with this duration and credit quality you want.
    • “There’s not one answer to it. For us, it’s a process. The process is fact-based and analytical. ESG is a field where people spend a lot of time with opinions as opposed to facts. We don’t like to make up our mind until we have the data.”
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Payoffs From ‘Preaching the Gospel of Global Treasury Operations’

Partnering with global business services (GBS) helped one treasury team boost cash visibility and achieve consistency.

Companies expanding globally have often left regional affiliates with their own treasury back offices to support the local business, resulting in fragmentation of the treasury function and costly inefficiencies. That takes time away from corporate treasury that could be spent addressing more strategic issues.

  • “Preaching the gospel of global treasury operations,” the assistant treasurer (AT) of one NeuGroup member company said, required convincing local business leaders that corporate treasury didn’t seek to wrest control.

Partnering with global business services (GBS) helped one treasury team boost cash visibility and achieve consistency.

Companies expanding globally have often left regional affiliates with their own treasury back offices to support the local business, resulting in fragmentation of the treasury function and costly inefficiencies. That takes time away from corporate treasury that could be spent addressing more strategic issues.  

  • “Preaching the gospel of global treasury operations,” the assistant treasurer (AT) of one NeuGroup member company said, required convincing local business leaders that corporate treasury didn’t seek to wrest control.
  • In the case of cash, he told those leaders, “We’re not here to take it, but to make sure you have the cash you need, when you need it.”

Reaching out to GBS. Treasury’s first practical step to reduce the fragmentation of operations was to reach out to global business services (GBS) centers for Asia-Pacific (APAC); Europe, Middle East and Africa (EMEA); and Latin and North America. 

  • Corporate treasury explained that fragmented treasury options made it difficult for the company to locate and measure cash in a timely manner, and to track bank accounts and their signatories.
  • Among the questions the AT asked: “Can we partner with you and build out regional treasury operations centers, to bring that work to those centers and bring consistency to fundamentals such as opening and closing bank accounts?”

Dividing duties. Key to the argument was clarifying that corporate treasury would control the strategy and the health of the processes, including the company’s in-house bank and global treasury operations, while the lower-cost GBS centers would retain responsibility for operational execution.

  • The approach to implementing the initiative in each region differed, since each GBS center was at a different stage of development.
  • The regional treasury office (RTO) teams now report administratively to the GBS operations leader, while taking much of their technical direction from corporate treasury.
  • The exception is EMEA’s GBS, which houses the in-house bank, where employees also administratively report directly to corporate treasury, “because of the complexities of the work and the close linkage they have with executing treasury strategies,” the AT said.

The benefits. Consistency is first and foremost, the AT said, adding that while the approaches to centralizing treasury activities in the GBS centers may have varied, the processes and standards they apply across the globe are now consistent.

  • That should reduce “hiccups” stemming from local treasury offices entering into hedges without fully understanding those instruments, something that in the past resulted in unnecessary costs and risk, a comfort to him and the treasurer, the AT said.
  • With its regional treasury centers now all using the same treasury management system (TMS), corporate treasury has 90% visibility into its cash, enabling balance sheet cash to be slashed in half, a boon for a net-debtor company from a credit perspective.
  • Centralizing treasury around those centers has expanded the use of a tool to uncover unnecessary or excessive bank fees. “That’s enabled us to get more competitive pricing from our banks quickly,” the AT said.
  • The Latin American treasury team center often spent a majority of its time reconciling prior-day transactions, the AT said, and now, with access to the TMS, “That team can deploy their intellectual capacity in other areas that produce savings for the company.”

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Talking Shop: Who Outside Treasury Reviews Hedging Strategy?

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


Member question: “Do other companies review their FX hedge strategy with functions/leadership outside of treasury?”

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


Member question: “Do other companies review their FX hedge strategy with functions/leadership outside of treasury?

  • “We review FX impact results (underlying + hedge) monthly with the CFO, but we don’t discuss our hedge strategy, which has raised questions on governance.
  • “If you do review your hedge strategy (hedge ratios, currencies, execution approach, instrument usage, etc.) with other functions/leadership outside of treasury, how frequently is that done, with whom, and to the extent you can share, what kind of detail do you go into?
  • “Also, do you need approval outside of treasury to change your hedging approach?”

Peer answer 1: “We review our hedge strategies and update them quarterly at a hedge committee meeting.

  • “The hedge committee includes the CFO, corporate controller, corporate business operations leader and regional/business unit finance leaders.
  • “We also do a deep dive annual FX hedge review with each regional/business unit finance team.”

Peer answer 2: “We are doing the same. We have a finance risk committee meeting on a quarterly basis. For any changes in FX strategy, we get the committee’s approval or review. 

  • “Finance committee members are the leaders of tax, FP&A, accounting, treasury and corporate CFO.
  • “We also review the committee members once in a while to make sure we include the right stakeholders in the meeting.”

Peer answer 3: “We recently put in place a quarterly FX committee meeting reviewing hedge results.

  • “This is in addition to the CFO/board committee report/meeting. The FX committee members are from accounting, FP&A, tax, etc.
  • “We review hedging strategies, but the unofficial goal of the committee is raising FX awareness and getting alignment with teams that may impact your hedge results.”

Anne Friberg, NeuGroup senior director: “In the end, it all comes down to who owns the results of the FX hedge activities and how that is tied to people’s KPIs and incentives. If all the results are held at the corporate level, there is little reason to involve stakeholders outside of treasury in hedge strategy because treasury owns it.

  • “If results are allocated in some way to regions or business units (for example, via back-to-back internal hedges or because treasury hedges on their behalf), then they will feel the pain or gain (either from forecast inaccuracy or hedge decisions, or both) and will want to have a say in how exposures are hedged.
  • “Hedge accounting changes a few years ago also moved the results from other income & expense (‘below the line’) to the line item that’s being hedged, which for many is revenue, which is often very integral to compensation/KPI targets.
  • “If treasury owns the results, its communication with business units is still very important because forecasts that drive the hedge decisions—if inaccurate—can result in over- or under-hedging and undesirable volatility on earnings, for example. Treasury has to educate and create an appreciation for the importance of accuracy to company results overall.”

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A Treasury Dream Coming True: Handing KYC to Corporate Governance 

One treasury team made a winning case that the governance group should own KYC.

Call it reaching the treasury promised land or a dream come true. Whatever you call it, one treasury team’s early-stage success at shifting responsibility for know your customer (KYC) compliance to a corporate governance group generated plenty of buzz and some envy at a recent meeting of NeuGroup for Global Cash and Banking.

  • “I’m really excited to get out of the KYC business,” the member told his peers during the projects and priorities session of the meeting.
  • “I would LOVE to know how [he] convinced corporate governance to take over KYC!!” wrote one peer in the Zoom chat.
  • The member’s response: “Lots and lots of meetings and many examples of where ownership of the data should truly be managed.”

One treasury team made a winning case that the governance group should own KYC.

Call it reaching the treasury promised land or a dream come true. Whatever you call it, one treasury team’s early-stage success at shifting responsibility for know your customer (KYC) compliance to a corporate governance group generated plenty of buzz and some envy at a recent meeting of NeuGroup for Global Cash and Banking.

  • “I’m really excited to get out of the KYC business,” the member told his peers during the projects and priorities session of the meeting.
  • “I would LOVE to know how [he] convinced corporate governance to take over KYC!!” wrote one peer in the Zoom chat.
  • The member’s response: “Lots and lots of meetings and many examples of where ownership of the data should truly be managed.”

Don’t make it about KYC pain. Key to making the case that treasury should not be an owner of KYC, the member told NeuGroup Insights, is to avoid focusing on the burden of KYC and banks’ varying data requests; that pain is not going away anytime soon, he said.

  • Instead, the member focused on problems in internal KYC processes and the value of shifting ownership to a corporate governance group that sits between tax and legal. That would mean replacing the existing, fragmented approach where treasury was considered the expert for both bank and non-bank KYC requests.
  • “That’s how we kind of framed a lot of this up: This is not our comparative advantage; it never should be. So, [we were] trying to take more of that back into the groups where it should belong.”
  • He added, “We should not be responsible for knowing when to disclose our shareholders’ driver’s license and passport or social security numbers. Treasury shouldn’t own that data, in my opinion.”

The power of a diagram. His team put together a diagram for the company’s tax and legal groups showing the complexity of the company’s current system, where at least eight separate groups—including treasury, tax, business legal teams and the investment group—receive KYC requests.

  • Seven of the groups respond to the requests and five, including treasury, are the primary owners of KYC.
  • The result, treasury said, is inefficiency as well as inconsistent and potentially inaccurate information flowing to requesters. And there’s no clarity on who owns KYC across the company.
  • The diagram of the proposed solution gives the corporate governance group responsibility for responding to KYC requests and ownership of the process—improving efficiency, accuracy and consistency.
  • The point of walking the company’s tax and legal teams through the diagram was to get them “aligned with the value of creating a centralized group, outside of treasury, to manage KYC for the company,” the member said.

Traction and examples. “We started to get traction when we met with some of the heads of our legal and tax groups and they frankly didn’t realize how bad it was out there,” the member said.

  • “We started giving them more and more examples that we’re not really following a good model, and we may be giving inaccurate information in some cases.”
  • The key moment: “For us, it came from our head lawyer who said, ‘You guys have to take this and fix it’ to the governance group.”
  • A company-wide reorganization and centralization process also worked in treasury’s favor, the member said. Following the consolidation of tax and legal teams, “they’re more willing to listen on a [company}-wide scale.”
  • Another element of treasury’s case for reducing KYC responders to one group is that the multinational corporation is privately held and places great importance on protecting the privacy of its shareholder owners.
  • Under the approved transition, treasury will serve as an “escalation point” to banks and be responsible for naming account signers.

Be patient, realistic and watchful. The corporate governance group has identified someone to take on a full-time position managing KYC. Treasury will begin training that person in the next couple of months, the member said. He expects training to last about six months.

  • “Until they are fully up to speed and able to handle these requests without treasury’s involvement, I don’t see our KYC workload decreasing”—something that won’t likely happen until the second quarter of 2022, he said.
  • Before treasury made its proposal, some on the broader team asked what incentive the corporate governance group would have to respond to KYC requests “as quickly as we do,” the member said. “So we’ll have to continue to build that accountability.”
  • The member also expects his team will need to keep close watch to ensure treasury’s bank relationships are not adversely impacted as the corporate governance group begins communicating directly with banks—something only treasury has done heretofore.
  • Treasury has begun discussing the changed KYC process with its top banks and will seek their input on how to make this a successful initiative.
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Cryptocurrency Challenges: A Risk Manager Prepares with Peers

Insights and observations on the intersection of treasury and crypto in a video interview with Medtronic’s Tim Husnik.

Medtronic senior treasury director Tim Husnik loves a challenge. So it’s no surprise that he’s giving lots of thought to what his FX risk management team and other treasury groups will need to do, and how to do it, if Medtronic customers start asking to pay for products with cryptocurrency.

  • “There will be an intersection with treasury at some point in the future,” he tells NeuGroup’s Antony Michels in the video interview below. “It’s a fascinating world to start thinking about.”
  • One key topic on his mind is how to hedge cryptocurrency risk. “I’ve spent more time thinking about that than I care to admit,” Mr. Husnik says in the interview.
  • He also admits that he’s not eager to be the “first one to figure out the solution” to this particular challenge—one reason he says it’s critical to attend trade conferences and—our favorite part—participate in peer groups.
  • “It’s really important to stay connected to your industry peers, more so than the banks, because right now a lot of banks can’t provide a customer a cryptocurrency transaction.”

Please listen to all of Mr. Husnik’s insights in the full interview below:

Insights and observations on the intersection of treasury and crypto in a video interview with Medtronic’s Tim Husnik.

Medtronic senior treasury director Tim Husnik loves a challenge. So it’s no surprise that he’s giving lots of thought to what his FX risk management team and other treasury groups will need to do, and how to do it, if Medtronic customers start asking to pay for products with cryptocurrency.

  • “There will be an intersection with treasury at some point in the future,” he tells NeuGroup’s Antony Michels in the video interview below. “It’s a fascinating world to start thinking about.”
  • One key topic on his mind is how to hedge cryptocurrency risk. “I’ve spent more time thinking about that than I care to admit,” Mr. Husnik says in the interview.
  • He also admits that he’s not eager to be the “first one to figure out the solution” to this particular challenge—one reason he says it’s critical to attend trade conferences and—our favorite part—participate in peer groups.
  • “It’s really important to stay connected to your industry peers, more so than the banks, because right now a lot of banks can’t provide a customer a cryptocurrency transaction.”

Please listen to all of Mr. Husnik’s insights in the full interview below:

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Talking Shop: Cash Needs in Israel, Cash Investments in China

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


Member question: “A global banking partner is discontinuing physical cash services in Israel, where our cash needs typically exceed ATM levels.

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


Member question: “A global banking partner is discontinuing physical cash services in Israel, where our cash needs typically exceed ATM levels.

  • “Does anyone have experience obtaining USD and ILS (Israeli new shekel) in country without opening a local bank account?”

Peer answer: “Our global bank partner can offer USD and ILS accounts in the Netherlands, Ireland and the UK, which could be used for deposits or to make cross-border payments (FX wires and cross-currency ACH).”

Member question: “We are exploring other investment vehicles for cash in China. Beyond bank deposits and money market funds, what products do others in the group use?”

Peer answer: “We also invest in structured deposits. There are various types of structured deposits in local market, some of which are principal protected, whose structures fit with our investment policy and offer pretty decent yield.

  • “While banks were asked to scale bank structured deposit offerings by regulators in 2020, this product category itself is regulation-compliant, and is still a valid investment tool in China market.”
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Money Is Time: How TIS Simplified One Treasurer’s Bank Connectivity

With flexibility in both bank file types and system compatibility, TIS can be the key to a “best-of-breed” approach.

Fernando Tenuta, an assistant treasurer at the staffing solutions provider ManpowerGroup, knew he was in for a steep climb when he was tasked with digitizing treasury and assisting with a cloud-based ERP. But he got a lift in the form of Treasury Intelligence Solutions (TIS), a bank connectivity aggregator whose solutions are specifically designed to make this kind of process simpler.

  • Before this project, Mr. Tenuta was working off of a spreadsheet for central treasury operations. He was intrigued by what TIS calls a best-of-breed approach, a term that refers to employing a number of top-rated applications built on an architecture of interlocking “microservices” with specific purposes, versus the one-size-fits-all solutions that can often come up short.

With flexibility in both bank file types and system compatibility, TIS can be the key to a “best-of-breed” approach.

Fernando Tenuta, an assistant treasurer at the staffing solutions provider ManpowerGroup, knew he was in for a steep climb when he was tasked with digitizing treasury and assisting with a cloud-based ERP. But he got a lift in the form of Treasury Intelligence Solutions (TIS), a bank connectivity aggregator whose solutions are specifically designed to make this kind of process simpler.

  • Before this project, Mr. Tenuta was working off of a spreadsheet for central treasury operations. He was intrigued by what TIS calls a best-of-breed approach, a term that refers to employing a number of top-rated applications built on an architecture of interlocking “microservices” with specific purposes, versus the one-size-fits-all solutions that can often come up short.
  • ManpowerGroup’s process now starts with TIS, which acts as a communicator between the company’s bank accounts and the rest of its systems, which Mr. Tenuta says has “really reduced” the amount of time his team spends dealing with technology.
  • He and Jonathan Paquette, TIS’ head of customer success, described how TIS helped ManpowerGroup develop this solution at a recent NeuGroup Virtual Interactive Session sponsored by TIS.

TIS and beyond. In the meeting, Mr. Paquette shared how TIS’ SaaS platform works, addressing both the bank connectivity and file formatting complexities that impede many organizations’ initiatives toward automation and straight-through processing.

  • “We connect with all banking relationships as well by any method of the customer’s choosing, whether that’s APIs or local connectivity protocols like EBICS or even SWIFT,” he said.
  • As the graphic below shows, TIS sits between a corporate’s various banks and its ERPs (SAP, Oracle, etc.), its TMS and other third-party solutions. This allows for simpler bank account management, analytics and payment processing, among other functions.

A manpower problem. For ManpowerGroup, automated bank connectivity was a primary objective. The company operates in 75 countries and provides work for over 600,000 employees—a sizable operation for a central treasury team with only a handful of members.

  • Although finance functions such as AP and accounting are managed by regional teams, ManpowerGroup maintains one corporate treasury team in Wisconsin that has global oversight over cash management. On top of this, ManpowerGroup was in the midst of rolling out Oracle Cloud Financials, a cloud-based ERP that required complete system and bank interoperability, as well as a bank rationalization project, which required better visibility of accounts.
  • Initially, Mr. Tenuta planned out a system like the one below, which would require a central TMS connected to all bank accounts and applications, using a variety of connections and technology. “There is so much complexity of the multiple apps connecting to the banks in different manners,” compared to TIS’ relatively simple architecture, he said.

Plug and play. It wasn’t until Mr. Tenuta’s team worked with industry consultants that it considered seeking an aggregator like TIS to simplify the system instead of relying on a central TMS.

  • “We sat down and took a hard look at the TMS landscape and the treasury aggregators and really came to the conclusion that it made sense for us to kind of split the two apart,” he said.
  • “That’s when we sat down and created a cleaner architecture, an aggregator in the middle between the banks and our various systems,” he said. “So now, down the road, if we wanted to change a TMS or one of those other systems, it would be easier.”

A simple solution. Mr. Tenuta said ManpowerGroup is already reaping the benefits of time saved and processes streamlined by TIS.

  • “Our Oracle team only has to build one XML file, and it’s exported from Oracle and it’s transferred over to TIS,” he said. “From TIS, they’ll translate it into the bank-required format in whatever country we’re in.”
    • This significantly helped ease the implementation for the company’s IT department: Once they build the initial file, they can transfer it to TIS, which does the rest of the work.
    • “And then we’ll get data coming back from the banks through TIS and then back into Oracle: prior-day reporting, credit notices, payment file notifications, things of that sort.”
  • In addition, “TIS enabled smooth connectivity and a full implementation of a TMS, moving from an Excel-only solution,” he said. “TIS account connectivity greatly increased global cash visibility.”

TIS impact. As an unexpected benefit of TIS, Mr. Tenuta has found that the platform provides an agile on-demand source for bank connectivity to address a variety of unforeseen needs. 

  • When government regulation in Singapore changed and required the company to pull an outsourced transactional process back in-house, he was able to quickly implement a solution that accessed existing bank connectivity through the TIS platform.
  • Moving forward, Mr. Tenuta sees considerable opportunity to standardize legacy connectivity processes put in place by the regional teams by incorporating them into the TIS connectivity hub. The file formatting capabilities of TIS also allow him to easily upgrade the legacy file formats used in these processes to more modern ISO XML standards.   
  • In these ways, Mr. Tenuta has established a solution that will both support future bank and system changes as well as provide immediate solutions to unforeseen bank communication needs.

Sponsored by:

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The Treasury Cryptocurrency Handbook, Chapter 1: Ransomware

Finance teams prepare for questions on crypto as corporates plan for ransomware attacks.

Cryptocurrency and ransomware proved popular topics at a recent meeting of NeuGroup for Global Cash and Banking, during both the Projects and Priorities session and in a smaller breakout group.

  • Some members are being asked how treasury plans to respond if cryptocurrency is needed in the event of a ransomware attack.
  • Most members said their companies have no current interest in investing in or holding cryptocurrency.  A few members work at corporates exploring the potential use of crypto as payment by customers.

Finance teams prepare for questions on crypto as corporates plan for ransomware attacks.

Cryptocurrency and ransomware proved popular topics at a recent meeting of NeuGroup for Global Cash and Banking, during both the Projects and Priorities session and in a smaller breakout group.

  • Some members are being asked how treasury plans to respond if cryptocurrency is needed in the event of a ransomware attack.
  • Most members said their companies have no current interest in investing in or holding cryptocurrency.  A few members work at corporates exploring the potential use of crypto as payment by customers.

Preparing a handbook. One member said someone on her team is developing a cryptocurrency handbook that will include use cases and address “when and why and if” the company would use crypto.

  • Treasury wants to have the information “readily available because we know the questions are going to be coming soon,” she said.
  • Treasury will share the information with other parts of the business and finance teams to educate people and make them more comfortable with what crypto is and how it’s used—or could be used at the company.
  • The idea intrigued another member, who said, “I want to hear more on the crypto handbook. This is something we’re starting to contemplate as well. How can we be prepared in case we’re asked or forced to accept [crypto] in the jurisdictions where we operate or sell?”

Ransomware strategies, facilitators. Several members discussed looking into using third-party facilitators that, among other services, help corporates make payments using cryptocurrency following a ransomware attack. “If we have a ransomware attack, what happens?” one member asked.

  • Among the companies mentioned in the discussion on facilitators were Bitpay, Coverware and Arete Advisors.
    • Arete’s website includes this note: “If it is determined by the [insurance] carrier and breach coach that paying a ransom is the most effective way to resolve the issue, Arete will communicate with the ‘bad actor’ on the client’s behalf to obtain the amount of the ransom demand and negotiate a settlement.”
  • The general consensus among members: Banks are not interested in playing a role in transactions involving crypto, one reason corporates are turning to facilitators.
  • One member told NeuGroup Insights, “Certain banks are more willing [than others] to provide contacts to these facilitators. Others are more strict and would point a corporate to the FBI to handle the situation. The FBI would then help in advising how to handle any ransomware payment.”
  • Within some corporates, the issue of ransomware and cyberattacks involves coordination with insurance and corporate security teams.

Ransom payer beware. One member at the meeting referenced an article previewing sanctions and other actions by the Biden administration to make it harder for hackers to use cryptocurrency to profit from ransomware attacks.

  • The same week as the global cash and banking meeting, the Treasury Department announced those sanctions and actions.
  • They include an updated advisory from Treasury’s Office of Foreign Asset Controls (OFAC) on potential sanctions risks for facilitating ransomware payments.
  • It includes this recommendation: “The U.S. government strongly discourages all private companies and citizens from paying ransom or extortion demands and recommends focusing on strengthening defensive and resilience measures to prevent and protect against ransomware attacks.”
  • The law firm Bracewell commented, “While the advisory does not change existing law, it signals increased regulatory enforcement and an intent to put companies on notice that they will have an even more complicated risk analysis to conduct when faced with a ransomware attack.”
  • One member said he finds it “very interesting…how OFAC plays a role in this whole process and may create additional hurdles for corporates to face in paying any ransom in the future.”
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Environmental Scrutiny: Internal Audit Takes Stock of ESG Goals

As ESG initiatives grow, audit teams work to ensure companies meet their publicized targets.
 
At recent NeuGroup meetings, internal audit heads discussed taking the first steps at integrating ESG into their audit plans, conducting tests to ensure alignment with public statements on environmental goals.

  • Though only a handful of members currently have ESG in their audit plan, others recognized the need and are kickstarting the process to get out ahead.
  • ESG goals “can become a sales pitch,” one member said, adding he is actively monitoring the goals, hoping to stave off the looming threat of ESG litigation.

As ESG initiatives grow, audit teams work to ensure companies meet their publicized targets.
 
At recent NeuGroup meetings, internal audit heads discussed taking the first steps at integrating ESG into their audit plans, conducting tests to ensure alignment with public statements on environmental goals.

  • Though only a handful of members currently have ESG in their audit plan, others recognized the need and are kickstarting the process to get out ahead.
  • ESG goals “can become a sales pitch,” one member said, adding he is actively monitoring the goals, hoping to stave off the looming threat of ESG litigation.

A legal perspective. At a first-half meeting of NeuGroup for Internal Audit Executives, Heather Palmer, a partner who helps lead the global ESG practice at the law firm Sidley Austin, gave members advice on how companies can eliminate potential legal or reputational issues before they happen.

  • She said that the first way companies can protect themselves in terms of their public claims is to be careful and cautious about what goals are being advertised.
    • “One of the challenges to publicizing goals is you have to be careful about what goals you’re setting and how you’re vocalizing those goals,” she said. “Do you have a plan to back up how you plan to achieve those goals?”
  • Ms. Palmer said that lack of consistency in terms of public ESG goals and internal documentation has gotten several companies in trouble so far. “Externally, some are saying they can meet a certain goal, or they have these priorities, but within the company perhaps it’s a different story,” she said.
  • “A large part of avoiding litigation relates to ensuring consistency across the company and making sure the things that are material are getting disclosed in SEC filings.”

Auditing ESG targets. To ensure the company stays on track, one internal audit member recently completed the corporate’s first audit of its ESG and sustainability reporting process.

  • “For the first phase, we actually just completed a walk-through of the entire process, understanding where information is coming from and the overall governance of the process,” she said.
  • For the second phase of the audit, her team conducted more substantive testing focusing on areas in which the CEO had indicated goals during an investor conference.
  • “The audit started after the team had started pulling together information for the sustainability report, so the goal for next year is to conduct the audit a little earlier in the process so as to not interrupt their consolidation process,” she said. “We are also evaluating how we align this process to our reviews/audit of the proxy statements.”

Future-proof. Another member said she is working with the A4S Academy, a program that supports and trains finance professionals on ESG initiatives, which she said has been helpful in learning what approaches other companies are taking, especially around disclosures.

  • She is now working with her company’s technical accounting group to take “the next step” into future-proofing their disclosures.
  • The member said she is expecting an announcement from the SEC toward the end of the year mandating climate and human capital disclosures. “So we’ve already got something going for both of those,” she said. “We’re trying to start early in preparation for next year’s 10k.”
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Treading Carefully: Growing List of Risks Moves ERM to the Forefront

Treasury teams communicating with the board on financial risk need a common language.
 
NeuGroup’s longstanding enterprise risk management (ERM) group has nearly doubled in size in less than a year, perhaps unsurprising given the relentless unfolding of political, environmental, health and financial risks worldwide, and global companies’ likely exposure to many of them.

  • Assistant treasurers in a recent meeting compared the roles their treasury departments take within ERM and got insight from the head of ERM at a Fortune 500 technology firm on how to bolster the function.

Treasury teams communicating with the board on financial risk need a common language.
 
NeuGroup’s longstanding enterprise risk management (ERM) group has nearly doubled in size in less than a year, perhaps unsurprising given the relentless unfolding of political, environmental, health and financial risks worldwide, and global companies’ likely exposure to many of them.

  • Assistant treasurers in a recent meeting compared the roles their treasury departments take within ERM and got insight from the head of ERM at a Fortune 500 technology firm on how to bolster the function.

The rise of ERM. Ted Howard, who leads the peer group, noted the recent emergence of key risks—ESG, for example—as one of several reasons fueling ERM as a priority for companies.

  • Another is the insurance market’s currently high premiums, encouraging senior leadership to emphasize more management of risks internally.
  • In addition, the ERM function’s ability to identify, quantify and qualify the types of risks requiring better control has greatly improved, Mr. Howard said, adding, “And what I keep hearing in our group is people asking, ‘How do you build a risk culture?’”

Treasury leads financial. One AT said ERM was added to her responsibilities a year ago, and the finance pillar—one of several risk pillars in her company’s ERM program—sits squarely in treasury rather than other parts of corporate finance.

  • The ERM executive presenting to the group said his company has 20 or so functional groups, each with a “risk-champion subject matter expert,” including investor relations, human resources, and all the business units.
  • “They’ve been trained in decision-making and risk management, and as the likelihood of them achieving their goals improves, the company as a whole benefits.”
  • The AT of a consumer goods company said ERM sits within treasury, noting the treasurer recently spoke to the audit committee about rising risks and mitigation efforts, and provided a subset session on ERM.
    • A large manufacturer’s AT added that ERM sits in the audit unit, but “treasury naturally leads initiatives related to finance.”

Where the risk lies. The AT a medical device company said treasury took responsibility of ERM a few years ago, but it has since moved to operations, where risks are deemed more significant.

Patience, communication and pre-mortems. Noting ERM may become one of a treasury leader’s several responsibilities, Mr. Howard asked the ERM executive for advice on where to focus.

  • For starters, he said, be patient, because adopting ERM is a culture change, and that takes time. Support from the board of directors and the executive team is essential, as is developing a common language to communicate about ERM to them and with those responsible for ERM in other units.
    • “Without a singular language, it’s hard for the board to understand and compare and make decisions about where to invest,” he said.
  • Do a “premortem” risk analysis, the executive said. That’s where a team embarking on a project or strategy is asked to assume, hypothetically, that it fails and quickly analyze what risks led to the failure.
  • This, he said, will typically result in a longer and more objective list of risks than a postmortem analysis, when team members tend to defend the plan they had followed.

Tech tip. An AT asked whether the ERM executive had found software to facilitate the ERM process. Nothing off the shelf that met all his needs, he said.

  • But his company’s research and development team adapted Atlassian’s Jira project management software to create a web interface that enables employees across the company to input risks.
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Talking Shop: How Long Is Your 10b5-1 Buyback Cooling-Off Period?

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


Member question: “We have stringent guidelines for establishing 10b5-1 plans: A cooling-off period of 30 days between executing a 10b5-1 plan and the first trade under the plan.

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


Member question: “We have stringent guidelines for establishing 10b5-1 plans: A cooling-off period of 30 days between executing a 10b5-1 plan and the first trade under the plan.

  • “The program should generally be no shorter than six months in duration and must not be ‘front-loaded’ (i.e., relatively even purchases over five months).
  • “We’re working with legal to reform these guidelines and trying to make an argument that one to five days is an appropriate cooling-off period and plans can be two to three months long.
  • “To support the change, we are looking to benchmark what our peer group and other large-cap companies are doing, with particular interest on established cooling-off periods, if any.”

Peer answer 1: “We don’t have any cooling-off period. Our typical 10b5-1 program duration is about six weeks for earnings blackouts.

  • “Those commence in the middle of the third month of the quarter and end after the earnings call + two trading days (we are able to be back in the market on the third trading day after any [material nonpublic information] is released).”

Peer answer 2: “We execute our share repurchases systematically throughout the year, entirely through 10b5-1 plans.

  • “We have no cooling-off period and no constraints on plan duration.
  • “We typically put a plan in place two days after an earnings announcement, with an expiration date that is two days after the following earnings date.”

Peer answer 3: “We run our 10b5-1 programs through the blackout period (starts 15 days prior to quarter-end and ends after earnings release).

  • “We have a 15-day cooling period after the plan is executed; the plan is executed at the end of the second month of each quarter.
  • “All other share repo is done under open market 10b-18 programs.”

Peer answer 4: “Our cooling-off period is similar [to the questioner] in length; however, our programs are generally about two months.

  • “In terms of structure, we typically increase the amount purchased each as the share price falls or we pick a price and say we want to be in for “X” volume at everyday under that price.
  • “Let me know if you have luck with a shorter cooling-off period.”

Peer answer 5: “[Your guidelines are] consistent with our 10b5-1 plan policy for employees.

  • “Are there corporates that have different 10b5-1 policies for employees vs. share buybacks?”

Read our recent article, “Caution at the 10b5-1 Intersection: Buyback Plans and Insider Sales” by clicking here

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The Sun Sets for Some on Easy, Shared Access to Bloomberg Terminals

Adjusting to the end of Terminal access via Bloomberg Disaster Recovery amid hybrid work.

Many treasury and finance teams that relied on Bloomberg’s Disaster Recovery (DR) services to share access to the company’s powerful Terminals are adapting to the end of their access.

  • It’s a challenge for some teams, given that many employees will continue to work from home part of the week and won’t have access to Terminals in offices.
  • That’s leading more companies to consider replacing physical Terminals with the Bloomberg Anywhere service.
  • Assistant treasurers at a recent NeuGroup meeting discussed Terminal access in the age of hybrid work models (home and office).

Adjusting to the end of Terminal access via Bloomberg Disaster Recovery amid hybrid work.

Many treasury and finance teams that relied on Bloomberg’s Disaster Recovery (DR) services to share access to the company’s powerful Terminals are adapting to the end of their access.

  • It’s a challenge for some teams, given that many employees will continue to work from home part of the week and won’t have access to Terminals in offices.
  • That’s leading more companies to consider replacing physical Terminals with the Bloomberg Anywhere service.
  • Assistant treasurers at a recent NeuGroup meeting discussed Terminal access in the age of hybrid work (home and office). 

Aggravation and appreciation. One member took his team’s shared Terminal home when the pandemic began and the office closed in early 2020. Other employees got access through Bloomberg’s DR services.

  • But the employee’s offices have reopened using a so-called hoteling model (reserve a desk when you’re in the office; someone else uses it when you work from home). So now the other employees don’t have the DR access.
  • The member said it would be disconcerting if he left the Terminal at a shared desk. For now, he’s taking it back and forth between his home and the office.
  • By contrast, another AT who works for a company using a hybrid model said he appreciated that the physical Terminal serves as an “anchor” for employees when they’re back in the office.     

Bloomberg everywhere? For some teams, Bloomberg Anywhere, which provides remote access to Terminal services through a personal computer or a mobile app, offers a clear solution.

  • The drawback: a company needs to pay full price for each user, as opposed to the single price of a shared, in-office Terminal.
  • One member at a company using a hybrid model who has a Terminal in the office said, “We’re trying to figure out, do we get rid of it? Do we just spend the money for Bloomberg Anywhere?”  
  • That’s exactly the plan adopted by another member whose company has gone fully remote, hiring employees from across the US.
    • He said the transition has forced him “to go to Bloomberg Anywhere, because my people are going to be everywhere.
    • “There’s no need to have any central Terminal, that’s not going to be a viable solution,” he said. “We’re definitely going to be moving toward Bloomberg Anywhere.”
  • One assistant treasurer said he was hired during the pandemic as the treasury team’s first step into a remote-only model. “They forked over the cash for Bloomberg Anywhere for me,” he said, joking that there was “no way” he’d cross the country to use the Terminal.

Bloomberg’s responses. A Bloomberg spokesperson, in response to questions from NeuGroup Insights about access to the Terminal using DR services, emailed the following statements:

  • “All firms with current subscriptions to the Disaster Recovery service continue to have access to it. Some companies may have opted not to renew, or to switch from Open Terminals to Bloomberg Anywhere, which provides each user with consistent remote access.”
  • “Starting in March 2020, we have extended use of the service for longer-term remote working scenarios. This extension has been available to all active DR services subscribers.”
  • “If clients need additional information, we recommend they contact their Bloomberg representative.”
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Caution at the 10b5-1 Intersection: Buyback Plans and Insider Sales

Companies using 10b5-1 plans for buybacks should keep informed about possible SEC rule changes aimed at executive stock sales.

The treasurer of a mega-cap tech company told peers at a recent NeuGroup meeting that he’s been hearing more “noise with regards to the SEC tightening up controls around repurchase windows” from the company’s legal team. He added, “We’re going to keep a close eye on it. We may tighten up our rules.”

  • The very same day—Sept. 9—SEC Chairman Gary Gensler thanked members of the SEC’s Investor Advisory Committee (IAC) who helped formulate draft recommendations on 10b5-1 plans—which are used by both corporate executives selling shares and corporates doing share repurchases.

Companies using 10b5-1 plans for buybacks should keep informed about possible SEC rule changes aimed at executive stock sales.

The treasurer of a mega-cap tech company told peers at a recent NeuGroup meeting that he’s been hearing more “noise with regards to the SEC tightening up controls around repurchase windows” from the company’s legal team. He added, “We’re going to keep a close eye on it. We may tighten up our rules.”

  • The very same day—Sept. 9—SEC Chairman Gary Gensler thanked members of the SEC’s Investor Advisory Committee (IAC) that formulated recommendations on 10b5-1 plans—which are used by both corporate executives selling shares and corporates doing share repurchases.
  • “These include a mandatory cooling off period between adoption of a plan and the first trades under the plan; prohibitions against an insider having multiple plans at the same time; and enhanced public disclosure of 10b5-1 plans,” Mr. Gensler said.

Footnotes and intersections. The first sentence of the recommendations has this somewhat intriguing footnote: “The IAC did not consider issuer share buybacks in its deliberations on this recommendation and believes that any changes to the regulation of these programs should be addressed separately.”

  • But attorneys contacted by NeuGroup Insights said corporates that engage in buybacks should not read too much into the IAC’s decision not to include buybacks in this set of recommendations on 10b5-1 plans.
  • Jonathan Richman, a partner at Proskauer, noted that “if the Commission were to amend Rule 10b5-1 without expressly excluding buyback plans, the amendments would likely apply to those plans as well to individual plans. So the fact that the current recommendations do not mention buyback plans does not necessarily mean they would not be covered by an amended Rule.”
  • Matt Rossi, a partner at Vedder Price, who formerly worked at the SEC, said, “I don’t think based on that footnote that it’s wise to disregard what the former Commission chair and the current chair have said about an intersection or interplay between 10b5-1 plans and buybacks.”

Critical context. Indeed, the IAC’s recommendations, aimed at further curbing insider trading, followed comments Mr. Gensler made in June when announcing he had asked staff for suggestions to “freshen up Rule 10b5-1.” His remarks included this sentence:

  • “In addition, I’ve asked staff to consider other potential reforms to the rule, including the intersection with share buybacks.”
  • His predecessor, Jay Clayton, had also called attention to share repurchase programs, recommending that companies use “additional hygiene” and implement “policies and procedures to ensure that when [buybacks] are put in place or restarted, the company does not have material nonpublic information (MNPI).”
  • Earlier, Mr. Clayton had written, “In addition to fostering an environment of compliance…around trading by senior executives and board members, boards of directors, and their compensation committees, should consider the interplay between company share repurchase plans and such trading, including when approving Rule 10b5-1 plans.”
  • Mr. Rossi observed, “Clearly, there’s some concern there about a corporation buying stock back from its own shareholders when it knows there’s a potential event coming up that may impact the share price but obviously the shareholders don’t have such knowledge.”

It’s not just about insider trading. Another sign that corporates need to make sure they have the proper controls in place around buybacks emerged last fall when the SEC settled charges against the refiner Andeavor, “for controls violations relating to a stock buyback plan it implemented while it was in discussions to be acquired by Marathon Petroleum Corp. in 2018.”

  • Andeavor agreed to pay a $20 million penalty to settle the charges.
  • As Mr. Rossi noted, the SEC charges against Andeavor were based on the company’s failure to follow its own policies and procedures related to stock buybacks—not insider trading.
  • For the SEC, “if a company fails to follow its own compliance procedures with respect to protection of material nonpublic information and share repurchase programs, nothing is easier than simply bringing a policies and procedures case,” Mr. Rossi said.

Best practices. In July, Mr. Rossi wrote that Mr. Gensler’s initial request for recommendations meant that, “Issuers and corporate insiders should consider now what changes can be made proactively to bring their Rule 10b5-1 plans in line with industry best practices.” He identified two critical areas:

  1.  “Companies should make sure they are not in possession of material nonpublic information with respect to things like M&A transactions before they start implementing buybacks, unless the buybacks are done pursuant to a Rule 10b5-1 plan adopted before the company was in possession of that MNPI. That’s certainly something that’s going to attract Commission attention,” he said this week.
  2. “Companies should be similarly vigilant to prohibit senior executives and directors from adopting Rule 10b5-1 sales plans at times when such individuals may possess material nonpublic information concerning the issuer’s stock repurchase plans,” he added.
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Expanding Horizons: Making the FP&A Mindset Cross-Functional

One member’s team streamlined its approach to forecasting with a transformation model from FP&A solutions provider Jedox. 

FP&A teams use data analysis to help companies understand their finances and plan for a long term future—but why limit this to only the finance group?

  • At a recent meeting of NeuGroup for Financial Planning and Analysis, Dr. Liran Edelist, president of Jedox, shared how the company’s planning and analytics solution supports digitizing the FP&A function and broadening its scope. (Dr. Edelist has a doctorate in business administration.)
  • Jedox uses the term xP&A (extended planning and analysis), coined by Gartner, to refer to this expansion of an FP&A-style approach, embracing a top-down, driver-based model of planning—one that focuses on the key drivers of business results.

One member’s team streamlined its approach to forecasting with a transformation model from FP&A solutions provider Jedox. 

FP&A teams use data analysis to help companies understand their finances and plan for a long term future—but why limit this to only the finance group?

  • At a recent meeting of NeuGroup for Financial Planning and Analysis, Dr. Liran Edelist, president of Jedox, shared how the company’s planning and analytics solution supports digitizing the FP&A function and broadening its scope. (Dr. Edelist has a doctorate in business administration.)
  • Jedox uses the term xP&A (extended planning and analysis), coined by Gartner, to refer to this expansion of an FP&A-style approach, embracing a top-down, driver-based model of planning—one that focuses on the key drivers of business results.

Breaking down silos. Dr. Edelist called xP&A the natural evolution of FP&A. Where FP&A was a name some companies gave their budget department, xP&A is about expanded, cross-functional planning. The idea, he said, is to break down silos between financial planning and business planning to yield better cooperation and increased collaboration.

  • “For example, if the FP&A team is forecasting revenue with an advanced tool for the financial forecast, sometimes the salespeople, when they need to do analysis, they use different tools,” he said. “If we break those data silos, we can create one center of excellence that uses data science, consolidating planning into one.”
  • Members at the meeting had the opportunity to grade their progress on the journey to a driver-based planning model.
    • Though the term xP&A was new to all at the meeting, a number of members shared that they are in the midst of the process.  
  • One member, whose experience resonated with a number of others, said that his corporate FP&A team is fairly close to achieving the goal of xP&A’s cross-functional planning.
    • “But getting buy-in with our business group FP&A teams can be difficult,” he said. Those teams have made less progress; they’re “building detailed, bottoms-up roles as opposed to driver-based forecasting.”

Streamlining. Using Jedox’s model of transformation, one member adopted machine learning models to streamline many processes in three steps, starting with cash forecasting:

  1. Automation. In two months, Jedox’s automated data integration and validation aided the member in setting up a machine learning-based forecast that cut the time needed to from two weeks to two days.
    • Dr. Edelist said this automation doesn’t necessarily have to be limited to forecasting, and could include generating reports, revenue and HR.
  2. Collaboration across the business. As Jedox is able to ensure accurate data and provides a single location for everything from P&L, cash flow or balance sheet information, it aids in bringing teams together. “Thinking about xP&A, it’s not just breaking silos, but connecting different parts of the company,” Dr. Edelist said.
  3. Transformative planning, creating value. The member said the project essentially paid off immediately and recommends first aiming for projects that provide quick wins to demonstrate the value of transformation.

Streamlined. “Going back five years ago, our top-down budget would be sent out in the form of a slide deck with a table in it,” the member said. “Now, we have a robust, automated process using Jedox.”

  • Now, the moment the FP&A team sets its targets, leadership is all sent individual charts, and can see the assumptions and details in a matter of minutes.
  • “Being able to do all that work and get to that level of granularity is fantastic,” he said. “There are more areas, like supply chain, that are just getting started as well.”

The journey to better planning. To get started, Dr. Edelist recommends FP&A teams start to consolidate as much internal data as possible. “Look at your planning information—do you have enough data to start, and is planning flexible?”

  • He suggests consideration of modern planning solutions that can support xP&A early on in the process, moving away from dependence on spreadsheets and internally built Excel solutions. “Spreadsheets are fine, but automation is the future,” he said.
  • “The road map to xP&A starts with looking not only at the financial arm, but the corporate drivers behind that: expenses, revenue, investment,” Dr. Edelist said. “We can start the transformation by putting all of that analysis in the same place.”
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Here and Now: The Benefits of Right-Time Finance for FP&A

At a time when agile enterprises are in favor, OneStream suggests finance functions live more in the moment.

Accounting functions tend to look backward, with reporting that’s subject to close processes and consolidation. Planning and forecasting, on the other hand, is looking forward, seeking to support business partnerships by helping managers predict what’s coming.

  • Covid—especially the early period of the pandemic, which was arguably the most forecasted and re-forecasted period in modern history—has helped emphasize the importance of focusing more on the here and now.

At a time when agile enterprises are in favor, OneStream suggests finance functions live more in the moment.

Accounting functions tend to look backward, with reporting that’s subject to close processes and consolidation. Planning and forecasting, on the other hand, is looking forward, seeking to support business partnerships by helping managers predict what’s coming.

  • Covid—especially the early period of the pandemic, which was arguably the most forecasted and re-forecasted period in modern history—has helped emphasize the importance of focusing more on the here and now.
  • The goal is to find signals of opportunity or risk that will help proactively drive performance with higher velocity, even in circumstances that are uncertain or subject to rapid change.
  • This also fits with the digitalization of business, where it pays to be agile and pivot quickly in response to new circumstances and what the most recent data signals about what’s coming.

Rise to the occasion. With that backdrop, John O’Rourke, OneStream vice president of communications and brand marketing, said the finance journey for financial planning and analysis (FP&A) is reaching an inflection point.

  • “This is a moment for right-time finance, where FP&A should be proactively reading performance signals and helping the businesses be agile and respond to change on a more frequent basis, such as daily or weekly,” he said.
  • This shift to right-time finance for FP&A was one of the key takeaways from day one of the NeuGroup for Financial Planning and Analysis pilot meeting sponsored by OneStream, which provides an intelligent finance platform for the modern enterprise.
  • According to Mr. O’Rourke, “Decision-makers can no longer wait until month-end or quarter-end to get access to financial and operating results. They need access to key performance data and metrics about customers, suppliers and working capital on a more frequent basis so they can make decisions that impact future results.”
  • What separates right-time data from its cousin real-time data is that data needs to be transformed to information by putting it in context and adding financial intelligence so business leaders have access to the right info at the right time in the right format and don’t just make knee-jerk decisions in response to each new data point that comes in.
    • In other words, FP&A still needs to help identify the trends and signals in the noise to help business leaders make the right decision at the right time.

Stress testing agility. Drawing on results from the FSN 2021 Survey on Agility in Planning, Budgeting and Forecasting, Mr. O’Rourke encouraged members to stress test the agility of their organizations against three benchmarks. Implicit in each of these benchmarks is enhancing FP&A’s ability to accelerate insights.

  • Velocity. The time needed to reforecast earnings and revenue should be less than a week, and that forecast should provide a look at the year ahead that can be relied upon with confidence.
  • Accuracy. Companies should be able to forecast earnings and revenues to within +/-5%, even with a speedy reforecast. However, members noted that this percentage may be too low for some businesses.
  • Change management. Companies should be able to make a minor change to their budget and roll out that change to budget holders’ templates within half a day. They also should be able to make a simple change to their hierarchy in that same timeframe.

How to improve. Clearly it helps to have capable people and software, but adopting a rolling forecast and zero-based budgeting is shown to significantly improve FP&A agility.

  • Rolling forecasts (see chart above): Per the FSN survey, 70% of respondents deploying rolling forecasts (and just 19% did) were able to reforecast in under a week (vs. 63% for those who only reforecast quarterly).
    •  Almost half of rolling forecasters had +/-5% or better accuracy (vs. 35% of quarterly updaters) and 71% could make a minor change to budget/forecast model within a half day (vs. 57% of the quarterly updaters).
  • Zero-based budgeters also outperform: 84% of them can reforecast in under a week (vs. 51%) with 58% having +/-5% or better accuracy on earnings forecasts (vs 28%; and 60% vs. 35% for revenue forecasts). Also, 62% of ZBBers could make a change within a half day (vs. 27%).

Final thought. Mr. O’Rourke says it’s still important to have an accurate and timely period-end financial close process, so that book-of-record financial and operating results can be delivered as rapidly as possible to internal and external stakeholders. 

  • And it’s becoming increasingly important, he said, “to have agile planning and forecasting processes that help managers adjust resource allocations based on changes in your company or industry”. 
  • But many organizations are now also providing more frequent snapshots of operating metrics to managers, some daily or weekly, to help identify key trends and signals in the business that can support midstream decision-making.
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