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Shifting Tides: The Role of DEI Firms in Capital Markets

New NeuGroup Peer Research shows DEI firms enjoy support among corporates but face headwinds in the current ESG climate.

A new NeuGroup survey reveals that 66% of corporate treasuries include diverse-owned firms in their capital markets deals, including bond underwriting, commercial paper (CP) and open market repurchase (OMR) programs. The survey, conducted in collaboration with Sustainable Fitch and the National Association of Securities Professionals (NASP) in December 2023, explored the level of engagement between treasury and diverse-owned firms.

Shifting winds. 
NeuGroup members who responded to the survey cited two top reasons for awarding minority-owned firms a share of treasury’s capital markets business. Chief among them is supporting the company’s diversity objectives, listed as a benefit by 87% of respondents (see chart), followed by sending a positive message to employees, suppliers and customers (78%).

New NeuGroup Peer Research shows DEI firms enjoy support among corporates but face headwinds in the current ESG climate.

A new NeuGroup survey reveals that 66% of corporate treasuries include diverse-owned firms in their capital markets deals, including bond underwriting, commercial paper (CP) and open market repurchase (OMR) programs. The survey, conducted in collaboration with Sustainable Fitch and the National Association of Securities Professionals (NASP) in December 2023, explored the level of engagement between treasury and diverse-owned firms.

Shifting winds. 
NeuGroup members who responded to the survey cited two top reasons for awarding minority-owned firms a share of treasury’s capital markets business. Chief among them is supporting the company’s diversity objectives, listed as a benefit by 87% of respondents (see chart), followed by sending a positive message to employees, suppliers and customers (78%).

  • These benefits illustrate both a weakness and a strength in supporting continued or expanded corporate engagement with diverse-owned banks and broker-dealers. Because they are related to companies’ overall commitment to DEI, they leave these firms vulnerable to shifts in the social, political and economic environment.
  • “The environment in 2024 is not what it was in 2021-22,” noted one respondent in a follow-up conversation. Indeed, several companies have made headlines by backing away from earlier ESG commitments and reducing the size of their DEI teams—one aspect of the social component of ESG.
  • “We have used diverse firms for a number of years, purely because it’s an effective way to demonstrate these are organizations we believe in,” one respondent said. “The danger is that if the company’s commitment to the issue wanes, it is no longer a big motivator.”

Investors and capital. The third most common benefit (72%)—access to a diverse investor base—indicates that minority-owned firms have an important and continuing role to play in executing corporate capital markets transactions, one with economic value. One member also highlighted the firms’ analytical skills related to investors. “The diverse-owned firms conducted much better analysis ahead of a bond deal,” one respondent said. “They looked at our overall debt investor base and dug deeper to find out, for example, what percentage of bonds is held by different types of investors, like insurance firms.”

  • But corporates allocating fees (share of wallet) typically award the most lucrative roles to banks that commit capital to their revolvers; most diverse-owned financial institutions lack the capital needed to support those credit commitments. As a result, over three-quarters of respondents that work with diverse-owned firms on bond deals use them as co-managers as opposed to being active book runners that earn higher fees.
  • “Our current pricing approach requires a bank to take trading risk,” explained one respondent. “The problem is that they lack the capital to support the types of transactions we undertake.”
  • Another member said, “At a certain point, we will be cannibalizing the fee pool for banks that are providing us capital. Continuing to grow our business with all but the largest diverse-owned firms may be a challenge in this environment.”

A different type of capital. The key for maintaining and growing diverse-owned firms’ share of corporate capital markets deals is to not compete with big banks, but to offer more reasons for treasuries to award them higher fees. “The firms need to find the one thing or value they can deliver and do it consistently,” one member said. “They need to offer something that differentiates them from other firms.”

  • Minority-owned firms often play active roles in CP and OMR programs because those do not require capital commitment. In fact, some treasurers said they use diverse-owned firms exclusively in their CP and OMR programs.
    • “We get better execution than we do with bulge-bracket banks because the smaller institutions pay more attention to our business,” explained one respondent. “We found that they actually outperform the bulge-bracket banks.”
  • As noted above, another area where some diverse-owned firms already shine is offering a unique point of view on the market and providing deeper and more insightful analysis. “They have to compete on intellectual capital,” said a respondent. “We partner with DEI firms that offer something unique and value added.”
  • He added: “If I get 100 emails from banks with their market insight every day, the only one I read is from a diverse-owned firm. They bring a different geopolitical and economic perspective that I don’t get anywhere else.”
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Seeking Solutions, Pushing Banks for Change on Signer Management

As NeuGroup members unite to lobby banks, digital signer portals from Citi and J.P. Morgan create buzz.

Frustration with the inefficiencies of tracking and updating signers on bank accounts has pushed some members of NeuGroup for Global Cash and Banking to form a subgroup to present a united front in asking banks for digital solutions and standards that will provide real-time visibility to signer data (Step 1) and, ideally, make it possible for that data to flow directly into treasury management systems (TMSs) and other corporate databases (Step 2).

  • “How can we collectively tell the banks we’re done waiting for this to get handled over the next 10 years, and to put the resources to it?” one member asked during a December session. “I’d rather have banks focus on that in the near future, rather than talk about AI.”

As NeuGroup members unite to lobby banks, digital signer portals from Citi and J.P. Morgan create buzz.

Frustration with the inefficiencies of tracking and updating signers on bank accounts has pushed some members of NeuGroup for Global Cash and Banking to form a subgroup to present a united front in asking banks for digital solutions and standards that will provide real-time visibility to signer data (Step 1) and, ideally, make it possible for that data to flow directly into treasury management systems (TMSs) and other corporate databases (Step 2).

  • “How can we collectively tell the banks we’re done waiting for this to get handled over the next 10 years, and to put the resources to it?” one member asked during a December session. “I’d rather have banks focus on that in the near future, rather than talk about AI.”
  • The good news is that some banks, including Citi and J.P. Morgan, are in different stages of offering digital signer portals and platforms to corporates. Members participating in rollouts of these solutions are sharing information on their capabilities and the experience of working with the banks to improve the offerings.
  • NeuGroup is committed to facilitating dialogue between banks and corporates to address this and other issues with electronic bank account management (eBAM). Existing NeuGroup members who are interested in participating or getting more information can reach out to peer group leader Julie Zawacki-Lucci via email.

Signer pain. A key frustration for treasury teams responsible for BAM is the time-consuming, manual nature of confirming with banks the names of signers on what can be thousands of accounts at dozens of banks spread across the globe—information needed for external audits, SOX compliance, fraud prevention and other reasons. Members also describe sending endless emails to obtain data and correct inaccuracies in bank records that have not been properly updated.

  • “It’s frustrating managing an Excel spreadsheet and trying to keep up,” one member said. Another agreed: “Even knowing who your signers are at any given point—the annual process is painful.” She added, “Today, if I needed to get reports on all those who have portal access across our banks, there are reports and visibility into users and accounts that I can run and see. My position is that the banks should have signatories set up in a similar manner.”
  • One factor that has inhibited progress, members said, is that many banks don’t have fast, digital access to signer information and documents. “Banks are telling us they also grew through acquisitions and are trying to consolidate systems on their end as well to gather that data,” one member said. “Even on their back end, it didn’t seem like there was an automated process they have for tracking signers,” another added.

Citi’s digital solution. One member at the December session told peers about what Citi calls its Digital Signer Management program that sits inside CitiDirect, the bank’s global, digital banking platform. “This new portal will allow us to see our signers that Citi has on file currently and, when we need to, we can use it to launch and initiate a signer update,” she said.

  • Citi confirmed to NeuGroup Insights that its portal gives clients the ability to maintain signer information and submit documentation online globally. The bank reviews changes and performs automated signer maintenance in a global, centralized signer database. Clients have access to real-time reporting to view signer details and create on-demand signer summary reports.
  • Citi’s work on the signer solution started three years ago and required combining local repositories of signer information and documents into one, global, digital repository to create “one source of truth,” said Magdalena Mielcarz, Global Head of Onboarding-Platforms & Data Services. This allows a treasury team to have visibility through the portal of all of their signers in multiple branches or countries, eliminating the need to ask the bank for signer summary reports.
  • The NeuGroup member whose company is now using Citi’s Digital Signer Management program is one of more than 300 corporates that Citi has invited to use the solution, which now covers bank accounts in 44 of the 95 countries where Citi has on-the-ground presence.
  • The companies invited so far have a majority of their accounts in those 44 countries. Citi, which went live with the offering in June 2023, will “start opening the gates a lot more this year” as it plans to add more countries, according to Ms. Mielcarz.
  • Julie Betts, a Citi director who has played a key role in the bank’s digital onboarding and Digital Signer Management program development, elaborated on the advantage the signer program provides, for example, when updating a person’s signing authority in multiple locations, formerly a decentralized, prolonged process.
  • “Now, this solution allows our clients to update one or more signers in multiple locations through a single, digitally initiated request; this allows Citi to make the requested changes at a personal level, instead of on an account-by-account basis,” she said.
    • “So if you’re updating Sally and she’s left the company and Jane is taking over, we allow the client to do that as one activity instead of having to go to 44 different countries. So that’s a huge, fundamental change from a client perspective in how they manage signer updates today.”

Working with J.P. Morgan. One member of the global cash and banking group told peers about her company’s use of Authorized Signer, a solution offered by J.P. Morgan through its Access platform that she said “has been great” in the US. Her team worked with the bank extensively to address differences between signers listed in the portal and the company’s own records. Discrepancies have been resolved successfully and the portal “can help with FBAR reporting as well,” she said.

  • A J.P. Morgan spokesperson described the solution, launched in 2022, as “a self-service tool for clients to have visibility and reporting of account and entity signers, simplifying the process for treasury teams,” adding that it allows new clients to view and export their signatories for reporting and other purposes.
  • Access Authorized Signer is available to “all new clients and current clients are being migrated to the tool,” the spokesperson said. It’s being used in “several countries across North America, EMEA, APAC and LatAm.”
  • For the member using it, the solution is a significant improvement over what had been a very decentralized process that “was all in spreadsheets,” she said. The portal offers the visibility and centralization the member wanted. It does not currently enable updating signer data within the portal; but requesting updates through email is not a problem for her.
  • “It’s going to be great when all banks are offering” similar digital signing portals, she said. However, “having to log into each portal and run a report is still going to be time consuming.” Another member said, “What I don’t like is that you have to go through a portal.” That leads directly to the other major issue for corporates joining forces: the desire to have signer data flow from banks to their TMSs.

Step 2: Standardization, APIs and TMSs. Yet another member, commenting on the solutions offered by Citi and J.P. Morgan, said she was “happy there was some small movement in the right direction. I think it’s a good Step 1. Step 2 would be getting that information into whatever work station you’re working with,” meaning a TMS.

  • Most everyone agreed with that assessment. But they also said that will require banks to agree on standard file formats and to work with TMS vendors. “I’d rather this be bank agnostic,” one member said. “We need it in our databases.”
  • That won’t happen overnight. “Banks are not ready is what I’m hearing,” one member said. She added that her TMS vendor is “not set up in a way to take all of that data and do something with it. You almost have to push in both directions or else it doesn’t move.”
  • Pushing is exactly what the subgroup of the global cash and banking group will be doing in the weeks and months ahead, supported by NeuGroup. A draft list of priorities written this week includes: “Future Consideration—automatic transfer of data (via API) to TMS or other system to help us consolidate signers across various banks.”

Bank agnostic? Looking into bank-agnostic fintech solutions to relieve signer management pain is also on the agenda of some NeuGroup members. One member who saw a fintech demo its solution said, “it seemed like a great product.” But his company is using an eBAM tool offered by its TMS vendor. Another member said his company tries to create solutions on its own. “We typically choose to build over buy,” he said.

  • Whatever road corporates go down, one thing is clear, according to Ms. Zawacki-Lucci, the NeuGroup peer group leader: “The bottom line is that banks must digitize the signer information they have been warehousing in antiquated ways,” she said. “Where the technology for bank portals exists, it is unacceptable that the information isn’t readily available to managers of those accounts.”
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Sharpening Treasury’s Strategic Profile Means More Collaboration

Members share the rewards and obstacles of collaborations with FP&A, tech, tax and other functions.

Top treasurers are growing into more strategic roles and playing a greater part in decision-making at companies where finance is valued as true partner of the business. The function’s broader profile means treasury teams need to collaborate effectively and frequently with a variety of other functions within the enterprise. Doing that well ultimately pays off, but isn’t always easy.

  • In a recent session of NeuGroup for High Potentials, treasury managers and analysts shared experiences, triumphs and challenges of working with their most frequent collaborators. One consistent theme: It’s worth making an extra effort to foster strong relationships.

Members share the rewards and obstacles of collaborations with FP&A, tech, tax and other functions.

Top treasurers are growing into more strategic roles and playing a greater part in decision-making at companies where finance is valued as true partner of the business. The function’s broader profile means treasury teams need to collaborate effectively and frequently with a variety of other functions within the enterprise. Doing that well ultimately pays off, but isn’t always easy.

  • In a recent session of NeuGroup for High Potentials, treasury managers and analysts shared experiences, triumphs and challenges of working with their most frequent collaborators. One consistent theme: It’s worth making an extra effort to foster strong relationships.

Figure out FP&A. Treasury’s often uneasy collaboration with FP&A primarily revolves around forecasting—which the functions approach from different perspectives. So it’s no surprise members reported varying degrees of responsiveness when seeking help or information from FP&A teams. One member found the remedy for slow response times is putting treasury and FP&A under the same organizational umbrella.

  • “We started under the controllership and then moved under FP&A; we actually work much closer with FP&A now that we’re part of the same org, particularly on the cash forecast, aligning the direct and indirect approaches,” he said. “We’ve gotten much higher quality data, and obviously much better responsiveness now that we have the same goals.”
  • Another member sits on treasury’s capital markets team and said FP&A is a vital partner. “If we have board presentations coming up and slides we need help on, they can do that,” he said. The collaboration helps on capital allocation issues, “whether it’s the timing of repurchases, or when to issue bonds: When does the cash come in, and when does the cash go out?”

Technology ties. Most members have some support from corporate IT, but some feel they’re left to manage complex implementations themselves. Treasury at some tech companies, meanwhile, has greater access to IT budget and more latitude to experiment and collaborate. Regardless, regular meetings with tech teams can help overcome obstacles.

  • One member at a tech firm collaborates on a nearly daily basis with a dedicated fintech team that helps manage the TMS and adds value in other ways. “I feel like they sometimes have a different insight into what new business lines we’re going into and vice versa, so I pretty frequently touch base with that team,” she said.
  • Not everyone is in that position, of course. One member whose technology budget was recently slashed said she “doesn’t have anyone that supports us.” Treasury is in charge of the TMS and connections to banks, and only gets help from corporate IT on what she called “enterprise projects” like updating the company’s ERP.
  • While a lack of technology support can be a pain, strong relationship management can pay dividends, one member said. “Having gone through an ERP change and implementation, it really helps having a good relationship with our enterprise applications team who manage any internal software,” he said.
    • “What’s been really great is educating and teaching them treasury concepts—so they can then know what we need. Even not having a dedicated team, having close relationships and even just having recurring meetings with them has been really helpful for our team.”

Adjusting the payments machine. Multiple members are transitioning from a transactional focus on payments to a more strategic approach. Treasury teams that now prioritize smarter decisions on fund allocation and banking relationships need close collaboration with AP and AR.

  • “Treasury was very much a payment machine, we generated wires and all that kind of stuff,” one member said. “In my role now, we do move money around, but it’s usually more strategic: Where does the money need to be in the bank account?”
  • “There are a lot of guidelines and policies on payments that we have been a part of as they’ve been built up over time,” another member said. “As long as everybody is following those guidelines, we know what to expect from a cash perspective. Those kinds of things are part of the structure that’s put in place so we don’t have to have the day-to-day interaction with AR and AP.”

Sizing up tax and accounting. Nearly all members said the majority of accounting and tax operations are done separately from treasury, with interactions limited to reviewing, auditing or on a one-off basis—though some teams maintain more collaborative relationships.

  • One member has a dedicated accounting team within treasury that helps with day-to-day operations. “They come to us for verification, so we’re doing the accounting on the back end and then when it posts in our system,” he said. “We verify with controllership that it’s posting exactly what we thought. So that one is a shared function.”
  • Members from larger corporates said they typically have smooth collaboration with tax teams on day-to-day operations. “It’s tax and treasury work hand-in-hand every day,” one member said. “Operations fly!”
  • That’s not always the case for smaller teams. One member from a less mature company said, “For us, working with tax has been challenging. Sometimes it’s been working for different purposes—we are in separate departments and they roll up through controllership, and we roll up through corporate finance. They don’t have the same priorities at an organizational level.”

The spirit of collaboration. One member, describing treasury’s mostly non-existent relationship with procurement, neatly captured the spirit of the ideal state of his team’s interaction with all other functions: “Our day-to-day jobs don’t align, but we collaborate when our strategic objectives do.”

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Battling Bias To Boost Small Businesses: C2FO CEO Sandy Kemper

The CEO of a working capital platform says early payments can level the field for minority- and women-owned businesses.

slowing US economy and elevated interest rates are putting renewed focus on working capital management and the obstacles faced by many minority- and women-owned small businesses in obtaining bank loans in the current regulatory environment. One way around the problem: early payments that allow vendors to get paid faster and offer buyers a discount.

  • In a NeuGroup video you can watch by clicking the play button below, C2FO founder and CEO Sandy Kemper advocates for solutions and platforms like the one his company offers that bypass traditional loan processes where banks must assess credit risk, putting smaller businesses at a disadvantage.
  • Early payments address what Mr. Kemper describes as bias. “The only way you’re going to solve bias, or to a degree, perceived prejudice in the financial system, is to stop the process and the need to risk underwrite,” he says in the video. “When somebody gets paid early, there’s no risk to it.”

The CEO of a working capital platform says early payments can level the field for minority- and women-owned businesses.

slowing US economy and elevated interest rates are putting renewed focus on working capital management and the obstacles faced by many minority- and women-owned small businesses in obtaining bank loans in the current regulatory environment. One way around the problem: early payments that allow vendors to get paid faster and offer buyers a discount.

  • In a NeuGroup video you can watch by clicking the play button below, C2FO founder and CEO Sandy Kemper advocates for solutions and platforms like the one his company offers that bypass traditional loan processes where banks must assess credit risk, putting smaller businesses at a disadvantage.
  • Early payments address what Mr. Kemper describes as bias. “The only way you’re going to solve bias, or to a degree, perceived prejudice in the financial system, is to stop the process and the need to risk underwrite,” he says in the video. “When somebody gets paid early, there’s no risk to it.”

Less friction. The full conversation between Mr. Kemper and NeuGroup founder and CEO Joseph Neu will be released in the coming weeks on NeuGroup’s Strategic Finance Lab podcast. The interview includes the former bank CEO’s insights on reducing “friction” in financial marketplaces and how he applied his friction reduction mindset to the art market. Mr. Kemper—who lives with his family on a ranch along with horses and sheep—also discusses lessons he’s learned from nature and ecosystems.

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Talking Shop: Limits in Treasury for Approving Funds Transfers

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


Context: Setting limits on the size of funds transfers that individuals on a treasury team can approve is a basic part of effective risk management, good governance and sensible treasury policies. The question is how to determine the dollar amounts. For context on the issue, NeuGroup Insights reached out to members with longtime experience in 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].


Context: Setting limits on the size of funds transfers that individuals on a treasury team can approve is a basic part of effective risk management, good governance and sensible treasury policies. The question is how to determine the dollar amounts. For context on the issue, NeuGroup Insights reached out to members with longtime experience in treasury.

Whom do you trust? 
One of our veteran treasurers said trust is a major piece of the equation, both in selecting which team members can approve wire transfers and in determining the limit amounts. “The number is inconsequential compared to the trust factor,” he said.

  • His trust depends in part on the person’s level of experience and training. For a more junior member, the number “is big enough that they’re approving the things that come from the AP group from our shared service center. And small enough that I’m not worried we’re going to break the bank.”

How big are the wires? Setting limit levels requires knowing the amounts that treasury has had to approve in the past. “When thinking about approval levels, you may have a treasury director that can approve payments up to a certain dollar amount, an AT up to an amount above that and then the treasurer above that,” a different member said. “When you think about the appropriate dollar amounts for each of those people, you need to understand the dollar range of payments to be made.”

  • “To set the approval levels, you look at the history of payments over a certain time period (i.e., one month, one quarter, etc.). You don’t want to have a situation where the treasurer needs to approve all payments over $250,000 and they then find themselves approving 90% of the payments. You need to strike an appropriate balance to establish what they need to approve.”

Member question: “What limits for approving/releasing funds transfers within treasury do you have by level? Do you delineate limits between external transfers vs. intercompany account transfers?

  • “I am working on proposing increasing limits to approve/release wires handled by treasury. Although I have no limit as treasurer, the head of [treasury] operations only has $5 million, so there are a lot of wires that I end up releasing. We also have an additional director with a $500,000 approval/release limit.”

Peer answer 1: “Given that the sizes of organizations are different, I think instead of looking at the dollar amount, you need to look at the dollar size distribution of the payments and decide what the appropriate approval levels are. The backdrop is that by the time the payment comes to treasury, it would have gone through an internal approval process.

  • “By setting the level too low, as you said, you end up releasing everything. Also, you may want to have separate approval levels for reoccurring payments, such as debt principal and interest payments since those are known upfront.”

Member response: “Good suggestion on looking at payment distribution, which we are in the process of doing to derive a recommendation. In terms of internal approvals, many of our payments are for treasury related items, so we are usually the ones who have approved the item for payment.”

Peer answer 2: 
“The treasurer and assistant treasurer have unlimited limits, primarily due to the potential for large internal transactions and milestone payments. A third individual in treasury has unlimited limits for internal transactions but has an external limit of $25 million.”

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Taking Advantage of the Cloud Stall

Smart treasuries are building and testing solutions to drive transformation, not waiting for cloud-based ERP implementations.

By Joseph Neu

NeuGroup’s 2024 Treasury and Finance Agenda Survey provides a backdrop that helps illuminate how smart treasuries are not letting what I have dubbed the “cloud stall” impede their progress toward digital transformation. The stall occurs when treasury waits for an enterprise to implement a cloud-based ERP—and the treasury functionality ERP vendors are developing—to drive technological advancement. By contrast, smart treasuries are taking advantage of the waiting time created by the cloud stall to experiment and build their own solutions, sometimes with help from internal and external resources.

  • These treasuries are implementing a new-generation of cloud-based applications that can be deployed quickly, are relatively inexpensive and integrate well in a cloud architecture to analyze data to drive decision-making. They provide an example of what others would be well advised to emulate to avoid a stall that sends the treasury plane falling from the sky.

Smart treasuries are building and testing solutions to drive transformation, not waiting for cloud-based ERP implementations.

By Joseph Neu

NeuGroup’s 2024 Treasury and Finance Agenda Survey provides a backdrop that helps illuminate how smart treasuries are not letting what I have dubbed the “cloud stall” impede their progress toward digital transformation. The stall occurs when treasury waits for an enterprise to implement a cloud-based ERP—and the treasury functionality ERP vendors are developing—to drive technological advancement. By contrast, smart treasuries are taking advantage of the waiting time created by the cloud stall to experiment and build their own solutions, sometimes with help from internal and external resources.

  • These treasuries are implementing a new-generation of cloud-based applications that can be deployed quickly, are relatively inexpensive and integrate well in a cloud architecture to analyze data to drive decision-making. They provide an example of what others would be well advised to emulate to avoid a stall that sends the treasury plane falling from the sky.
  • Recent examples of how smart treasuries at NeuGroup member companies are pushing ahead with self-built treasury technology solutions include a yearslong project at a large manufacturer to transform cash forecasting with the help of data scientist “wizards” who have built a number of algorithmic models based on statistical time theories, machine learning, neural networks and regressions, among other tools.
  • These and other examples, including treasuries building their own data dashboards using Tableau and Power BI or bolting on solutions from third-party vendors, have implications for ERP providers: They may find that their efforts to advance functionality for treasury, aiming to fulfill a longstanding goal to make a dedicated treasury management system (TMS) obsolete, will be too little, too late in comparison to what treasury teams implement while they wait.

The survey backdrop: unrealized expectations. Every year, treasurers predict a significant migration to cloud-based applications, yet adoption is not keeping up. As the chart below indicates, the percentage of NeuGroup members with over 80% of their current finance applications in the cloud is not keeping pace with the expectation to reach that threshold over the next 12-24 months.

Based on discussions with members during 2023, I believe the lengthy timelines for cloud-based ERP migrations may be to blame. You are doing well if you go live on the third scheduled go-live date, and usually that involves compromising on going live with all the desired treasury functionality. Plus, while more enterprises are being convinced that a cloud-based ERP will allow them to forgo a dedicated TMS, the timeline for the ERP implementation causes many to end up making the case for a cloud-native TMS anyway.

Time for TMS transformation. 
Current cloud-native TMS adoption has barely changed since 2022, although the survey shows that the vast majority of respondents (56%) expect to have a cloud-native TMS in place over the next 24 months, and 43% already have one.

  • Even here, traditional TMS providers may see market demand disrupted. This speaks to a lack of implementation resources and longer-than-expected timelines for new application rollouts and upgrades. These may not be as long as with ERP installations; but the question is whether TMS vendors keep up with the pressure for digital accelerations.

Smart automation. While cloud migration has stalled, the implementation of smart automation solutions rose sharply between 2022 and 2023, with more expected this year. Some of the most significant gains were in tools that eliminate manual intervention to free up staff to focus on value-creating work like decision support.

Year-over-year:

  • RPA adoption more than doubled.
  • Advanced analytics solutions adoption surged from 7% in 2022 to 17% in 2023.
  • AI and machine learning jumped from no current adoption to 13%.

Niche systems and API connectivity on the rise. Comprehensive systems change may be lagging, but niche systems enabled by cloud-based application integration or fed from data lakes show a significant rise. The same can be said for API connectivity in general, showing a significant rise in adoption (see charts).

If the niche systems play well with data from other sources and enjoy API connectivity while delivering the functionality leading treasuries seek, it will be easier to retain them once ERP projects are completed—if they are competitively priced. Moreover, the new niche systems may be modules of a single provider that may all but replace the need for a traditional TMS.

Mastering the data.
 Meanwhile, treasuries are focused on mastering data. Bringing it from a variety of sources, including out of the stalled ERP upgrade, into a data lake or warehouse is a major part of this. But the more important piece is master data management. As the chart below shows, less than a majority of respondents will have adopted master data management tools over the next two years, with 31% having them currently.

  • That needs to change. If you have the data housed and mastered, plus tools to analyze it, workflow automation to execute transactions from it and a governance and control overlay, what more do you need?

Final thought. Here’s the big risk for traditional software vendors, starting with ERP providers that are not keeping pace with digital acceleration: Their treasury customers will pull out of the stall and decide they’re flying higher than they would if they waited for a finally-ready-to-go-live, cloud-based ERP. I doubt treasury is alone with this trend. Of course, if all the applications play well with each other in the cloud, then everyone can still win.

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Fitch Economist Olu Sonola Sees Mixed Bag for Corporates in 2024

Companies face cooling inflation but elevated wage growth amid a slowing economy with recession unlikely.

In a Strategic Finance Lab podcast you can listen to on Apple and Spotify, Fitch Ratings’ head of US Regional Economics Olu Sonola paints a relatively positive picture of the economic outlook in 2024, thanks in large part to the strength of the US consumer and declining inflation.

  • “The balance sheet of the US consumer is very, very strong,” he tells NeuGroup Peer Group leader Andy Podolsky in the podcast recorded in December 2023 and sponsored by Fitch.
  • This week, Fitch raised its annual real consumer spending forecast for 2024 to 1.3% from 0.6%, “reflecting the ongoing willingness and ability of consumers to draw down buffers of excess savings.”

Companies face cooling inflation but elevated wage growth amid a slowing economy with recession unlikely.

In a Strategic Finance Lab podcast you can listen to on Apple and Spotify, Fitch Ratings’ head of US Regional Economics Olu Sonola paints a relatively positive picture of the economic outlook in 2024, thanks in large part to the strength of the US consumer and declining inflation.

  • “The balance sheet of the US consumer is very, very strong,” he tells NeuGroup Peer Group leader Andy Podolsky in the podcast recorded in December 2023 and sponsored by Fitch.
  • This week, Fitch raised its annual real consumer spending forecast for 2024 to 1.3% from 0.6%, “reflecting the ongoing willingness and ability of consumers to draw down buffers of excess savings.”

Mixed picture. That said, Mr. Sonola forecasts that both consumer spending and US GDP growth will slow this year from 2023, with negative implications for corporate revenues, especially for companies whose customers are on the lower end of the income scale, he explains in the podcast.

  • And although inflation will slow, companies will not have the same ability to pass on higher costs, he said. Combine that with wage growth that Mr. Sonola says is “still elevated” as well as higher interest expense but lower investment yields and corporates will see an erosion of margins this year.
Olu Sonola, Fitch Ratings

Along with recession, NeuGroup members surveyed in 2023 cited high borrowing costs as one of the top risks for this year. Those fears have tempered as a so-called soft landing for the economy appears more likely. But don’t expect the Fed to cut interest rates in March, Mr. Sonola said. Fitch forecasts cuts in the middle of the year, with the federal funds rate declining 75 basis points to 4.75% by the end of 2024.

  • But he expects highly-leveraged companies with lower credit ratings will need to refinance debt sooner than investment-grade corporates, meaning they “are going to be much more exposed to a higher rate environment,” noting that rates remain significantly elevated compared to three years ago.
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Treasury Leadership Is Alive and Well in Texas

Insights from member meetups in Austin and Houston, distilled by NeuGroup’s founder and CEO.

By Joseph Neu

Treasury leadership is alive and well in Texas. That’s one big-picture takeaway from my trip to the state last week. I was there to talk with treasurers—and leadership was on my mind. Here are some themes that surfaced, divided into three sections:

Why are you a treasurer?
 I asked that question at a salon dinner for members hosted by NeuGroup in Austin. In addition to “why,” the answers also highlighted how each person rose to the position of treasurer.

Insights from member meetups in Austin and Houston, distilled by NeuGroup’s founder and CEO.

By Joseph Neu

Treasury leadership is alive and well in Texas. That’s one big-picture takeaway from my trip to the state last week. I was there to talk with treasurers—and leadership was on my mind. Here are some themes that surfaced, divided into three sections:

Why are you a treasurer?
 I asked that question at a salon dinner for members hosted by NeuGroup in Austin. In addition to “why,” the answers also highlighted how each person rose to the position of treasurer.

  • Quality treasurers beget quality treasurers. What’s interesting is that no one present set out to become a treasurer. Instead, they learned about its attractions and advantages after coming into contact with a high-quality treasury team led by a top-notch treasurer during some phase of their finance career (i.e., on the job and not in school)—either on the banking or corporate side.
  • Strategic, please. Most members in Austin were drawn much more to being a strategic treasurer than one with a more administrative role. Strategic treasurers develop a deep understanding of the business so their teams can enable it. On a lighter note, in many cases, nobody in the company really knows what you do, yet it sounds like you are a supersmart rocket scientist. That gives you some sway to do things that add strategic value.
  • An important stop for CFO. Members were split on whether they wanted to become chief financial officer, with a number saying yes to CFO aspirations and a few saying they would prefer to remain treasurer. All agreed that working with a CFO who had been a treasurer made their jobs easier, especially if the CFO lets the treasurer be the treasurer. A good working relationship between treasurer and CFO is essential.

Treasury KPIs: Are they bold enough? The topic of treasury key performance indicators (KPIs) came up while I visited treasurers in Houston. Here are some discussion points to help answer the question:

  • Be bolder about enhancing business revenue. Efforts to enhance the revenue of the business can always be bolder, according to some back-and-forth among treasurers. Yes, the skewing of treasury KPIs toward cost reduction metrics deepened after some teams sought to profit from financial transactions, e.g., derivatives. But if treasury can instead enhance the revenue and profitability of the businesses it supports, then why not reward the function with profit-oriented goals and objectives?
  • Promote treasury leadership more boldly. The other area to strengthen KPIs is around treasury leadership. In a recent podcast, I discussed the correlation between top-performing companies and treasury leadership with Ron Chakravarti, head of global treasury advisory at Citi Treasury and Trade Solutions. He co-authored a study by Citi GPS demonstrating that companies with superior financial performance have leading treasuries. This should help both inspire treasurers to set bold treasury leadership goals and make the business case for resources to meet bold KPIs.
  • Treasury performance aligned to investors. If your treasury is in doubt about what KPIs to prioritize, think about what investors want. Ron emphasizes that treasury KPIs should be aligned to what matters to investors and that starts with a philosophy and mindset that treasury is there to support top-line growth and profitability. Accordingly, each goal should align to thinking about the business and what it may need to grow.

Development and retention of treasury talent. My conversations in Texas also touched on the critical component of talent in treasury leadership. Three takeaways:

  • Teach treasury well. Treasurers continue to find it challenging to recruit, develop and retain treasury talent, particularly at less senior levels. Thinking back to the Austin discussion about why members are treasurers, it is imperative to teach treasury well to produce future treasury leaders. These leaders will also be attracted to a strategic treasury mindset, so teach that approach.
  • Connect staff with peers to grow knowledge. A big part of learning is found in sharing and learning with peers. In conversations with treasurers about joining NeuGroup, for example, their first reaction is often focused on how it will help their staffs develop professionally. Whether it’s with NeuGroup or another means, treasury leaders develop better with networks that source and validate new ideas and best practices.
  • Be a talent exporter. Great treasury organizations will invariably see top people leave to lead treasury at other companies. One sure sign of a leading corporate treasury is that many of the team’s graduates are treasurers elsewhere, making some treasurer meetups feel like one company’s alumni gatherings. This reality of top talent moving up and out is one reason CFOs who have been effective treasury leaders may try to retain top performers by helping them find compelling career paths within their own organizations, outside of treasury. Exporting talent this way counts, too. The problem is that love of treasury can be hard to undo!
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Dollar-Denominated Bonds in Argentina Draw Corporate Interest

USD-denominated Bopreal bonds offer a way for subsidiaries in Argentina to pay debts owed to US-based parents.

The Argentine subsidiaries of some NeuGroup member multinationals are buying so-called Bopreal bonds that Argentina started selling late last year to help importers pay off debt—including money subsidiaries owe parent companies. The bonds are providing relief to corporates with cash trapped in a country with strict capital controls, hyperinflation and a heavily devalued currency.

  • Bopreals are dollar-denominated but can be purchased with Argentine pesos at the country’s official FX rate. They can only be used to pay outstanding invoices for goods delivered before December 12, 2023.

USD-denominated Bopreal bonds offer a way for subsidiaries in Argentina to pay debts owed to US-based parents.

The Argentine subsidiaries of some NeuGroup member multinationals are buying so-called Bopreal bonds that Argentina started selling late last year to help importers pay off debt—including money subsidiaries owe parent companies. The bonds are providing relief to corporates with cash trapped in a country with strict capital controls, hyperinflation and a heavily devalued currency.

  • Bopreals are dollar-denominated but can be purchased with Argentine pesos at the country’s official FX rate. They can only be used to pay outstanding invoices for goods delivered before December 12, 2023.
  • The bonds offer an attractive option to corporates with limited ways to get money out of Argentina. One of the more popular, called a blue-chip swap, carries an unfavorable, unofficial exchange rate and requires companies using it to wait another 90 days until accessing the country’s official FX market.
  • In recent NeuGroup sessions and online conversations, members have raised questions about Bopreals. To clear up any remaining confusion about these complex bonds, NeuGroup’s Argentina Crisis Community will meet in a virtual session on February 7 with experts from Banco Comafi to discuss upcoming auctions.

Buy, then sell. This week, one member based in Argentina bought Bopreals that will be used to make a payment to foreign vendors. The member plans to sell the securities in the secondary market.

  • In a recent NeuGroup session, Martin Merlo from Banco Comafi said he has seen the bonds sell for 60% to 70% of their original value in the secondary market. The other option would be holding the bonds until maturity, although members have indicated vendors are unwilling to wait years for payment.
  • One benefit of selling in the secondary market, according to members, is that a corporate can then access the blue chip-swap market starting April 1 to raise the remaining percentage of the invoice in USD, while remaining exempt from the 90-day required waiting period—a special exemption for the first series of sales.
  • So, if a corporate were to buy $1 million in Bopreal and sell the bonds, the amount they transfer to the vendor outside Argentina might only be $700,000. Because the vendor still wants the remaining amount, the Argentine entity could do a blue-chip swap to raise the remaining $300,000 without the 90-day penalty.
  • One US-based exporter had been told that accepting the bonds directly from the company’s customers was the only option for payment. But, following conversations with members, he now plans to suggest the buyers in Argentina sell the bonds on the secondary market.

Uncertainty ahead for invoices behind. Two more series of Bopreal bonds are on the horizon, with maturities in 2025 and 2026. The member said these will likely be aimed at smaller companies, as they carry less favorable conditions than the first series, including taxes and restrictions on secondary market sales. (The first series, exempt from the country’s 30% tax on outgoing cash, mature in 2027.)

  • “I don’t think you’ll get better conditions than what you will get now if you want access to dollars,” Mr. Merlo from Banco Comafi said.
  • A member responded, “If you don’t take advantage, those imports might be locked up for a long time.”
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Risk Readiness: ERM’s Key Role in Business Continuity Planning

Amid rising geopolitical, climate and cyber risks, enterprise risk managers play an important part in preparation plans.

Recent natural disasters, cyberattacks and wars in Ukraine and Gaza are underscoring the importance of developing robust business continuity plans (BCPs) to ensure companies can keep operating in the aftermath of a crisis. The current, volatile state of affairs is also drawing attention to the value enterprise risk management (ERM) teams bring to business continuity management, including the identification of risks that could require the use of BCPs.

  • A recent session of NeuGroup for Enterprise Risk Management made clear that collaboration between ERM and business continuity teams is both widespread and essential. Members participate in the development of plans, tabletop exercises, education and risk frameworks for BCPs.

Amid rising geopolitical, climate and cyber risks, enterprise risk managers play an important part in preparation plans.

Recent natural disasters, cyberattacks and wars in Ukraine and Gaza are underscoring the importance of developing robust business continuity plans (BCPs) to ensure companies can keep operating in the aftermath of a crisis. The current, volatile state of affairs is also drawing attention to the value enterprise risk management (ERM) teams bring to business continuity management, including the identification of risks that could require the use of BCPs.

  • A recent session of NeuGroup for Enterprise Risk Management made clear that collaboration between ERM and business continuity teams is both widespread and essential. Members participate in the development of plans, tabletop exercises, education and risk frameworks for BCPs.
  • “We basically make sure that we’re in sync on what they’re seeing,” one member said, referring to his company’s business continuity team. “They talk to some of the stakeholders we do, so we stay pretty aligned with them.”

Different structures, common purpose. Business continuity teams sit within a variety of functions, including ERM, quality, operations, finance and security. Members discussed the pros and cons of business continuity teams consisting of dedicated team members or subject matter experts from multiple teams. Whatever the structure, though, the goal of integrating ERM within the continuity planning process is increasing readiness.

  • One ERM member shares staff with the business continuity team, which spends much of its time going to different units ensuring that plans are in place. Business continuity also connects closely with the crisis management team that sits under corporate security. The key to this structure working is cross-functional collaboration.
  • One member whose business continuity team sits within ERM said this about the BCP: “We set the framework, and we have our critical partners from supply chain, facilities, etc. They have their own designated plans, and we have a requirement where everyone needs to do their tabletop exercise every year. Then ERM provides an update to our board committees.”
  • Another member added, “I’m not responsible, but I partner with our business continuity office. We are doing a relaunch, if you will. We want to restructure it and refine some areas, so I’m partnering with them to help navigate through the company and look at things from a high level, risk-down perspective.”

Calling out climate change. One member mentioned the tornado that destroyed a Pfizer warehouse last summer, another example of the rising risks of natural disasters that ERM must communicate to the C-Suite. “We’re starting to call out climate change to our leadership,” he said.

  • That’s a smart move: This member’s company recently suffered the total loss of a data center that ran local manufacturing in a European country. “So when the flood hit, crisis management runs the show and business continuity comes along to make sure that all the things they’ve been doing in tabletop exercises gets operationalized.”
  • The event revealed the company had key risk management infrastructure in place. “In some ways it was actually pretty remarkable how quickly the team was able to mobilize,” the member said. “Within a week, they pretty much got operations back to normal. Now it’s a matter of going and getting the equipment and rebuilding the data center—ideally in a place that won’t flood.”

Preparation pays off. In NeuGroup’s 2024 Finance and Treasury Agenda Survey, members ranked geopolitical conditions the fourth biggest risk facing their companies. Given that backdrop, companies have tasked risk managers with gaming out scenarios to judge readiness. One member recently reported the results of tabletop exercises to the board.

  • The company has a large credit and collection team in Romania which, due to its proximity to Ukraine, is at risk of a disruption in operations. To test preparedness, the company told the whole unit to stop work for two weeks and focus on longer-term projects. “We turned the whole team off without any warning and looked at how other teams around the world did picking up their work.”
  • The exercise turned out to be something of a success. The member said that there were “a lot of lessons learned. Nobody freaked out.”
  • The member’s company also ran a tabletop exercise focused on Israel a couple of weeks before the war in Gaza began. The timing of the exercise meant “now we can use what we learned then, live for the event itself,” he said.

Aha moments. Another escalating risk causing corporates to reassess their BCPs is cyberattacks. One member had run a mock crisis exercise just the week before a high-profile cyberattack was carried out on another company.

  • “Through that, there were some ‘ahas!’ that this isn’t going to be a 48-hour event. This could be several weeks and the ramifications could go on for several months after that,” he said.
  • Another member sees room for improvement in their business continuity setup. “I don’t think the cybersecurity and BCP are as well integrated as they should be. We are having a tabletop exercise next month.”
  • Several members shared that their companies have a separate cybersecurity council in their corporate structure that must work closely with their business continuity and ERM teams.

Overcoming obstacles. In a perfect world, ERM would work hand in glove with the business continuity team, but in reality it’s not always so simple.

  • One member shared, “I had participated in some of the local tabletops at manufacturing sites some years ago, and now they are managing them more locally.”
  • The company is planning a cyber tabletop exercise, and the member added, “I managed to get myself invited to this cyber tabletop but I had to force my way through the door and promise to not speak.”
  • A different member’s company’s cyber and crisis committees do not yet include IA or ERM in their exercises. The member added, “I have not pushed just yet for that. There are other priorities from a resource, bandwidth standpoint.”
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Speeding Ahead: How EY Fueled a Six-Month TMS Takeoff

Working with EY, one corporate went from the RFP stage to actively making FX hedge trades in half a year.

When one employee responsible for a corporate global order-to-cash process was tasked with upgrading to a new TMS—during a company-wide S/4HANA implementation—she knew she was in for a long and bumpy ride. But with the help of EY, the company was using the TMS for hedging in less than a year, with more functionality still to come.

  • In a recent NeuGroup virtual session, the global process owner who led the TMS implementation presented alongside EY’s Kenny Echendu and Angelina Ilchenko. They shared insights on the journey from RFP to go-live—including why the company started with Kyriba’s FX risk management functionality.

Working with EY, one corporate went from the RFP stage to actively making FX hedge trades in half a year.

When one employee responsible for a corporate global order-to-cash process was tasked with upgrading to a new TMS—during a company-wide S/4HANA implementation—she knew she was in for a long and bumpy ride. But with the help of EY, the company was using the TMS for hedging in less than a year, with more functionality still to come.

  • In a recent NeuGroup virtual session, the global process owner who led the TMS implementation presented alongside EY’s Kenny Echendu and Angelina Ilchenko. They shared insights on the journey from RFP to go-live—including why the company started with Kyriba’s FX risk management functionality.
  • “One of the big value props we had was on FX risk management, because we didn’t have good insight into FX exposure data,” the presenter from the corporate said in the session. “And the reason we did the FX component first was really its speed-to-value,” she added.

Mismatched data. Before the TMS implementation process, the company’s exposure data was spread across a number of ERPs, with details provided via monthly spreadsheets submitted by business units.

  • “The details were in systems that treasury didn’t have access to,” she said. “And we were losing money on hedging because we didn’t get the right visibility into the FX exposure data.”
  • The company’s treasurer wanted a single TMS that would integrate well with S/4HANA and allow the treasury team to have a single source of truth and phase out other legacy systems.
  • “EY helped us in modeling, doing due diligence to help ensure we selected the right solution based on our requirements,” the presenter said. “The FX component that we saw with Kyriba, particularly FiREapps, really won the day, especially with how user-friendly Kyriba is.”

Pre-implementation: cleaning up. Because data was split across several tools and many steps taken were undefined, undocumented processes, the treasury team still had plenty to do before Kyriba was ready to launch.

  • “You should not cut corners in the design phase,” said Mr. Echendu. “Well-documented processes will serve you well.”
  • During the process review, the treasury team discovered a problem: Some business units used different definitions of a monetary asset (e.g., cash and cash investments). This could lead to a major problem given treasury relies on these units to provide exposure data.
    • “We knew that data was going to be a problem, but I must admit we didn’t realize it was going to be quite as big of a problem,” the presenter said. “And that was a big area we spent a lot of time on.”
  • In the planning phase, EY also aided with ensuring each user had the right amount of access. “Understanding how roles, as defined in Kyriba, grant access—that was an area that required a lot of work,” the presenter said. “EY helped us to repurpose the profiles and roles to work for us.”

Going live: improved processes. Within six months of bringing on EY to aid in the implementation, the treasury team began using Kyriba to execute cash flow and balance sheet hedging programs.

  • The presenter highlighted a shift to a unified approach to hedging, using a single rate table across all ERPs. In prior processes, various teams used different tools to pull different currency rate tables based on region and send them to treasury.
    • EY helped discover that the treasury team was converting mark-to-market values to functional currencies of the entities before posting them to a shared database. Subsequently, they were converting these values to USD, which EY recognized as an unnecessary step in the workflow.
  • The company has also automated several accounting processes related to hedging within Kyriba, including generating journal entries for most hedging instruments.

Post-implementation: Change management never ends. EY is now aiding the treasury team as it configures Kyriba’s cash and investment management modules. But as companies enter new phases of TMS implementation, Mr. Echendu stressed that one of the greatest ongoing risks is missed opportunities that arise from resources not being used to their full potential—including employees that operate without proper knowledge of the system.

  • One common issue that causes teams to fail to leverage new systems’ full capabilities is employee turnover—when one, well-trained team member leaves, and the replacement isn’t properly caught up to speed on the project.
  • “After the go-live, change management is often left to the user, especially during the period right after a system launch,” Mr. Echendu said. “So, it can be frustrating, and maybe even lead to abandonment.”

At the end of the session, Ms. Ilchenko summarized the two key takeaways from the process that corporates undertaking a similar initiative should keep in mind:

  1. Don’t underestimate the preparation and planning stages. “We always say that if you plan and design, implementation will go smoother,” she said, emphasizing the importance of training and documentation ahead of the implementation.
  2. Keep working on change management. “Continue checking on how your teams are using the TMS and if they run into any problems after deployment,” she said. “This can help utilize the TMS system in the best way, and not revert back to Excel or manual processes.” Consultants like EY are often retained to facilitate post-implementation reviews which help to sustain and protect the new investment.
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A Citi Expert’s Mission: Help Treasury Leaders Reach New Heights

Citi’s Ron Chakravarti discusses the keys to treasury success on a new episode of the Strategic Finance Lab podcast.

Few people in the world of banking know as much about how corporate treasury teams can raise their games and bring more value to companies than Ron Chakravarti, head of global treasury advisory at Citi Treasury and Trade Solutions. His insights are backed by the experience of advising hundreds of companies looking to improve their management of liquidity, working capital and risk.

Citi’s Ron Chakravarti discusses the keys to treasury success on a new episode of the Strategic Finance Lab podcast.

Few people in the world of banking know as much about how corporate treasury teams can raise their games and bring more value to companies than Ron Chakravarti, head of global treasury advisory at Citi Treasury and Trade Solutions. His insights are backed by the experience of advising hundreds of companies looking to improve their management of liquidity, working capital and risk.

  • In the latest episode of NeuGroup’s Strategic Finance Lab podcast available on Apple and Spotify, Mr. Chakravarti shares those insights with NeuGroup founder and CEO Joseph Neu. Their conversation includes takeaways from Treasury Leadership: Does it Matter?, a Citi GPS study Mr. Chakravarti co-authored.
  • Based on a survey of over 300 Citi clients, the study concludes that companies that deliver superior financial performance also have top-performing treasury leaders and teams.
Ron Chakravarti, Citi

“The data does come through, that treasury leadership does matter,” he says in the podcast. “And the investment and deployment of technology is a key part of getting there.”

  • A self-described “citizen of the world,” Mr. Chakravarti also discusses his upbringing—including stints living in India, the UK, the US, Hong Kong and Singapore—and his lifelong love of reading science fiction.
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Staying the Course: Treasury Teams Aren’t Planning Cuts in 2024

NeuGroup’s 2024 Agenda Survey shows most treasury teams plan to stay the same size as headwinds die down.

Rising interest rates and rampant recession fears early last year had some treasurers feeling pressure to cut costs and reduce treasury headcount. But as those headwinds eased, NeuGroup’s 2024 Treasury and Finance Agenda Survey conducted in late 2023 shows most treasuries planned to stay the course and keep team size flat or even expand staffing in 2024 (see chart below).

  • A majority of respondents to the survey have treasury teams numbering between six and 24 full-time employees. The survey also documents that headcount can vary widely, naturally correlating to a company’s annual revenue—and that big, capital-intensive corporates typically have the largest treasury teams.

NeuGroup’s 2024 Agenda Survey shows most treasury teams plan to stay the same size as headwinds die down.

Rising interest rates and rampant recession fears early last year had some treasurers feeling pressure to cut costs and reduce treasury headcount. But as those headwinds eased, NeuGroup’s 2024 Treasury and Finance Agenda Survey conducted in late 2023 shows most treasuries planned to stay the course and keep team size flat or even expand staffing in 2024 (see chart below).

  • A majority of respondents to the survey have treasury teams numbering between six and 24 full-time employees. The survey also documents that headcount can vary widely, naturally correlating to a company’s annual revenue—and that big, capital-intensive corporates typically have the largest treasury teams.

Reducing headcount organically. One reason treasury teams may decide against laying off employees this year is a strategy shared by a number of members in 2023 to not replace people who leave the company.

  • “Our organization is going to evolve over time,” one member said. “That’s generally going to happen through attrition and planning to not backfill jobs that are realigning.”
    • The member added that, through embracing centers of excellence to execute manual activities, “we’re going to be reducing headcount slowly over time. Three years from now, our treasury org structure will look different, but it won’t happen immediately.”
  • Another member shared last year that his company’s corporate finance team planned to cut headcount in all departments but made an exception for treasury—which is actually expanding.
  • In a session of NeuGroup for Mega-Cap Treasurers, a member who has been with his company for 12 years said the treasury team has generally remained the same size—but is now made up of more skilled and senior employees. “On average, we’ve leveled up by two positions,” he said.

Higher revenue, larger teams. As you would expect, the biggest corporations answering the survey typically had much larger teams than smaller companies (see chart below). As one member said at a 2023 meeting of NeuGroup for Life Science Treasurers, “taking on multiple roles is just par for the course at smaller companies.” That said, so-called double- and triple-hatting is also increasingly common at mega-cap corporates.

  • “Something we’re thinking about is how do you increase efficiency with a smaller headcount,” another member said. A related challenge is not lowering standards in the quest for efficiency. “We’re always striving for quality and timely execution too,” the member added.

Bigger and more efficient teams. Although treasury team sizes tend to grow with annual revenue, the largest companies by revenue benefit from economies of scale. Those with more than $50 billion in revenue have less than one FTE per billion in revenue (0.59), one measure of efficiency.

  • The results above are split into capital-intensive companies and non-capital intensive companies, with capital-intensive defined as corporates operating in industries where more than 50% of earnings before interest and taxes are allocated to net capital expenditures.
  • NeuGroup’s Scott Flieger clarified that, “It is challenging to produce ratios that make sense to everyone, because the results can get skewed by companies that have very high revenues but small EBITDA because their margins are low.”
  • Capital-intensive companies benefit less from economies of scale—but still are far more efficient as measured by the FTE-revenue ratio than smaller corporates with lower revenues.
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How SAP Helped Clean Up a Messy, Fragmented Treasury Landscape

Using SAP’s FX risk solutions across its hedging portfolios is paying off for one company where SAP is the sole ERP.

Adopting SAP’s risk management solution to manage FX risk has allowed the treasury team at one NeuGroup member company to reduce manual tasks, use real-time data to increase agility and enhance data analytics, optimize its hedging programs and save money by retiring non-integrated, third-party treasury applications.

  • At a recent meeting of NeuGroup for Foreign Exchange, the company’s senior financial risk manager said implementing SAP Risk Management for SAP S/4HANA has helped transform what was a messy, “very fragmented treasury landscape” into a far more efficient, unified system that is less prone to human error.

Using SAP’s FX risk solutions across its hedging portfolios is paying off for one company where SAP is the sole ERP.

Adopting SAP’s risk management solution to manage FX risk has allowed the treasury team at one NeuGroup member company to reduce manual tasks, use real-time data to increase agility and enhance data analytics, optimize its hedging programs and save money by retiring non-integrated, third-party treasury applications.

  • At a recent meeting of NeuGroup for Foreign Exchange, the company’s senior financial risk manager said implementing SAP Risk Management for SAP S/4HANA has helped transform what was a messy, “very fragmented treasury landscape” into a far more efficient, unified system that is less prone to human error.

A single source of truth. It’s essential to point out one key advantage this treasury team had compared to some NeuGroup members considering similar projects: The entire corporation uses a single instance SAP ERP. Having a single source of truth and data has made implementation of SAP’s risk module and applications more straightforward than for companies with multiple ERPs.

  • “The reason this works for us is because we do run SAP company-wide,” the member said. “So everything is in SAP. If you had a more fragmented landscape, I think it would be more complex.” She added, “The reason this was such a success is because all of the data was there, all you have to do is think about what you want to do with it.”
  • That’s not to say the member’s SAP Risk implementation journey has been easy or fast. It formally began in 2019 with the preliminary goal to replace non-integrated treasury applications and manual processes with full automation in SAP. Treasury had started analyzing and planning two years earlier, in 2017, a process that took longer than expected.
  • Then, the Covid pandemic made it “very challenging to implement the first phase of the SAP plan,” the member said. In-person meetings with consultants or workshops became impossible. Nonetheless, treasury implemented trade deal management, connecting its FXall trading platform to SAP S/4HANA. It also automated payments and accounting associated with FX settlement and set up a data integration hub.

Game-changing changes. In the fall of 2021, treasury began using a cloud-based SAP balance sheet exposure app and stopped using FiREapps, a risk management solution offered by Kyriba. This took about six months and included running the two solutions in parallel for three months.

  • The member called this switch a game changer “because it allowed us to view our exposures in SAP versus looking at them in FiREapps, sending somebody that report, opening up a trade sheet, trying to come up with whatever the trades were.” She added, “So this really allows us a lot of flexibility and to react very, very quickly.”
  • Treasury also has stopped using a third-party TMS, Reval, saving hundreds of thousands of dollars annually. FX costs have dropped significantly due to straight-through processing and real-time data in SAP.
  • “We really were able to pretty much automate everything within SAP,” the member said. “We created many different dashboards as well. At any point in time you can look at all your different positions, where all your cash is, offsetting exposures as well.” Treasury also created an FX rates dashboard shared with the whole company.

A finance innovation team. To create dashboards, the member has benefitted from finance innovation teams within the corporation that are skilled and have access to data within SAP S/4HANA. “We worked with a team that had access to all the back-end tables and they were able to create some incredible things for us,” she said. “I think you do need a pretty solid analytics team; it’s not something that you can build yourself. That’s in part because of levels of access.”

  • In the past, she said, her team would spend six hours pulling data, typing it into a spreadsheet, using pivot tables to summarize large datasets. “Now, we literally click and all the data’s there consolidated, super customized, all the visualizations are there.” She added, “Everything is real-time. We can look at balance sheet exposures, hedges outstanding, all of that; and we can look at what we have on the books for cash flow.”
  • Another major advantage of adopting SAP’s treasury modules and applications is the additional tech support treasury receives thanks to the companywide commitment to SAP. “We are now part of the company’s SAP machine which is constantly looking to improve and upgrade,” the member said. “And we are now partners in a process with them. They show us a new upgrade and say, ‘we can push for these additional things. What is it that you want to do?’”

Road ahead. In 2023, treasury implemented solutions from the SAP Analytics Cloud, including its cash flow hedging program. It’s still in the process of automating hedge accounting. The member said the integration treasury has with the balance sheet exposure app “is not perfect” and will be improved in the fourth and last phase of implementation this year.

  • Treasury also plans to implement hedge effectiveness and reporting capabilities. The member said the current hedge effectiveness process at the company is not bad, taking her about six hours four times a year. “But I don’t want to do it,” she said with a laugh. “So I’m going to automate it.”
  • Treasury also now benefits from being under a SAP internal control reporting umbrella, simplifying a process involving outside vendors providing data to auditors. That has become vastly easier since “everything is in SAP now,” the member said, adding “that’s been wonderful, to be honest.”
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Talking Shop: How Do You Process Tax Payments?

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: “I wanted to ask how your organizations process tax payments (federal, state, sales and use, etc.)? Through your ERP system, via manual wires, direct debit or using outside vendors?”

NeuGroup Insights
 asked the questioner about the circumstances at his company that led to his question. His reply: “Tax payments are very complicated, especially state taxes and sales and use taxes. I wanted to look for best practices to drive payment efficiencies.”

Context: 
For additional insight about the question, NeuGroup reached out to an experienced tax professional at a mega-cap corporation. “They may not be at an ideal state today (e.g., manual payments/wires which are always more subject to fraud/error) and are looking for support to embed payments structurally in an ERP system, which of course takes investment of time and resources, “ he said.

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: “I wanted to ask how your organizations process tax payments (federal, state, sales and use, etc.)? Through your ERP system, via manual wires, direct debit or using outside vendors?”

NeuGroup Insights
 asked the questioner about the circumstances at his company that led to his question. His reply: “Tax payments are very complicated, especially state taxes and sales and use taxes. I wanted to look for best practices to drive payment efficiencies.”

Context: 
For additional insight about the question, NeuGroup reached out to an experienced tax professional at a mega-cap corporation. “They may not be at an ideal state today (e.g., manual payments/wires which are always more subject to fraud/error) and are looking for support to embed payments structurally in an ERP system, which of course takes investment of time and resources, “ he said.

  • “Direct debits and outside vendors have challenges as well,” he added. “Like any payment, the more they can be embedded in the ERP infrastructure, the more control you can put around process.”

Peer answer 1: “Bank of America has a very robust tax payments module that has most of the tax authorities already preset and you could just process using their templates. There might be other banks offering the same, but at a former employer we used BofA’s module, which is highly recommended if you make many payments.

  • “At my current company, we still process using the tax authorities’ websites and then approve direct debit transactions on our bank account.”

Peer answer 2: “It is a mix! But we do not use third-party, and we do not allow direct deposit.

  • “ACH – State/local taxes: Manual batch upload into banking portal.
  • “Wires – Federal tax payments: Processed through ERP and then manually entered into API and routed.
  • “Checks – State/local tax payments that don’t accept ACH: processed through ERP, check generated.”

Peer answer 3: “We use the entire array of options. Citibank tax module, ERP generated, manual wires.”

Peer answer 4:
 “We do it a few different ways depending on the tax authority and payment type. Happy to have a call.”

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Unlocking Success: The Impact of Treasury Leadership

Citi global head of treasury advisory Ron Chakravarti on what separates the highest-performing corporate treasuries.

A recent Citi GPS study, Treasury Leadership: Does It Matter?, reveals that corporations scoring high on measures of treasury sophistication and automation showed the highest earnings-to-revenue ratios. In other words, the answer to the question posed in the study’s title is resoundingly “yes” when financial performance is what matters most.

  • In a NeuGroup video you can watch by hitting the play button below, Citi managing director Ron Chakravarti, who co-authored the study, describes some of the building blocks and attributes that are hallmarks of superior treasury leadership.
  • Mr. Chakravarti, who has spent over 17 years at Citi and is currently the bank’s global head of treasury advisory, helped analyze the results of a survey of hundreds of clients. Among the conclusions in the 88-page report: “There are fewer excuses for treasury underperformance as we move into 2024 and beyond”—in part because of what companies can learn from the study.

Citi global head of treasury advisory Ron Chakravarti on what separates the highest-performing corporate treasuries.

A recent Citi GPS study, Treasury Leadership: Does It Matter?, reveals that corporations scoring high on measures of treasury sophistication and automation showed the highest earnings-to-revenue ratios. In other words, the answer to the question posed in the study’s title is resoundingly “yes” when financial performance is what matters most.

  • In a NeuGroup video you can watch by hitting the play button below, Citi managing director Ron Chakravarti, who co-authored the study, describes some of the building blocks and attributes that are hallmarks of superior treasury leadership.
  • Mr. Chakravarti, who has spent over 17 years at Citi and is currently the bank’s global head of treasury advisory, helped analyze the results of a survey of hundreds of clients. Among the conclusions in the 88-page report: “There are fewer excuses for treasury underperformance as we move into 2024 and beyond”—in part because of what companies can learn from the study.

A carefully considered philosophy. In the video, Mr. Chakravarti also discusses the need to establish a philosophy of principles-led decision-making. It’s an approach that requires precisely outlined responses to various scenarios, but also trust in treasury team members to strategically adapt to new situations.

  • “You never know if you’re going to be right or wrong,” he says in the video. “You always want to have optionality. You want to think through the downside, and you want to make a decision that gives you optionality as much as possible—then you give people the latitude to be able to do that with good, principles-led thinking.”

Stay tuned. Later this month, the full conversation between Mr. Chakravarti and NeuGroup founder and CEO Joseph Neu will be featured in NeuGroup’s Strategic Finance Lab podcast, available on Apple and Spotify.

  • You’ll hear them discuss the full takeaways of the survey, as well as Citi’s methodology behind identifying which treasury teams are performing above average—and the data showing that great treasury leadership leads to exceptional financial performance.
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Designing a Net Investment Hedging Program That Makes Sense

How one NeuGroup member company tackled hedging net investments denominated in foreign currencies.

The process of preparing to launch a net investment hedging (NIH) program to manage risk requires assessing necessity and exposure, a determination of hedge accounting capacity, deciding between instrument alternatives, and early, effective communication between treasury, tax, outside auditors and other stakeholders. Those insights emerged from a member presentation at the fall meeting of NeuGroup for Mega-Cap Assistant Treasurers.

  • The NIH process followed by the presenting member’s company may prove useful to other multinationals; but he made clear that one size does not fit all in what is a very company-specific and mission-specific initiative.
  • “As you go about evaluating bank proposals, these are some of the things we learned to consider upfront, evaluating the metrics, such as capacity and the size of the program, that were important to us,” he said by way of introduction.

How one NeuGroup member company tackled hedging net investments denominated in foreign currencies.

The process of preparing to launch a net investment hedging (NIH) program to manage risk requires assessing necessity and exposure, a determination of hedge accounting capacity, deciding between instrument alternatives, and early, effective communication between treasury, tax, outside auditors and other stakeholders. Those insights emerged from a member presentation at the fall meeting of NeuGroup for Mega-Cap Assistant Treasurers.

  • The NIH process followed by the presenting member’s company may prove useful to other multinationals; but he made clear that one size does not fit all in what is a very company-specific and mission-specific initiative.
  • “As you go about evaluating bank proposals, these are some of the things we learned to consider upfront, evaluating the metrics, such as capacity and the size of the program, that were important to us,” he said by way of introduction.

NIH basics. Companies typically hedge investments in foreign operations by issuing debt in a foreign currency (called organic debt) or using derivatives such forwards or cross-currency swaps (called synthetic debt). Like most corporates that disclose net investment hedging, the member’s company uses both synthetic and organic debt in its program.

  • Deloitte paper on NIH explains that “companies also have an opportunity to reduce overall interest expense when hedged investments in foreign operations are domiciled in a region with comparatively lower interest rates and qualifying cross-currency interest rate swaps are used as the hedging instrument.”
  • In describing his company’s motivation, the member said, “For us, by designating debt as a net investment hedge, we were leveraging the ability to manage and offset the potential balance sheet fluctuations and receive the economic benefit of lower interest rates on foreign currency debt.”
  • He and other members noted that the decision to engage in net investment hedging is usually more complicated because it involves both FX and debt capital markets and the tenors involved are generally longer than cash flow or balance sheet hedging. In many cases, it is viewed as a less tactical and more strategic form of hedging FX risk.

Determine net investment exposure. The member outlined the steps to determine net investment exposure through the lens of accounting considerations. “You’re looking for those foreign functional subsidiaries and your equity position on a book value basis in aggregate across your organization,” he said. He showed a slide prepared by a bank that made these additional points:

  • Book value is adjusted for earnings minus dividends paid from the subsidiary to the parent.
  • There should be no intervening subsidiary with a non-functional foreign currency between the USD parent and the subsidiaries with functional foreign currencies. “You really have to have a clear line from your parent or wherever you decide to do the hedge down to that foreign subsidiary,” the member said.
  • Companies may be able to gross up the net investment exposure for tax to designate a larger notional amount as a hedge.

Determine NIH program size. The first step in determining the size of the NIH program, focusing on risk management considerations, involves looking at the capacity of the exposure eligible for hedge accounting, according to one of the member’s slides provided by a bank. “You have to have a pretty good understanding of your organizational structure, your functional currencies and what your capacity is,” he said.

  • Hedge accounting for foreign debt (be it organic or synthetic) is important, of course, to reduce earnings volatility. Electing the spot or forward method to judge hedge effectiveness will dictate how the hedge affects earnings.

Next, according to a slide from a bank that the member showed, the corporate needs to “rightsize” its FX liabilities. This involves:

  • Forecasting the amount of FX cash that will be generated to support debt service (EBITDA).
  • Applying the company’s leverage ratio to EBITDA.
  • Multiplying the two numbers produces the amount of foreign debt needed to match cash flows and desired leverage.
  • The member noted the importance of managing risk by building in “buffers” to account for possible changes in entity structures and divestment of businesses so that the size of the NIH solution is less than the capacity for hedge accounting.
  • The slide raises the question of whether companies should incur foreign debt above the leverage target for currencies where interest rates are lower and/or increased EBITDA is projected.


Focus on the cash flow statement treatment.
 The member said that different accounting firms may have contrasting views on the classification of cash flows from net investment hedges. Free cash flow and cash conversion are key metrics for his company, one reason treasury got input from technical accountants and auditors early in the process.

  • “We wanted all of the solutions we were evaluating, be it direct issuance, forwards or cross-currency swaps to run through the financial statements in a relatively consistent manner,” he said. The company has now achieved consistent treatment after initially facing obstacles with its auditor in using synthetic solutions.

NIH alternatives. The member mentioned “spot risk at maturity” as a focal point for many companies weighing NIH programs and alternative instruments. His company is confident that given the size of its program it can access foreign currency should it need to settle a contract, he said.

The member’s presentation included a detailed comparison, prepared by a bank, of the benefits and considerations of various ways to execute net investment hedges. Those methods and some of the points made:

  1. Direct issuance of debt in a foreign currency. Organic debt provides a natural hedge to foreign-denominated assets but is subject to market conditions in the foreign market; and pricing may be less attractive than synthetic. Debt market capacity for certain currencies can also be a constraint, the member said.
  2. Swapping new USD debt to foreign currency debt. Cross-currency swaps offer flexibility on the foreign currency leg of the swap. The member company asked all of its banks for pricing information and credit charges—a big component of cross-currency swaps because of longer tenors.
  3. Enter into an FX forward. This offers the least amount of transaction cost and upfront cash. A rolling and layering strategy can be used to smooth volatility of the USD value of foreign revenues. But mismatches in FX forward maturity and dividend payments or asset sales can result in cash settlement costs.
  4. FX options to create synthetic foreign exposure. Combining swaps or forwards with options creates bespoke cash flow to limit settlement exposure and/or mitigate credit charges. But they require premium payments and purchasing options reduces the interest rate differential which can be recognized through the income statement.

Key learnings. The member’s presentation listed these suggestions and lessons:

  1. Get your accounting team and auditors involved early in the process. “Getting people involved early in the idea phase is a best practice,” the member said.
  2. Make sure to build in lots of time to understand the alternatives; the first solution may not be the best one for your organization. Treasury needs to articulate clearly to senior management why NIH makes sense.
  3. Involve the stakeholder group at the idea stage; build redundancy in bank partners so that if pricing changes you have options.
  4. Understand the full spectrum of FX risk and its ongoing impact.
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Rates, Credit Risk and AI: The Best of NeuGroup Insights 2023

Popular posts telling the story of 2023, including volatile interest rates, bank counterparty credit risk and early treasury use cases for AI.

Top NeuGroup Insights of 2023. We are looking back at the 10 NeuGroup Insights posts that resonated most with members, sponsors and other readers during the past 12 months. These popular articles help tell the story of 2023 and merit reviewing or reading for the first time because they retain their relevance—for better or worse—as treasury and finance teams prepare for the year ahead.

Popular posts telling the story of 2023, including volatile interest rates, bank counterparty credit risk and early treasury use cases for AI.

Top NeuGroup Insights of 2023. We are looking back at the 10 NeuGroup Insights posts that resonated most with members, sponsors and other readers during the past 12 months. These popular articles help tell the story of 2023 and merit reviewing or reading for the first time because they retain their relevance—for better or worse—as treasury and finance teams prepare for the year ahead.

  • For example, some of what corporate risk and cash investment managers did to prepare for the debt ceiling showdown that we described last spring may, unfortunately, become useful this winter as Congress faces two government shutdown deadlines, one on January 19, the other on February 2.
  • Interest rates—including when to swap from fixed to floating rates—remain a paramount concern of treasurers and chief financial officers weighing how the markets and the Fed are reading inflation data and weighing the risk of recession or the chances of a soft landing.
  • In addition and related to rates, you’ll also find posts on counterparty credit risk, an urgent concern that NeuGroup Peer Research explored in depth after the spring banking crisis prompted widespread fear about the credit worthiness of financial institutions among corporates. And for some regional banks, the crisis isn’t over.
  • Technology stories—yes, including some about artificial intelligence (AI)—also scored high this year as finance teams progress on their journeys of digital transformation and seek ways to reduce transactional work and focus on extracting actionable insights from data.
  • And while they’re not on this list, we want to call your attention to our two post popular Strategic Finance Lab podcasts from 2023. Top honors go to Aaron Bloomer of Baxter International and his insights on ChatGPT, AI and FP&A; and Sandra Ramos-Alves, who shared her career journey to becoming treasurer at Bristol Meyers Squibb.

Happy New Year! To read the complete list of NeuGroup Insights’ top 10 articles of 2023, please click here.

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Don’t Ignore the Halo Effect in Credit Ratings for Subsidiaries

Why ratings used to set rates for intercompany loans should factor in ‘ordinary’ support parents provide subsidiaries.

The internal credit ratings of subsidiaries that a parent company may use to help determine the interest rate for an intercompany loan need to reflect a halo effect that incorporates any day-to-day, ordinary support the subsidiary receives from the parent. That is among the key takeaways from a presentation by Societe Generale at a recent meeting of NeuGroup for Mega-Cap Assistant Treasurers sponsored by the bank.

  • Jacques Ouazana, head of US ratings advisory at Societe Generale, shared recommendations for corporates that want to provide tax authorities with a “fair, consistent, clear and traceable methodological framework” if and when they are asked to explain interest rates based on internal ratings.

Why ratings used to set rates for intercompany loans should factor in ‘ordinary’ support parents provide subsidiaries.

The internal credit ratings of subsidiaries that a parent company may use to help determine the interest rate for an intercompany loan need to reflect a halo effect that incorporates any day-to-day, ordinary support the subsidiary receives from the parent. That is among the key takeaways from a presentation by Societe Generale at a recent meeting of NeuGroup for Mega-Cap Assistant Treasurers sponsored by the bank.

  • Jacques Ouazana, head of US ratings advisory at Societe Generale, shared recommendations for corporates that want to provide tax authorities with a “fair, consistent, clear and traceable methodological framework” if and when they are asked to explain interest rates based on internal ratings.
  • Societe Generale prepared a methodology for a client with more than 300 subsidiaries across the globe. A banker who worked with the client said that by the end of the process, the company “could show the tax authorities they had, in fact, risk-rated for the country risk and risk-rated for the individual subsidiary.”

Why it matters. One NeuGroup member explaining the significance of credit ratings for subsidiaries noted that the issue lends itself to tax disputes. That’s because interest expense is deductible for corporates, with limits, in most jurisdictions. “Given that interest is deductible and ratings impact credit spreads, the rating matters,” he said. That’s especially true for corporates today given the sharp jump in rates that began in 2022.

  • “One major item of controversy is whether a subsidiary can have a rating different than its ultimate parent company,” the member added. “Many countries argue that the subsidiary benefits from an implicit guarantee from the parent and therefore should be issued the same rating, regardless of sovereign or other risks.”
  • Mr. Ouazana commented, “Making a distinction between only implicit and fully explicit support is necessary from a credit risk perspective—and also justifies why formal guarantees exist. At the end of the day, it is about assessing the likelihood that parent support will be there when needed.”

Ordinary vs. extraordinary. Determining an accurate credit rating for an individual subsidiary requires considering the impact of it being part of a broader group, according to Societe Generale. This includes brand recognition, access to ongoing liquidity as well as use of the group’s technology systems. These benefits constitute what the bank described as a halo effect provided by the parent and are forms of ordinary support.

  • Rating a subsidiary as a standalone entity would not account for the halo effect provided by ordinary support and could lead to pricing a loan at a rate that’s too high. “We need to think about what really differentiates a subsidiary from a standalone entity,” Mr. Ouazana said.
  • By contrast, the bank’s methodology excludes extraordinary support, defined as the parent stepping in to avoid a default on the subsidiary’s debt obligations. As one member noted, most intercompany loans are not guaranteed by the parent.
  • By equalizing the subsidiary’s rating with that of the parent, the latter would become the reference point to price intercompany loans, which could underestimate pricing, according to Societe Generale. In other words, incorporating unguaranteed extraordinary support could mean a loan is priced at a rate that is too low.

Middle ground. Societe Generale’s solution reaches a middle ground that is inspired by rating agency methodologies which are “adapted to fit the unique characteristics of a subsidiary and the need to incorporate some form of support,” Mr. Ouazana told NeuGroup Insights in a follow-up email exchange.

  • “Based on our methodology, we assign to subsidiaries arm’s length credit ratings, which are neither fully supported ratings nor fully standalone ratings,” he said. “They reflect both standalone credit features and some ongoing support provided by the parent.”
  • He added “Because our arm’s length ratings do not reflect full, extraordinary support, they tend to be lower than the parent rating. Overall, we believe that they are a better representation of the individual creditworthiness of a subsidiary.”
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How a P&G Tax Whiz Quickly Got Comfortable Running Treasury Too

Tadd Fowler’s deep engagement in treasury activities, a masterful team and helpful peers got him up to speed.

Tadd Fowler wears two big hats at Procter & Gamble, the world’s largest consumer goods company. He’s head of global tax operations—a natural fit for a former PwC tax partner—and also took on the treasurer role in 2021. In a Strategic Finance Lab podcast you can listen to on Apple and Spotify, he explains how an accountant steeped in the world of tax “got very comfortable very quickly” also running treasury at a multinational that sells products in 180 countries.

  • He gives lots of credit to P&G treasury team members whose mastery of areas including capital markets, insurance and pensions helped him learn the nuances of bond deals, cross-currency swaps and how to manage banking relationships. He also praises peers and peer groups for his quick education in treasury.

Tadd Fowler’s deep engagement in treasury activities, a masterful team and helpful peers got him up to speed.

Tadd Fowler wears two big hats at Procter & Gamble, the world’s largest consumer goods company. He’s head of global tax operations—a natural fit for a former PwC tax partner—and also took on the treasurer role in 2021. In a Strategic Finance Lab podcast you can listen to on Apple and Spotify, he explains how an accountant steeped in the world of tax “got very comfortable very quickly” also running treasury at a multinational that sells products in 180 countries.

  • He gives lots of credit to P&G treasury team members whose mastery of areas including capital markets, insurance and pensions helped him learn the nuances of bond deals, cross-currency swaps and how to manage banking relationships. He also praises peers and peer groups for his quick education in treasury.
  • His deep commitment to learning, as well as knowing what questions to ask, also played a crucial role. “When opportunities presented themselves, I tried to be very engaged in things that normally someone at my level might not be engaged in. I just tried to take advantage of it and learn from it,” he said. 
Tadd Fowler, Senior Vice President, Procter & Gamble

One person running both tax and treasury is not typical among current NeuGroup member companies. But it may become more common as corporations break down silos and seek one leader capable of steering two groups that often must work together closely but whose collaboration isn’t always smooth.

In his conversation with NeuGroup Insights editor Antony Michels, Mr. Fowler explains some of the advantages he sees in having the two functions under one leader. “The ability to have somebody that is familiar with both the tax and treasury implications of decisions ensures that you get to potential solutions on a quicker basis. And I think it ensures that we can quickly prioritize if there is a conflict, which priority is going to win the day.”

  • Mr. Fowler is proud of the relationship that has developed between the tax and treasury teams at P&G. “There’s a lot of trust,” he said. “That took a while to build, but there’s a lot of trust and there’s a lot of respect for the mastery each of us brings. And I think the ability for people to learn a little bit about those other technical disciplines is exciting.”
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