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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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A Journey With J.P. Morgan To Improve Cross-Border Payments

How one member uses the blockchain-based JPM Coin System to streamline cash sweeping.

One NeuGroup member whose company operates in Asia, North America and Europe faced a persistent issue with cash trapped in bank accounts after closing hours. To address the problem, he was invited to collaborate with Onyx by J.P. Morgan—and in the process helped shape a new infrastructure for instant payments built on the blockchain.

  • The member, along with a small group of peers, worked with team members from Onyx to provide feedback on how its blockchain-based payments system can benefit the companies. In the years since, the program has grown to dozens of institutional J.P. Morgan clients, with over $1 billion in transactions flowing through the system each day.

How one member uses the blockchain-based JPM Coin System to streamline cash sweeping.

One NeuGroup member whose company operates in Asia, North America and Europe faced a persistent issue with cash trapped in bank accounts after closing hours. To address the problem, he was invited to collaborate with Onyx by J.P. Morgan—and in the process helped shape a new infrastructure for instant payments built on the blockchain.

  • The member, along with a small group of peers, worked with team members from Onyx to provide feedback on how its blockchain-based payments system can benefit the companies. In the years since, the program has grown to dozens of institutional J.P. Morgan clients, with over $1 billion in transactions flowing through the system each day.
  • In a recent session, the member, as well as representatives from Onyx, presented on how the blockchain-based payment rail, called the JPM Coin System, alleviated a major pain point by offering 24/7 instant payments—with further features that streamline and automate the company’s entire payments process.

Tackling trapped cash. The member’s recurring issue stems from payments made to the company’s Singapore bank account after the close of the Singapore business day. Before using the JPM Coin System, the company had to sweep cash from Singapore at 5:30 p.m. local time to London, and again from London to New York later in the day. This left the corporate with no way to access cash sent to its accounts after hours until the start of the next day.

  • “When we wake up the next day in Singapore, all these transactions have come in and it’s too late to optimize our use of that capital,” the member said. “Our average daily balance of prior day transactions is about $40 million a day—we’re sitting on that with lower interest and inefficient funding.”

A blockchain-based solution. Because the JPM Coin System provides infrastructure based on the blockchain, payments are unencumbered by hours of operation. This allows the company to move cash to and from its J.P. Morgan accounts in minutes.

  • A treasury analyst from the member company demonstrated the ease and quickness of JPM Coin payments—in a few clicks, he made a payment from the company’s Singapore account to its London account without going through any external clearing system.
  • The first step of the transaction transfers the cash from their account held at J.P. Morgan’s Singapore branch, denominated in USD or euro, to an equivalent blockchain deposit account (BDA) attached to the Singapore entity. Then, a transfer is made to a London-based entity’s BDA. In the final step, the payment is withdrawn from the London-based entity’s BDA into the company’s London bank account.
  • “With JPM Coin, we can sweep from London or Singapore until right up to New York’s close, do the transaction, and get into the New York account,” the member said. “There’s no way to do that without the blockchain environment.”

The future of payments? Onyx is continually making improvements to the JPM Coin System and has gradually raised the maximum size of payments. Other instant payment systems, like FedNow, have much lower limits.

  • Last month, the system launched Programmable Payments, which allows corporates to set up rules-based automations for instant payments.
    • The member said his company expects to fully automate systems like the sweeping process, or even end-of-day margin calls.
  • Representatives from Onyx also shared plans for interoperability with other banks, in which a JPM Coin payment could be sent to any participating account, including those that aren’t held at J.P. Morgan.
  • Another plan, which excited a number of members in the room, is for payments made in one currency that are converted and deposited in another currency—opening up a possibility for 24/7 foreign exchange.
  • “This should be a treasury superhighway,” one Onyx representative said. “When you’re making high value cross-border payments, the stakes are high and the settlement risk is high. But if you use JPM Coin network to settle flows, this can happen in minutes.”
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Tied to the Business When Crisis Hits: P&G Treasurer Tadd Fowler

At P&G, treasury and tax are “tied at the hip” with the business in countries where instability and volatility prevail.

Many multinationals and their finance teams have extensive experience operating in countries in the throes of economic and geopolitical turmoil. Most have used what they’ve learned from managing amid hyperinflation, currency devaluation and war to prepare for future crises. Among them is NeuGroup member company Procter & Gamble.

  • In a NeuGroup video you can watch by hitting the play button below, Tadd Fowler, senior vice president, treasurer and head of global tax operations at P&G, explains how the consumer products giant manages in what it calls crisis markets such as Egypt, Pakistan and Turkey, for example. The video is an excerpt from a forthcoming episode of NeuGroup’s Strategic Finance Lab podcast, available on Apple and Spotify.

At P&G, treasury and tax are “tied at the hip” with the business in countries where instability and volatility prevail.

Many multinationals and their finance teams have extensive experience operating in countries in the throes of economic and geopolitical turmoil. Most have used what they’ve learned from managing amid hyperinflation, currency devaluation and war to prepare for future crises. Among them is NeuGroup member company Procter & Gamble.

  • In a NeuGroup video you can watch by hitting the play button below, Tadd Fowler, senior vice president, treasurer and head of global tax operations at P&G, explains how the consumer products giant manages in what it calls crisis markets such as Egypt, Pakistan and Turkey, for example. The video is an excerpt from a forthcoming episode of NeuGroup’s Strategic Finance Lab podcast, available on Apple and Spotify.

Early warning. P&G’s goal is to prepare for market disruption—before a crisis develops—by using an early warning system that gathers macroeconomic and geopolitical information on countries across the world. “That gives us the opportunity to plan for volatility in these markets and determine how best to manage,” Mr. Fowler said in a follow-up conversation this week.

  • He added that the goal of the system is to “give visibility to potential volatility in a market, and via that visibility, the business can begin to plan its approach to manage pricing, productivity, portfolio, working capital management, etc.” He said there are markets currently in crisis mode where P&G has been able to successfully operate thanks to early preparation.

Tied at the hip. Anticipated or not, when a country has hit crisis mode, treasury and tax are tied at the hip with their business partners to make sure everyone is on the same page in decision-making that best serves the company, Mr. Fowler said. In some cases, that moves the emphasis away from a business unit’s typical focus on the P&L.

  • “We may decide to move away from that and try to focus on cash—trying to preserve cash and protect cash to the greatest extent we can,” Mr. Fowler said. “And that takes sometimes a different philosophical approach to how we run the market, which requires close collaboration between treasury and the business.”
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Pension Risk Transfer Calculus: Costs, Benefits, Risks

Considering cost is crucial when evaluating the benefits of a pension risk transfer.

The pension risk transfer (PRT) market stayed hot this year after setting a record in 2022 that included a $16 billion transfer by IBM. And there are signs—both qualitative and quantitative—that PRT volume will continue to grow as more companies with well-funded plans seek to remove pension liabilities from their balance sheets.

Considering cost is crucial when evaluating the benefits of a pension risk transfer.

The pension risk transfer (PRT) market stayed hot this year after setting a record in 2022 that included a $16 billion transfer by IBM. And there are signs—both qualitative and quantitative—that PRT volume will continue to grow as more companies with well-funded plans seek to remove pension liabilities from their balance sheets.

Not so fast. Not everyone is jumping on the PRT bandwagon, though. One big reason is cost—because in a PRT, a corporate typically pays an insurer a premium to take over its portfolio of pension liabilities and the costs of running the plan.

  • “My sense is the market for PRT is expensive,” one member said. “We’re not averse to doing one, but we need to view it through an economic lens compared to what’s at risk.”
  • He’s not alone. At a recent meeting of the pensions group, members discussed how they are assessing the merits of a risk transfer against an often steep price.

Watch the scoreboard. Part of the cost calculus is informed by the risks the corporate retains by continuing to manage the pension itself. That risk is often seen as less significant for plans that are overfunded and could make use of a surplus at some point—a potential reason to postpone or avoid a PRT.

  • “I think about it in terms of American football,” one member said. “If assets are our points, and liabilities are our opponents, maybe there’s a scoreboard on the side of the field that currently states we have 19 in assets, and the opponent has 13 in liabilities. But it’s only the end of the first quarter—if I wait until the end of the game, that 13 has somehow gone down to zero, and my team has had many more touchdowns.”
  • Another member agreed and said corporates with cash left over “after the game” have flexibility on how to use a potential surplus. “When you’re starting to feel safe, that’s great, then you start looking for how to use it,” he said. “You should start looking for things like 401(k) matching and maybe even paying bonds from the surplus.”
  • The first member said, “There may be a point where it is worth waiting for the plan to terminate, to allow the scales to tip, but there may be a point when you don’t want to wait any longer. That’s what we’re trying to figure out: are we already there?”

Self-management. Members who aren’t already there and decide to continue managing a pension plan themselves will need to address the challenges of managing cash flows to meet their obligations. Representatives from meeting sponsor Insight Investment shared an approach that offers what they say is a more certain path to ensuring a plan achieves its goals while minimizing risk. It involves timing cash flows and harvesting income from fixed-income investments.

  • “Cash flow matters as much as anything else,” said an Insight representative. “The trade-off is not only between assets and liabilities—it’s a three-dimensional problem. Some of the more obvious trade-offs involve cash flows, and this is how we think about our whole process.”
  • Taking cash flow into account along with assets and liabilities may be especially relevant for fully- or over-funded defined benefit plans and particularly for those closer to their end state, according to Insight.
  • “Cash outflows can be very significant for pension plans heavily in decumulation,” said Ciaran Carr, who heads Insight’s North American Client Solutions Group. “Plans that fully consider cash flow exposures within their investment framework may prefer to opt for self-management over a PRT.”
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Bangalore Bound: Pushing Processes to Centers of Excellence

Treasury at one company is migrating some processes to a COE in India, part of a larger transformation.

The increasingly popular move among multinationals to establish a treasury center of excellence (COE) in a low-cost country or region is a multifaceted endeavor that for one NeuGroup member company included thoroughly assessing processes to determine which ones remain in corporate treasury or regional treasury centers, which go to a managed service provider (MSP) and which belong in the COE.

  • Members of NeuGroup for Mega-Cap Assistant Treasurers heard a firsthand account of the company’s journey to complete a treasury process realignment by mid-2024 that includes a COE in Bangalore, India. The treasury team’s director of global operations described the steps taken so far, lessons learned and the treasury COE’s relationship with the corporate’s global business services (GBS) organization.

Treasury at one company is migrating some processes to a COE in India, part of a larger transformation.

The increasingly popular move among multinationals to establish a treasury center of excellence (COE) in a low-cost country or region is a multifaceted endeavor that for one NeuGroup member company included thoroughly assessing processes to determine which ones remain in corporate treasury or regional treasury centers, which go to a managed service provider (MSP) and which belong in the COE.

  • Members of NeuGroup for Mega-Cap Assistant Treasurers heard a firsthand account of the company’s journey to complete a treasury process realignment by mid-2024 that includes a COE in Bangalore, India. The treasury team’s director of global operations described the steps taken so far, lessons learned and the treasury COE’s relationship with the corporate’s global business services (GBS) organization.

Big picture. The development and expansion of that GBS organization and the more recent establishment of COEs are part of a transformation designed to limit transaction processing and provide deeper business insights to senior leadership throughout the enterprise, the member explained. This will be achieved in part through standardization and simplification of processes, and reducing work through automation and rationalization.

  • When asked by a peer about compensation cost savings, the member said there is value to realize in India. However, she made it clear that eliminating jobs is not the point of the COE. She expects treasury’s size to change over time, but more as a result of attrition, moving jobs and not backfilling positions. And in response to another member’s question, she said treasury is describing the movement of processes to the COE as a potential opportunity.
  • “We’re saying your job will look different in the future. Today you may be spending your time on operations. Tomorrow, we hope you’re spending your time providing insights to our organization. That’s how we’ve framed it and that’s been beneficial.”

COEs, SSCs and MSPs. As NeuGroup Insights noted earlier this year, the subject of COEs often prompts a debate about how they differ from shared services centers (SSCs) used by many corporates—a distinction that matters. The presenting member said, “We view COEs as more of a center of expertise where we can pull in higher-value, operational processes that introduce more risk; I think of SSCs as performing very rules-based, prescriptive processes.”

  • For many non-treasury functions, this company is pushing repetitive, transactional, rules-based processes out of corporate teams to a third-party MSP, not an SSC, as part of a realignment overseen by the GBS organization. But only 5% of treasury processes will be performed by the MSP, including global bank account reconciliation.
  • “Our MSP doesn’t have the expertise to support all the transactional processes” for treasury, the member said. “There are and will be cases where our COE is supporting both transactional and value-add processes.”
  • The scope of a COE may change over time. One member quoted in our earlier story said, “When we started our COE five years ago, it performed pretty simple work, like data aggregation and first-line analysis. Now we are using it to concentrate high-caliber talent who can develop advanced models, which serve finance in executing sophisticated analytics.”

Building the COE. Treasury designed a global standard taxonomy that involved documenting all its processes, requiring all treasury teams to allocate their work using the taxonomy. Workshopping sessions classified every process as either transactional, value-add or strategic. The final stage of the process is deploying structured, repeatable standard processes, tools and functional roles.

  • As a result of the assessment, treasury is moving these areas to the COE:
    • Manual treasury payments.
    • Treasury closing processes.
    • Back-office functions for derivatives.
    • Treasury system (tech) support.
    • Treasury reporting.
  • To run the COE organization, the member hired a senior manager with extensive treasury experience who is already based in India and works for the company. He will oversee treasury operations (payments, closing and back office) as well as treasury technology, which will handle tasks including level one and level two help-desk ticket support for activities including bank account management.
  • The senior manager will report to the member, who reports to an assistant treasurer. The COE reports to corporate and reports indirectly via a dotted line to the GBS organization. (Corporate treasury will manage governance, strategy and policies.)

Lessons learned. The experience of the GBS organization demonstrated for treasury the downside of lifting and shifting processes from corporate or business teams to a COE, MSP or SSC. “Ideally you would standardize and automate before you shift work to a managed service provider if at all possible,” the member said. “We are putting those standardizations and automations in place before we move forward to establish our center of excellence.”

  • Hiring in India is hard. “The sooner you can start, the better,” the member said. The challenge reflects intense competition for talent and the need to find people with very specific skill sets. Another issue: finding people willing to work North American hours. “No one wants the night shift: that’s where we lose people.”
  • To train new employees, the member is overseeing corporate and regional teams that are documenting “as-is processes” using process maps and detailed desktop procedures. “We want enough details in those desktop procedures so that when we transfer it, theoretically someone could perform the process by just having a desktop procedure in front of them.”
  • The team is also mapping what it sees as the standardized, global approach to the process it hopes to achieve in the future. “What will a global standard process look like when we realign it into the COE?”

Looking ahead. The AT from another company going through the COE process asked if the member, like him, was already facing questions from senior leaders about expanding the scope of the activities done by the COE. “It’s ‘why can’t you do your FX there, why can’t you issue CP out of there?’ The bar keeps getting raised as you start building out your capability,” he said.

  • The member envisions her company going through an optimization. “This is the beginning for us. But then we’ll review that taxonomy again. It will look different now that we’re evolving our organization; so we’ll take another review and see if there are any other opportunities. I think first, the leadership team wants to see this be successful. So we’re starting here, but I really do envision that evolving over the course of the next few years.”
  • Part of that process, she said, will be the establishment of metrics. “It’s going to be really important to manage our metrics so we’re working with the corporate team and regional treasury centers to develop service level agreements and KPIs and have those in place so that we’re really managing how the team is performing as we move forward.”
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Flying Into AI Use Cases, an Internal Auditor Turns to Copilot

Microsoft’s Copilot helps pave the way for more use of AI by auditors and others at corporates embracing change.

One NeuGroup member who is an early adopter of Copilot, Microsoft’s assistant for using generative AI within its Office suite of products, demonstrated the usefulness, efficiency and power of large language models (LLMs) like ChatGPT by presenting at a recent NeuGroup meeting with a slide deck generated in part by—you guessed it—AI.

  • The presentation, delivered at the fall peer group meeting of NeuGroup for Internal Audit Executives, sparked a conversation about AI use cases, best practices, risks and governance. It was one of dozens held across the NeuGroup Network this year about leveraging ChatGPT and other LLMs.

Microsoft’s Copilot helps pave the way for more use of AI by auditors and others at corporates embracing change.

One NeuGroup member who is an early adopter of Copilot, Microsoft’s assistant for using generative AI within its Office suite of products, demonstrated the usefulness, efficiency and power of large language models (LLMs) like ChatGPT by presenting at a recent NeuGroup meeting with a slide deck generated in part by—you guessed it—AI.

  • The presentation, delivered at the fall peer group meeting of NeuGroup for Internal Audit Executives, sparked a conversation about AI use cases, best practices, risks and governance. It was one of dozens held across the NeuGroup Network this year about leveraging ChatGPT and other LLMs.
  • One of those sessions focused on the implications of AI for IT auditors. A few companies are setting up labs to give IT auditors a deeper understanding of LLMs and the risks they present.

Audit use cases. The presenter provided a hypothetical use case of a team member designing an audit program entering the prompt, “Pretend you are an auditor assessing X; what are the key risks? And what test steps would you suggest?” Members who have done similar prompts have been impressed with the tool’s ability to help teams get started in the early stages of a long process, freeing up users to spend more time on activities that add value.

  • Another relatively straightforward use case is employing AI to record interviews or meetings. The Copilot tool can produce a transcript from Teams, Microsoft’s communications platform, summarize the discussion in a work paper and produce a list of to-dos for meeting participants. One member said, “the summarization tools are amazing.”
  • With a Copilot license, a user can also access any referenced document or chat to produce a PowerPoint presentation. And they can search an entire database more efficiently depending on their access permissions.
  • Auditors using Copilot can ask Excel to write formulas, create pivot tables and identify outliers from any dataset. Suggested prompts include, “summarize this data and identify three key trends” and “create a model to show what if X happens.”

Tips for prompting. The presentation included a list of tips for interacting with ChatGPT or other AI interfaces. They include:

  • Define the tool’s role: “pretend you are an IT auditor assessing…”
  • Use “chained prompting” by breaking up a complex prompt into multiple, simpler tasks.
  • Define the output by supplying the format you want: “create a document” or “provide a list.”
  • Change the tone or format: “make this less formal” or “summarize this.”
  • Provide context and be as specific as possible. Example: “Pretend you are an IT auditor in a large tech company assessing access controls in SAP S/4HANA. Provide a list of three key risk areas I should focus on with suggested audit test steps in each, in a form that a non-expert would understand.”

Risks. Access control for companies using AI was a key risk identified in the discussion. As one member put it, “It seems if you’re going to put this into place, then your data governance needs to be really strong.” If it’s not, companies run the risk of users accessing confidential or privileged information.

  • A section of the member’s presentation on AI governance recommended establishing a clear and accountable structure; developing and implementing AI policies and procedures; conducting regular AI risk assessments and audits.
  • Several members discussed the risk of employees’ personal information being accessed in error, and fallout from that. When asked about whether a rogue user could ask the chat to pull the CEO’s Social Security number, one member said, “In theory, it could find it.” This is where a company’s IT and IT audit teams come into play.

IT auditors setting up AI labs. At the inaugural meeting of a NeuGroup pilot peer group for IT auditors, members discussed how they are handling the use of AI across organizations. To do their jobs, they need to understand AI technology. Or as one member put it, they need to be able to “use their own sticks to make fire.” His company is among a small number setting up labs where experts will instruct IT auditors.

  • The member wants IT auditors to get hands-on experience with what they’re auditing and told his team, “This is your opportunity to learn how AI and ML works in detail.” He said having the ability to audit AI tools without relying on a third party is imperative.
  • Another member, who is not setting up a lab, pointed out that AI advancements may mean that IT auditors will have to add advanced skillsets to their teams. “Now you’re talking about finding a qualified data scientist. How are you solving the people problem on this?” he asked.
  • That generated much discussion among participants. Most agreed that finding the perfect person—a data scientist with audit experience—was unlikely. But looking for a data scientist who likes challenges and is a leader is a good first step.
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Talking Shop: Defining the Scope of Fraud Risk Assessments

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: Fraud risk assessments performed by internal auditors are designed to identify a company’s vulnerabilities to internal and external fraud, including embezzlement, asset misappropriation, misstatement of financial information, corruption and cybercrime. According to a position paper by The Institute of Internal Auditors, “organizations should have robust internal control procedures to limit the risk of fraud, and internal audit’s role is to assess these controls.”

    • fraud risk management guide produced by the Committee of Sponsoring Organizations (COSO) and the Association of Certified Fraud Examiners (ACFE) states that organizations perform “comprehensive fraud risk assessments to identify specific fraud schemes and risks, assess their likelihood and significance, evaluate existing fraud control activities, and implement actions to mitigate residual fraud risks.”

Member question: “Have you typically completed fraud risk assessments based on a company-wide perspective or have you started with a smaller group or portion of the business? IA has not executed one at my company since I have been here, so I’m looking for how this has been approached elsewhere to determine if we can narrow the scope.”

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: Fraud risk assessments performed by internal auditors are designed to identify a company’s vulnerabilities to internal and external fraud, including embezzlement, asset misappropriation, misstatement of financial information, corruption and cybercrime. According to a position paper by The Institute of Internal Auditors, “organizations should have robust internal control procedures to limit the risk of fraud, and internal audit’s role is to assess these controls.”

  • fraud risk management guide produced by the Committee of Sponsoring Organizations (COSO) and the Association of Certified Fraud Examiners (ACFE) states that organizations perform “comprehensive fraud risk assessments to identify specific fraud schemes and risks, assess their likelihood and significance, evaluate existing fraud control activities, and implement actions to mitigate residual fraud risks.”

Member question: “Have you typically completed fraud risk assessments based on a company-wide perspective or have you started with a smaller group or portion of the business? IA has not executed one at my company since I have been here, so I’m looking for how this has been approached elsewhere to determine if we can narrow the scope.”

Peer answer 1: “We do a company-wide fraud risk assessment via survey and leverage the ACFE model, tailored for our business. While we include functions across the company, we only survey 55 to 60 cross-functional representatives to complete the survey.”

Peer answer 2:
 “We do a company-wide one for Sarbanes-Oxley (SOX) focused on financial reporting fraud risk. For operational fraud risk, it’s audit by audit (we require every team to assess fraud risk in the risk control matrix). We just completed a procurement fraud review which was basically a procurement fraud risk assessment plus walk-throughs of key controls.”

Peer answer 3: 
“Rather than focus on groups or portions of the business, we do ours based on a combination of 23 general fraud schemes that are applicable, e.g., channel partner fraud, government contract noncompliance, manipulation of estimates/reserves, off-balance sheet activity, expense reimbursements), results of relevant investigations that occurred during the year, and emerging trends.

  • “We then assign a risk level to each, identify risk mitigations (primarily by mapping them to existing SOX controls), and then flag the schemes with no or insufficient mitigating activities and controls. The flagged areas are either escalated to management for consideration of new risk mitigations or considered as auditable areas as we develop and update our audit plan.”

Peer answer 4: “Our fraud risk assessments are conducted annually with a company-wide perspective to satisfy our entity-level SOX control and to give EY info to modify their audit scope if needed. This approach involves:

  • “Considering enterprise risk management assessment results.
  • “Conducting surveys to gauge employees’ perspectives on the company’s fraud risk management as well as the company culture on fraud.
  • “Identifying processes with high inherent fraud risks for focused analytics. There were 11 this year, but we did analytics on higher inherent risks and where actual fraud happened, assessing the effectiveness of existing controls for these areas.”

NeuGroup Insights asked the member who posed the question for an update. She said, “We have decided to move forward with a company-wide fraud risk assessment in order to perform a more comprehensive assessment. We have not begun the project yet, so there is a possibility the scope will be narrowed slightly.

  • “The approach will be to conduct three to five brainstorming sessions with cross-functional groups to obtain input on possible fraud risks and scenarios. In future years, perhaps, I would hope we transition to a survey approach, but that is just a preliminary thought.”
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Recession and Rates Rank High on Treasurers’ 2024 Risk Lists

New NeuGroup Peer Research reveals the risk of an economic downturn and high interest expense loom large.

As treasurers look ahead to 2024, the results of the NeuGroup 2024 Finance and Treasury Agenda Survey reveal two intertwined risks—headwinds which may also appear at odds with each other—looming on the horizon: the continuing threat of recession, paired with interest rates that may remain higher for longer. Normally, of course, economic weakness brings about lower rates. But the last few years have been anything but normal.

New NeuGroup Peer Research reveals the risk of an economic downturn and high interest expense loom large.

As treasurers look ahead to 2024, the results of the NeuGroup 2024 Finance and Treasury Agenda Survey reveal two intertwined risks—headwinds which may also appear at odds with each other—looming on the horizon: the continuing threat of recession, paired with interest rates that may remain higher for longer. Normally, of course, economic weakness brings about lower rates. But the last few years have been anything but normal.

Economic downturn ripple effect. So although more observers believe the Fed may be able to navigate a soft landing following the recent cycle of rate hikes in the US, members’ top risk headed into 2024 is the same as it was headed into 2023: economic downturn.

  • “I continue to see a great deal of uncertainty ahead that requires one to consider downside scenarios persistently in their thinking,” one member told NeuGroup Insights in an email. “The global economy is going through multiple major transitions and events are affecting economies in uneven ways and increasing overall fragility.”
  • NeuGroup senior executive advisor Paul Dalle Molle, who leads NeuGroup for Growth-Tech Treasurers, noted that fast-growing companies with credit ratings below investment grade are particularly vulnerable to the risks of tightening credit markets that would most likely accompany an economic downturn.

Perfect storm. A potential recession, or even persistent declines in consumer spending, could put higher pressure on working capital—an issue which could compound if interest rates remain high, keeping borrowing costs elevated as well (members’ No. 3 risk for next year).

  • Over half of survey respondents expected interest rates to stay high or continue rising (see chart)—an issue that could portend weaker earnings, margin pressure and intensified calls by stakeholders to cut costs. To be sure, volatile markets and the recent decline in rates have no doubt altered rate expectations for some members—for now.

Political fallout. NeuGroup members also expressed apprehension about political impacts, including geopolitical volatility and uncertainty around regulation.

  • Ongoing armed conflicts in the Middle East and Eastern Europe will continue to disrupt business in the new year. Other concerns mentioned by members include fallout from Argentina’s election of a president who promises to upend the status quo and another polarizing presidential election in the USA.
  • More restrictive regulation in the US on clean energy requirements may also follow in 2023, along with proposed tightening to Basel III and potential changes in Fed stress-test criteria in the wake of the banking crisis earlier this year.
  • “Fundamentally, I remain optimistic, but with a heightened sense of risk and urgency,” one member said. “For treasury, it’s a good moment to reflect on risk management. Take the time to review exposures, strategies and processes.”

The cyber element. We should note that members ranked cyber risk No. 2 in the survey. Earlier this year, a Deloitte poll showed that over one-third of corporates had faced a cyberattack over a 12-month period.

  • In recent meetings, a number of members have shared how they are stepping up cybersecurity procedures within treasury, because insurance for cyberattacks is often too expensive.
  • One member shared that his company has regular drills in which the entire office shuts down its computers and switches to using spare, encrypted laptops for the day.
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Cashing In: Trade Finance Fuels Working Capital, Boosts Sales

How HSBC helped an energy company optimize working capital, boost sales and keep a key client happy about payment terms.

Earlier this year, the treasurer at a clean energy company found himself in a precarious position: he needed to get cash in the door faster to fund operating expenses, but the corporate’s annual revenue is heavily reliant on a few large clients who had negotiated long payment terms. At a recent session of NeuGroup for ESG, the treasurer dug into the details of a project that leveraged a strategic partnership with HSBC to offload the receivable to the bank and get paid sooner.

  • The NeuGroup member company’s business relies largely on selling a single product and has lopsided payment cycles, with the bulk of revenue coming in at the end of every quarter. The treasurer said this led to a “dry period in the middle” of each reporting period, which required a solution to maintain cash balances for regular expenses including payroll.

How HSBC helped an energy company optimize working capital, boost sales and keep a key client happy about payment terms.

Earlier this year, the treasurer at a clean energy company found himself in a precarious position: he needed to get cash in the door faster to fund operating expenses, but the corporate’s annual revenue is heavily reliant on a few large clients who had negotiated long payment terms. At a recent session of NeuGroup for ESG, the treasurer dug into the details of a project that leveraged a strategic partnership with HSBC to offload the receivable to the bank and get paid sooner.

  • The NeuGroup member company’s business relies largely on selling a single product and has lopsided payment cycles, with the bulk of revenue coming in at the end of every quarter. The treasurer said this led to a “dry period in the middle” of each reporting period, which required a solution to maintain cash balances for regular expenses including payroll.
  • HSBC, which offers a variety of global trade and receivables finance solutions, worked with the energy firm to purchase the receivable while the company continued to offer its customer attractive payment terms. So without jeopardizing the relationship, the business was able to get the cash it needs up front and minimize its counterparty risk—allowing it to expand sales to the buyer.
  • This structure takes into account the varying credit profiles of the energy company and its client, the balancing of seller and buyer risk, the corporate’s need to ensure sales are not jeopardized and its desire to improve working capital.
  • During the session, Vivek Ramachandran, HSBC’s head of global trade and receivables finance, said, “the upside is huge: they get early access to cash flow and can build up capacity a lot quicker, even with long-term contracts.”

Shorter cash conversion. The treasurer shared that the company has a “constant need to reduce pressure that comes from working capital requirements,” which he described as growing pains—a good problem to have. Because sales cycles often range from nine to 12 months, working capital forecasting isn’t easy.

  • Mr. Ramachandran said HSBC is well-positioned to enable solutions to address challenges like this. “We have a view not just of companies themselves, but also of their counterparties,” he said. “For this transaction, we had a relationship with the buyer, and worked with them to structure payment obligations that also reduce risk.”
  • The treasurer said that the deal had very specific boxes to check, which required a partner bank willing to create a bespoke solution. “The deal had very long terms, which you won’t always see, and the amount was very significant,” he said. “The pricing had to be reasonable as well, in sync with our working capital needs. HSBC had to basically make sure everybody is winning, and make a margin—but now we are all able to win.”

Treasury’s strategic opportunity. The member added that treasurers have an opportunity to enhance working capital at all companies by breaking down silos and collaborating with the business. “Step into the other world, whether it’s sales or procurement pricing, and you might see opportunities,” he said. Finding those opportunities is becoming a requirement for strategic treasury teams.

  • “Sometimes, I’m having discussions with vendors on payment terms, or working on a financing solution for customers,” the member said. “Normal, conventional cash and risk management is no longer enough for treasurers.”
  • He added that this is especially vital for growing companies in unconventional industries like clean energy, but “treasury is changing across the board.”
  • Mr. Ramachandran added that “the more visibility treasury has into buyer contracts, the easier it is for banks like us on both sides of the transaction to inject financing that releases working capital.”
    • “I think the world of trade will change a lot,” he said. “The conversations we’re having do not sound like historical trade finance conversations, because working capital optimization is going so much further now: it’s not just financing a receivable, it’s part of a broader capital structure discussion and how companies can optimize their sources of capital, with trade finance now being one of them.”
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