Insights

Peer-Validated Insight Distilled by NeuGroup

Sign up to get NeuGroup Insights by email—and share what you learn.

Russia Sanctions and Exits: Devil’s in the Details

Members discuss bank guarantees, clients that are in no hurry to pay and good news on intercompany funding—at least for now.

Editor’s Note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis. Senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions.

By Paul Dalle Molle

The war in Ukraine is now, sadly, one month old. With this milestone we also note an evolution of the concerns of NeuGroup members. They have more clarity on their companies’ decisions regarding Russia (to exit, suspend operations, stay), sanctions, counter-sanctions and local laws, as well as on the specific needs of their local staff. At this week’s Russia meeting, a few new issues surfaced, as well as wrinkles on familiar topics. Here are some highlights.

Members discuss bank guarantees, clients that are in no hurry to pay and good news on intercompany funding—at least for now.

Editor’s Note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis. Senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions.

By Paul Dalle Molle

The war in Ukraine is now, sadly, one month old. With this milestone we also note an evolution of the concerns of NeuGroup members. They have more clarity on their companies’ decisions regarding Russia (to exit, suspend operations, stay), sanctions, counter-sanctions and local laws, as well as on the specific needs of their local staff. At this week’s Russia meeting, a few new issues surfaced, as well as wrinkles on familiar topics. Here are some highlights. 

Open bank guarantees and letters of credit. Companies that have stopped operations may end up halting work for which they signed contracts, raising potentially challenging issues that one member raised. A corporate might be able to negotiate amicably and come to an agreement with Russian suppliers and customers, but that is not likely. 

  • The most probable scenario is that companies will eventually see drawings under bank guarantees and letters of credit, and a subsequent commercial dispute. What happens if a sanctioned bank is involved in that situation? How will such disputes be resolved under a sanctions and counter-sanctions regime? Going forward, this is likely to be a big source of headaches for multinational corporations (MNCs).

Customers who say they’re unable to pay. Members report that customers are less likely to feel pressure to pay for products already received after a company has announced it is no longer shipping product to Russia. That’s happening now.How will MNCs collect on these receivables? As time goes on, these will be increasingly categorized as bad debts and eventually written off, adding to the total cost of stopping operations. The short-term effect is that corporates will collect fewer rubles to use for paying suppliers, staff, rent and taxes, making their working capital situation worse. 

Domestic intercompany cash pools are working normally again, thanks to Russia’s Presidential Decree No. 126. There is unanimity among members on this point based on discussions with banks, accountants and lawyers. Intercompany deposits from Russia to foreign locations on the books prior to March 2 appear to be rollable without authorization, but no new cross-border deposits of this type seem possible.   

The big four foreign banks in Russia are increasingly the focus for multinational companies. These institutions—SG Rosbank, Raiffeisen, Unicredit and Citibank—have local bank charters. Other foreign banks have signaled that their local operations will wind down. Some new bank accounts are being opened, but this seems to be dependent on the corporate’s overall global relationship with a bank, and it is difficult to see a pattern emerge.  

The elephant in the room. A major issue is how to implement a corporate decision to suspend operations or exit Russia. Many companies seem to have accepted that their Russian businesses will be written down dramatically, so most are not too focused on the financial aspects of these decisions. Instead, companies with thousands of local staff and dozens of factories or industrial sites have continuing practical decisions to make. 

  • So far, member companies seem to have done everything possible to help keep their staff employed and paid, even if operations have stopped. But there is a lot of variation from company to company and sector to sector.
  • Some members report that Russian authorities are inspecting their foreign work sites weekly. One member said his company’s local managers in Russia are afraid they risk a jail sentence if a plant shuts down, based on their understanding of Russian law. Given such circumstances, at what point do companies stop paying staff? What is the legal mechanism for turning a business over to the employees to run? Add these to the list of questions for which there are not yet concrete answers.
Read More Read Less
Contact Us

Turn Down the Volume: Cutting Through ‘Noise’ in FX Hedging

NeuGroup members share their common sources of unexpected volatility in cash flow and balance sheet hedging programs.

One goal of a foreign exchange hedging program, one FX risk manager said at a recent NeuGroup meeting, is to minimize the risk that senior executives will face questions during quarterly earnings calls about the impact of currency on results. But uncertainty sparked by global issues like the war in Ukraine, inflation and fallout from the pandemic means this isn’t always possible.

NeuGroup members share their common sources of unexpected volatility in cash flow and balance sheet hedging programs.

One goal of a foreign exchange hedging program, one FX risk manager said at a recent NeuGroup meeting, is to minimize the risk that senior executives will face questions during quarterly earnings calls about the impact of currency on results. But uncertainty sparked by global issues like the war in Ukraine, inflation and fallout from the pandemic means this isn’t always possible.

  • Those issues can be one source of unexpected FX gains or losses, often called “noise” by treasury teams. And noise can highlight hedging challenges and invite questions from senior leaders who seek the source of the noise. “On a month-to-month basis that’s what we have to spend a lot of our time explaining to leadership,” one member said.
  • Members at the meeting, a summit for NeuGroup for Foreign Exchange 1 and 2 sponsored and co-hosted by Chatham Financial, said noise often comes from market volatility, forecasts that aren’t timely or accurate enough, or simple human error.
  • Attributing the noise to a source reveals if it’s an external factor the corporate can’t control, or may help identify errors and process improvements that can be remedied.

Cloudy crystal ball. Cash flow hedging relies on forecasted exposures of foreign revenues and expenses over a company’s planning and hedging horizon. Forecasts that miss the mark are the biggest source of noise, according to a survey at the meeting (see chart below).

  • Increasing uncertainty since the start of the pandemic has caused forecasting to be far less reliable. One member said that even when volatility leads to increased sales, it makes life harder for the FX team.
    • “As we looked at our updated cash flows when Covid first happened and sales were expected to decrease, we started to be over-hedged, so we pushed out positions to make sure we were not,” he said. “In the end, we actually flourished from a sales perspective, but the unknown of Covid led us to be too conservative,” leaving the company under-hedged.
  • FX impact, cited by 22% of those surveyed as the largest source of cash flow hedging noise, stems from movement in exchange rates that hasn’t been hedged or modeled as an acceptable risk. “How do you differentiate between what the market is doing and the things you’re choosing to do from a hedging strategy perspective?” Chatham Financial’s Amanda Breslin asked the group.
    • “Many companies choose to hedge a subset of their exposures based on risk tolerance, cost to hedge, reliance on correlations or forecast visibility. Outcomes that deviate from the assumed degree of residual risk are where we see companies exploring the sources of additional noise.” She added that FX teams need to understand “from a hedge perspective, are they targeting the right ratios, currencies and tenors? It gets quite messy.”

Missing the match. For balance sheet hedging programs, the sources of noise identified by members are a bit broader, which can make solving the issue more complex. The common sources are mismatches in notional value, timing and currency rates (see chart below).

  • Mismatches in notional are similar to deviations from forecasts in cash flow hedging, as they can occur when forecasted exposures are fully hedged but the company’s actual balances are higher or lower than the forecasted amounts, or when currency exposures go unregistered and remain unhedged. Almost half (48%) the members surveyed identified this as their primary issue, which can also be caused by errors in bookkeeping.
    • “We identify errors, which have a huge impact on our balance sheet exposure notional,” one member said. “When we go to the ERP system, often times, [local teams that execute FX transactions] book the balance in a certain FX currency, but actually balance in a functional currency which is not part of the exposure.” Because of this, she said the forecast is often incorrect, resulting in a balance sheet that is either over-hedged or under-hedged.
  • For other members (26%), a mismatch in rates can cause a cacophony. This issue can arise when the spot rate used to revalue derivatives comes from a market rate, while exposures are remeasured using a company balance sheet rate. “If someone is using the wrong exchange rate, we’re creating a lot of noise,” one member said.
  • An equal share of members say the biggest source of unexpected results is a mismatch in timing. “We have data coming in from multiple ERPs and multiple systems,” one member. “I’ve seen a lot of companies, a couple days before the end of the month, start generating some forecast exposures to get an idea of what they think the balance sheet will look like.”
    • He continued that companies often do pre-balance sheet hedging to get the process started and then when the data becomes available, often five or six days into the month, will make additional hedges on top of that. “That presents a lot of issues,” he said. “You’re going to have timing mismatches, you’re going to have notional mismatches, you’re going to get some noise.”

Communication to turn down the volume. One FX head shared a simple approach to track a source of noise and tackle it, going one step further than simply being prepared to explain its origin.

  • “The first step is just having a conversation,” he said. Each month, the member meets with controllers for each currency and has a “kumbaya” moment to break down any noise and where it stems from.
    • “We talk about what the previous exposure was, what the upcoming one is going to be, and try to figure out why there were issues with the prior forecast,” he said.
  • After identifying the reason for the unexpected volatility, the team tracks the source using “reason codes” for recurring causes, creating a historical log that tracks the origins of noise. “Now we can identify whether it was a revenue mismatch, whether there was something wrong on the cost side or something wrong with tax, and these reason codes are specifically tied to the P&L impact of that mismatch,” he said. “It allows us to very quickly look back to see exactly what caused the problem and why, so we know who to talk to.”
  • Another member added that beefing up tracking of these noisemakers can be very valuable when meeting with leadership, which the member ran into when faced with an issue hedging deferred income, which “always comes out at a different rate than the prevailing monthly rate” due to a reliance on forecasting.
    • One senior executive who recently joined the company confronted the member’s team, expressing concerns about an unexpected $9 million loss due to this issue.
    • “But I showed him the data, and I said, ‘A forecast cannot be perfect, and that’s a big driver.’ And after that he said, ‘well, you know what, I’ve never felt so good about losing $9 million,’” the member said. “You just need to be able to translate what is happening in a way the business understands.”
Read More Read Less
Contact Us

Liquidity and Payments in Focus as Sanctions Deadlines Loom 

Top concerns remain paying salaries to staff and ensuring local businesses have enough liquidity to meet their obligations.   

Editor’s Note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis. Senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions.

By Paul Dalle Molle

Thousands of international companies have been weighing their options since Russia’s invasion of Ukraine. These range from full and immediate pullouts to doing business as usual—and many nuanced positions in between. Even corporates pausing operations or announcing exits face challenges to meet financial responsibilities to staff, suppliers, customers and governments.

Top concerns remain paying salaries to staff and ensuring local businesses have enough liquidity to meet their obligations.   

Editor’s Note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis. Senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions.

By Paul Dalle Molle

Thousands of international companies have been weighing their options since Russia’s invasion of Ukraine. These range from full and immediate pullouts to doing business as usual—and many nuanced positions in between. Even corporates pausing operations or announcing exits face challenges to meet financial responsibilities to staff, suppliers, customers and governments.

  • The details depend on a company’s level of investment, number of employees in the region and its industry. Businesses that sell humanitarian products such as pharmaceuticals and medical devices, for example, will keep operating in compliant ways, in some cases with an OFAC license, as in other sanctioned countries.

How to exit? Let me count the ways. Some companies that are willing to part permanently with their Russian business are stymied by the present situation. Let’s say you have a professional services company and would like to turn it over to your Russian employees. If your clients are mostly sanctioned companies or the government, would the employees want it? Does it still meet the Russian definition of a going concern that could be transferred, or must it be wound down and declared bankrupt?

  • This unprecedented situation is being reviewed by attorneys in Russia and around the world, looking to understand the rules and for answers on next steps.    

These challenges will go on for weeks, months and possibly years before companies definitively cut ties to Russia or—we can hope—the conflict ends and some sense of normalcy returns. Treasurers are hungry to share best practices to make sure that they can do what’s needed as some key banks reduce or withdraw local services and Russian counter-sanctions get rolled out.

  • Many eyes are now focused on the end of the transition period to full implementation of sanctions, with several NeuGroup members mentioning a March 26 deadline for some bank sanctions.

Here are other topics, comments and questions that surfaced this week:    

The top concern remains how to pay the salaries of Russian and Ukrainian staff, both those remaining in-country and those leaving. The consensus among members, though not unanimous, is that purely domestic payments in Russia may continue under sanctions. The Russian subsidiary of a foreign company with RUB liquidity at a non-sanctioned bank in Russia can instruct that bank to pay the company’s employees in RUB with a domestic funds transfer, even if some payments are made to employees with accounts at sanctioned Russian banks. 

  • In the same way that cross-border cash pools are no longer possible but domestic cash pools are functioning as usual, companies must make sure local staff initiate salary payments, with no cross-border nexus. As we have heard since the start of the crisis, corporates are asking employees in Russia to open personal accounts at non-sanctioned banks, but this is a slow and imperfect process. 
  • Dealing with the complexities of bank sanctions while paying employees requires “constant rejiggering of who can we touch, who can’t we touch,” one member said. “Is it the bank that can touch it, can’t touch it; is it us that can touch it, can’t touch it?” He and others are holding frequent calls with compliance and other teams to stay aligned on what’s allowed.
  • One member shared with peers a Western Union B2C solution called Quick Cash to wire to money to fleeing employees once they reach other countries. Another is preparing to use a stablecoin if paying employees through banks proves impossible. He told NeuGroup Insights the company’s IT security group “put us in touch with outside vendors who specialize in helping companies with cryptocurrency, particularly for ransomware payments.
    • “While they have never done this particular structure before, they saw it as very feasible, subject to security protocols and regulatory clearance. Getting stablecoins to our Russian affiliate should be fairly simple. More of a challenge would be the affiliate using it to pay vendors or employees, but that should be solvable.”

The banking landscape continues to shift. The biggest foreign-owned Russian banks continue to receive praise from members for their positive attitude in finding solutions for payments that are compliant with sanctions and local law. That includes Citibank, which one member called “fantastic,” citing its efforts and ability to help the company get payments to employees fleeing Ukraine to other countries, in some cases using debit cards and the bank’s extensive regional network of offices, with limited bureaucracy.

  • Smaller foreign banks, especially branches, are rapidly curtailing activity, announcing exits, and informing members that they will not be continuing business as usual. And some banks consider overdrafts or drawdowns on uncommitted lines of credit to be “new business” and they are telling members that they will not do new business. 

Companies with excess ruble liquidity are, as far as we can tell, unwilling to swap or sell that liquidity to companies that are scrambling for more local funding in Russia. The reason? In a crisis the typical calculations of minimum cash go out the window. The priority becomes keeping the cash for essential payments to employees, suppliers and tax authorities. Having excess cash allows for flexibility in the future, including the unknown costs of winding down a business.  

  • One member reported that even lending excess rubles to an affiliate company looks to be compromised, at least temporarily, by a recent presidential decree that forbids Russian legal entities lending to other entities owned by a parent company located in an “unfriendly country.” Apparently, a company must apply for and receive a specific license from the Russian authorities for such inter-company loans. Members are seeking confirmation from their local regulators and attorneys. 

Many companies are negotiating with banks for early termination of hedges on the theory that negotiating calmly and openly with the banks, and having flexible timing, leads to better prices and eliminates the risk of settlement delays and failures. But not all companies are doing this, with some opting to maintain all their hedges to term and relying on the quality of their counterparties to deliver. There still appears to be no market appetite for rollovers or new trades. 

Read More Read Less
Contact Us

Assembly Required: Closing Loops by Building Automations

One member, challenged to create a solution without external resources, automated FX processes through in-house ‘citizen developers.’

While a TMS can offer an integrated treasury technology solution, no single system can support the full range of automation requirements. In the case of one fast-growing, high-tech NeuGroup member company, the deficits surfaced in the area of FX transaction management and reporting. Faced with a need to improve the process, shorten cycle time and reduce cost with no additional resources, the company decided to build the automations in-house, leveraging its access to so-called citizen developers.

One member, challenged to create a solution without external resources, automated FX processes through in-house ‘citizen developers.’

While a TMS can offer an integrated treasury technology solution, no single system can support the full range of automation requirements. In the case of one fast-growing, high-tech NeuGroup member company, the deficits surfaced in the area of FX transaction management and reporting. Faced with a need to improve the process, shorten cycle time and reduce cost with no additional resources, the company decided to build the automations in-house, leveraging its access to so-called citizen developers.

  • The member who shared her team’s journey at a recent meeting of NeuGroup for Foreign Exchange 2 said her company’s revenue doubled in a short span of time, but her FX team remained the same size. On top of this, its TMS is only equipped to handle cash reporting, positioning and the majority of intercompany fundings, with all FX hedging handled separately.
  • “Thus, we augmented our processes with automation tools to better communicate with our fellow treasury cash managers,” the member said.

System for the self-taught. Members on the team trained themselves and one another through online coding boot camps and internal training sessions. They ended up implementing three tools that require increasing degrees of expertise while functioning together.

  • A license in the efficient (but relatively pricey) self-service data tool Alteryx Designer allows the team to access large datasets from its ERP, which are then pulled into the programming language Python to manipulate and analyze the data. Next, the data is exported into an Excel spreadsheet with a detailed set of macros scripted in VBA (visual basic for applications).
  • While the flow may sound complicated, in the end it dramatically cuts the amount of time the FX team spends by eliminating manual processes.

Top of the line. Alteryx Designer, which allows users to create automations using flow charts and a simple, drag-and-drop user interface, is the first stop. The member calls the tool “coding for dummies,” as its capabilities aren’t quite as open as a programming language, but she said it is very helpful for cleaning up large datasets pulled from SAP S/4HANA, “digging into the details and finding a needle in the haystack in a fraction of the time.”

  • The member was fortunate that treasury had a license to spare for Alteryx, as the tool requires a pretty steep resource commitment compared to free-to-use programming languages.
  • The team uses Alteryx to do the first step in updating balance sheet exposure by pulling a report, scrubbing the data and exporting it into a clean an Excel spreadsheet. A process that once took 20 minutes each day now happens in 11 seconds at the push of a button.

The second stop: Python. The most powerful tool the member uses is Python, an open-source programming language. It takes time to learn, but the member’s team now uses Python code to model and forecast the impact of cash flow hedges.

  • The company has millions of invoices per quarter for its four largest traded currencies, which she said caused it to “outgrow doing calculations in Excel, which was no longer an option. I’m sure everyone can understand how frustrating and impossible it is to manipulate massive amounts of data in Excel.” 
  • “From my experience, it’s actually not super difficult to get set up in Python,” she said. “I usually get a little intimidated trying to get set up with new technology, but this was actually pretty straightforward. It’s nice because there is no monetary cost to it: The world is your oyster.”
  • Leveraging her new skill with the tool and assistance from Python-proficient team members, the company now uses a Python function that takes the code from Alteryx and applies forecasting and cash flow hedging models, which previously ran on a manual basis.

Virtual connectivity. The data ends up in Excel, which the member admitted is not the best tool for processing large data sets. But VBA, which she called “the granddaddy automation tool,” allows users to create macros, which are simple, repeatable tasks within Excel that can assist with reporting.

  • At the member’s company, “FX produces a monthly forecast deliverable to FP&A surrounding cash flow hedging impact,” tracking the impact throughout the quarter, up to six times per quarter.
  • The employee in charge of the company’s use of VBA explained that team members were once doing thousands of calculations per quarter that are now  completed in an instant. “We hedge with options, about 60 options every quarter.” he said. The company amortizes its options out 12 months, “so if you take 300 options at minimum over 12 months, that’s 3,600 lines of information that needs to be accurate.”
  • Though he admits the process is pretty complicated, the member said it “has been very beneficial to provide quick and accurate information,” and the team couldn’t have done it without the assistance of automated tools.

Read More Read Less
Contact Us

Lead by Example: Verizon Spotlights Fees Paid to Diversity Firms

Aggregated data shows which IG bond issuers paid diversity firms the most in dollars and as a percentage of total fees.

Verizon treasurer Scott Krohn this week presented data to his peers in NeuGroup for Mega-Cap Treasurers showing the top 20 issuers of investment grade (IG) debt ranked by the fees they paid in 2021 to banks and brokerage firms owned by women, Blacks, Latinos and veterans—so-called diversity and inclusion or D&I firms. Verizon is a recognized leader among corporates that have committed to giving more business to D&I firms in the past several years. More importantly, Verizon and some other companies are giving the firms more meaningful roles, including in green bond deals where Verizon has elevated some D&I banks from being co-managers to serving as active joint book runners.

Aggregated data shows which IG bond issuers paid diversity firms the most in dollars and as a percentage of total fees.

Verizon treasurer Scott Krohn this week presented data to his peers in NeuGroup for Mega-Cap Treasurers showing the top 20 issuers of investment grade (IG) debt ranked by the fees they paid in 2021 to banks and brokerage firms owned by women, Blacks, Latinos and veterans—so-called diversity and inclusion or D&I firms. Verizon is a recognized leader among corporates that have committed to giving more business to D&I firms in the past several years. More importantly, Verizon and some other companies are giving the firms more meaningful roles, including in green bond deals where Verizon has elevated some D&I banks from being co-managers to serving as active joint book runners.

  • The fee data was part of a larger presentation by Mr. Krohn that offered Verizon’s perspective on corporate issuers and D&I engagement and the company’s strategy of “investing for growth” as well as “differentiated economics” when selecting, engaging and paying D&I firms. Other data presented showed racial diversity at Wall Street firms; the representation of new corporate board directors who are women and ethnic minorities; Verizon’s green bond syndicate structures; D&I dealer equity capitalization and head count levels and trends.

Reading the rankings. The companies in the table below are ranked by the amount they paid D&I firms;  the first column of numbers shows the figure as a percentage of the total fees the companies paid for IG debt deals. In terms of leaning into meaningful economics, “all we really control from year to year in terms of policy and approach is the percentage, given varying issuance amounts and needs,” Mr. Krohn said. Verizon ranked No. 1 in dollar amount ($21.1 billion); by percentage of total fees (13.2%), it ranked third, behind Microsoft (15%) and Edison International (14.1%).

  • The shaded fields show banks—which took five of the top 10 spots. “The banks have started to walk the talk in certain cases,” Mr. Krohn said. He noted that Verizon pays close attention to where banks rank in percentage of fees paid to D&I firms when selecting lead managers for its green bond deals, as the company has added underwriter selection criteria focused on sustainability and diversity commitments to its green financing framework.

Context. Mr. Krohn noted that while the supply of investment grade debt in the primary market fell by about 18% in 2021 from 2020, the D&I fees paid by the top 20 issuers in 2021 exceeded 2020 fees by nearly 20%. “That highlights the overall market’s higher prioritization of engaging with D&I firms as part of broader social responsibility goals,” he said.

  • “Not shown in the table are the tremendous strides D&I firms are making to distribute bonds,” Mr. Krohn added. “It goes beyond cutting a check for D&I firms to grow. While increasing their capital base is important, so is the ability to enhance their distribution franchise to place bonds with investors. And there’s a call to action, with a role to play in providing a meaningful opportunity for D&I firms whether you’re an issuer, large bank or fixed income investor.”

The art of the possible. In discussing the value of showing data comparing the allocation of fees corporates pay to D&I firms, Mr. Krohn said, “One of the things we wanted to accomplish in this presentation and with this data is to help people understand what the art of the possible is. And for those that haven’t yet made a change but may be interested in making a change, we hope this data is helpful.”

  • With regard to bulge bracket banks, he added, “Part of my hope is that there are more of us that draw conclusions on who’s walking the talk, and that we demand more from our partners in the capital markets.”
Read More Read Less
Contact Us

NeuGroup’s Strategic Finance Lab Podcast, Episode 1: Finance and ESG Reality

Step into a lab where innovation and digital transformation empower senior finance executives to become true strategic partners.

NeuGroup is launching the Strategic Finance Lab podcast by zeroing in on the need for finance leaders to take a comprehensive approach to helping corporations make good on achieving their net-zero carbon reduction goals and ESG metrics. The pressure companies are feeling now will only grow, so now’s the time to learn more and do more.

Step into a lab where innovation and digital transformation empower senior finance executives to become true strategic partners: Nilly Essaides interviews Stephen Ferguson from The Hackett Group on the role of finance leaders in ESG initiatives.

NeuGroup is launching the Strategic Finance Lab podcast by zeroing in on the need for finance leaders to take a comprehensive approach to helping corporations make good on achieving their net-zero carbon reduction goals and ESG metrics. The pressure companies are feeling now will only grow, so now’s the time to learn more and do more.

  • Please listen to our first episode on Apple and Spotify to hear NeuGroup’s Nilly Essaides interview The Hackett Group’s Stephen Ferguson, who advises major European corporations on all aspects of finance. He says corporates face a major challenge as regulators start imposing new disclosure standards and companies are evaluated by investors and other stakeholders not only on their own records but those of their suppliers.

In the weeks and months to come, the Strategic Finance Lab will bring you probing interviews and discussions about how practitioners and providers are advancing finance’s transformation into a strategic partner to the business and driver of enterprise performance by providing data-driven insight to support management decision-making.

  • Plus, NeuGroup members will share their personal experiences in achieving career success and how they’re enabling others to reach their full potential. We can’t wait to bring you into the conversation.
Read More Read Less
Contact Us

Russia Crisis: Finance Navigates Complexity, Fluidity, Unknowns

Paying staff in Russia as companies exit and complying with complex sanctions increase pressure on finance leaders.

Editor’s note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis to help members navigate the financial consequences of the war. NeuGroup senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions, and we asked him to share his latest insights and takeaways. 

By Paul Dalle Molle

At this stage of the crisis, there are still, unfortunately, more questions than answers for corporate treasurers and their teams. They are struggling to take the right steps to help employees and businesses while respecting US and European sanctions as well as rules governing business activities within Russia. That said, as the war proceeds and the sanctions are published, thousands of people within treasury and on other internal and external teams are whittling away at these questions and helping to make the choices facing decision-makers clearer. This group includes lawyers, bankers, accountants, financial advisory firms and security advisors. Before delving into the details, two overall comments:

Paying staff in Russia as companies exit and complying with complex sanctions increase pressure on finance leaders.

Editor’s note: NeuGroup is running weekly special sessions on the Russian-Ukrainian crisis to help members navigate the financial consequences of the war. NeuGroup senior executive advisor Paul Dalle Molle, a former banker with extensive European experience, leads the discussions, and we asked him to share his latest insights and takeaways. 

By Paul Dalle Molle

At this stage of the crisis, there are still, unfortunately, more questions than answers for corporate treasurers and their teams. They are struggling to take the right steps to help employees and businesses while respecting US and European sanctions as well as rules governing business activities within Russia. That said, as the war proceeds and the sanctions are published, thousands of people within treasury and on other internal and external teams are whittling away at these questions and helping to make the choices facing decision-makers clearer. This group includes lawyers, bankers, accountants, financial advisory firms and security advisors. Before delving into the details, two overall comments:  

  1. Every multinational will strictly comply with sanctions. Some cynics have suggested that companies will find ways around sanctions, but I have seen just the opposite. Companies will do what they can to meet their obligations to Russian staff, suppliers, customers and regulators provided that their actions are permissible under sanctions. 
  2. While some companies withdraw from Russia or suspend operations, they must remain completely devoted to sanctions compliance and respecting local rules. Corporates have responsibilities that require numerous tactical responses that include paying staff as they exit, mothballing facilities, paying bills and taxes and collecting invoices. Finance plays a critical role in most of these obligations.

Each company is unique.  There are some common, major issues confronting all multinational companies, but the degree to which each issue affects a specific company relates to the nature of its industry and the corporate’s business model for Russia. For example, the problems in Russia facing a software company are quite different from those of a commodities firm or an industrial business. The answer to these questions and others will dictate the specific steps each corporate takes:

  • How big is your local staff in Russia? 
  • Do you need to import supplies or export production?  
  • Do you have your own distribution network or use third parties? 
  • How is your local business funded—from retained earnings in rubles, by periodic injections of foreign currency capital or by local borrowing? 
  • How do customers pay you in Russia—are you a B2C paid by credit cards, or a B2B with traditional collections from indigenous Russian companies? 

Even when a company pulls out or suspends operations in Russia, it means different things to different companies and their treasurers. So, keeping in mind that each specific corporate situation may call for unique answers, here are the most important topics that have emerged:

Paying staff in Russia, the top concern of corporates since the crisis began, introduces complexity. Right now, there is a conviction among treasurers and compliance specialists that it is permissible for the Russian subsidiary of a foreign company with RUB liquidity at a non-sanctioned bank in Russia to have that bank pay the company’s employees in RUB with a domestic funds transfer—even if some payments are made to employees with accounts at sanctioned Russian banks. But that same transaction would not be permissible if it arose from offshore and/or in foreign currency. Some companies are asking employees to open personal accounts at non-sanctioned banks to help further distance the companies from sanctioned banks, but this is a slow and imperfect process.   

Similarly, the tactic of paying salaries in advance has been a hot topic. Several companies have done this, paying employees three months in advance to avoid impediments. But other companies were counseled against this precaution and some were even told that such advance payments are illegal in Russia.    

Circumvention risk. Also, as always with sanctions, corporates need to be aware of so-called circumvention risk: US persons, as they are called by the Treasury Department’s Office of Foreign Asset Control (OFAC), cannot instruct non-US persons to engage in activity that would be impermissible for US citizens, such as dealing with a sanctioned bank, even in another currency. Members are consulting continuously with their legal teams to ensure that what they did last week is still permissible this week. Of course, if payments arise within the EU or are done in euros, the EU sanctions regime would apply and so the same careful analysis of permissible activities is taking place for the EU sanctions. 

Local Funding is extremely important and the focus of intense corporate activity. It appears that a new Russian regulation allows banks in Russia to lend to multinational companies only for salaries, rent and tax payments. If correct, this is relatively good news, as companies are very focused on paying staff, but bad news as it would appear to eliminate borrowing for all other working capital needs. For some companies that do not generate sufficient local free cash flow, that could mean finding compliant ways of bringing capital into the country or ceasing activity. Companies are systematically seeking to add RUB liquidity lines from non-sanctioned banks.   

Additional banking partners are being sought by multinationals. Companies must stop working with the sanctioned banks, so many are trying to add new relationships with the biggest foreign banks in Russia (SG Rosbank, Raiffeisen, Unicredit and Citibank), as well as other European and American banks, and Asian banks. Related to this is an attempt to understand how the Chinese CIPS payments clearing system could be used to transfer funds in and out of Russia without using sanctioned banks. This appears to be feasible, albeit cumbersome and potentially expensive, as the amounts will originate in USD or EUR and then be exchanged for CNY and finally into RUB.    

Hedging seems to have dried up. From what we have heard, there is no liquidity for rollovers and new trades, and settlement of existing trades are being completed, but sometimes with delays.   

Abiding by local Russian rules is difficult. Members say they have been told by counsel that companies that run unprofitable businesses in Russia for two years risk having their businesses confiscated. So corporates must adapt their transfer pricing system to consider the new costs of operating in that environment, to avoid generating losses in Russia. But should they do that immediately, or wait to see what happens with the war and sanctions? Such transfer pricing adjustments might need to occur on a weekly basis during wartime conditions. Members have also been told that they risk revocation of their business licenses if they fail to respect Russian rules about corporates paying employees on time and maintaining certain balance sheet ratios.   

Some legitimate commercial payments seem to now be nearly impossible due to sanctions or Russian rules. For example, a company that booked credit card payments from Russian residents and now must reverse those payments can no longer credit those customers because the credit card companies have suspended operations in the country. Will they send checks? Is there another solution? And if collections are due from customers who pay from sanctioned banks, how can the company receive the funds without violating sanctions?   

The rule requiring companies to convert 80% of FX proceeds into rubles has also raised more questions. The rule is retroactive to January 1. Members seem unclear about the deadline for converting the previous proceeds and have major accounting and liquidity management headaches to isolate the funds.   

Even if individual employees and executives working at US and European multinational companies are appalled at the unprovoked invasion and war, as corporate executives they must act in the best interests of their employees, customers, and shareholders. Until companies make the strategic decision to pull out of Russia entirely—and perhaps for months or years afterward—treasury and other finance teams will try and navigate both sanctions and local Russian business rules as best they can, being good corporate citizens in all the jurisdictions in which they operate. 

Read More Read Less
Contact Us

Right Direction, Slow Progress for Women in Finance

The finance sector is notoriously male dominated. And despite some progress over the past decade, there’s still a long way to go before women have an equal voice.

By Nilly Essaides

Back in the early 1990s, when I started my career in finance, I was often the only woman in the room. And my colleague Anne Friberg, NeuGroup senior director and peer group leader, says that in the 2000s, when she was facilitating peer group meetings across the country, those rooms had a lot more men than women. “Now, the room looks more diverse,” she said this week.

The finance sector is notoriously male dominated. And despite some progress over the past decade, there’s still a long way to go before women have an equal voice.

By Nilly Essaides

Back in the early 1990s, when I started my career in finance, I was often the only woman in the room. And my colleague Anne Friberg, NeuGroup senior director and peer group leader, says that in the 2000s, when she was facilitating peer group meetings across the country, those rooms had a lot more men than women. “Now, the room looks more diverse,” she said this week.

  • Her impression is backed by data: Today, 31% of NeuGroup members are women. Women also make up a third of senior positions (treasurers and assistant treasurers) and 26% of all treasurers. “The rise in membership is indicative of progress,” Ms. Friberg said.

It is certainly an improvement. But the fact remains that there are not enough women seated around conference tables in rooms (virtual or otherwise) where finance is the focus.

It’s lonely at the top. At the highest levels of the finance profession, women are conspicuously absent. According to 2021 data provided to the WSJ by Crist Kolder Associates, only 15% of the CFOs at S&P 500 companies were women. The silver lining, if it can be called that, is that this number represents a 25% rise since 2017.

  • “When we talk about women in finance, we talk about them broadly but also in leadership. Just playing a numbers’ game is not going to cut it,” said the treasurer of a large tech company at a recent meeting of Women in NeuGroup (WiNG), sponsored by CNote and Seelaus Asset management, both women-owned firms. “While overall, we now have 50% women in finance, the question is how many are in leadership roles? That’s the metric we track,” she said.

Greater opportunities. Treasury is more diverse than finance, because “it offers a greater degree of flexibility in backgrounds and experiences as opposed to the rest of the finance organization,” another member said. For example, the accounting field remains more male-dominated because many of the staff have Big Four experience, and the Big Four have a long way to go towards greater diversity.

  • “I’ve really enjoyed the evolution in my lifetime. When I started, there were no other women, only men with no kids or with a stay-at-home wife,” said one NeuGroup member.

There is a long way to go. “The statistics continue to reflect a jarring reality, and while I appreciate the data is directionally positive, given demographics, women are still severely underrepresented,” said NeuGroup COO, Amy Kemmerer.

  • The pandemic has also slowed progress toward greater participation by women, as it forced more women than men to exit the workforce, due to additional childcare responsibilities. Our own data reveals that the participation of women in NeuGroup’s network essentially stalled between 2019 and 2022. “With restrictions lifting and schools once again open more consistently, I hope progress will resume,” Ms. Kemmerer said.
  • Of course, the urgent need to balance home and work life is not new: women were often the ones to pick up more than their fair share of work at home, while having to work even harder than men at the office just to be perceived as equals.

Building awareness. While many female treasury executives report they are heavily involved in diversity work within their own organizations, they also feel they have a responsibility to build broader awareness. “We have an opportunity to share and learn about how we can use the power of our positions to really solidify commitment to a more inclusive financial industry,” said Cat Berman at CNote.

  • “Sharing our experiences, intentionally, methodically, is so important. But it’s also important to be visible,” noted one of the members. “It’s one thing to work on D&I behind the scenes, but it’s different when you are visible and stating your priorities.”
  • Another member said when she was pregnant, she felt like she lost her seat at the table. “The CFO told me that he wasn’t coming to me with new projects because he was trying to be respectful. That’s the worst thing that can happen in your career.” She has responded by becoming more vocal, announcing what projects she wants to work on. “It’s a little pushy, perhaps, but you have to make sure people know what you want.”
  • Raising awareness also means raising the bar on what you expect from male colleagues. Gender equity is not just a women’s issue. Men, particularly in senior positions, must play an active role in advancing the careers of women on their teams.

Share of wallet. Female treasury leaders report that they often find they are the only women in a room full of bankers. Their advice is not only to say something but do something. “I brought up the issue of diversity with my bank team,” one member said. “I told them: ‘I am working on my team; what are you doing for yours?’”

  • Another member sent a poll to her banks to find out how many women were on their teams. “I felt that just asking the question is powerful.” Her question put her bankers on notice this is something they should be thinking about.
  • One member of WiNG took the opportunity to drive change when executing a lucrative bond deal. She asked the deal’s diversity coordinator to go through each of the participants and assess their commitment. “It delayed the transaction for 45 minutes, but it forced the bank teams to own up to what they’re doing.”

A generational change. Real change will take time. ““We need to continue to invest in and support future generations of women in finance and celebrate different mindsets,” Ms. Kemmerer said. From a practical standpoint, it means not only ensuring diversity in hiring but also continuing to nurture and develop talent. “We also need to support more young women to enter STEM careers.”

  • “We need to think about creating the next generation of accounting and finance professionals, and what are we doing to ensure that they all have a really rich career path,” one member said. To this end, her company created a library of training materials and ties continuous learning into staff’s  year-end feedback.
  • “We’ve been doing lunch and learn sessions where we show a video on a D&I topic and then move into breakouts where we discuss the videos and really dig into some hard-to-talk-about areas to raise awareness and understanding of each other as individuals,” the member said.
  • “People are starting to try different approaches and different solutions,” said Annie Seelaus. “And I think two, three, five years out, we’ll start to see if we’re changing the paradigm. We have to be thoughtful about what things are going to really change representation forever.”
Read More Read Less
Contact Us

A Starbucks Fund Blends Racial Equity, Environmental Resilience 

The company selected CDFIs for its Community Resilience Fund to achieve specific goals.

During a NeuGroup Diversity and Inclusion Working Group session held during Black History Month (Feb.), presenters from NeuGroup member company Starbucks shared insights on a $100 million fund the company launched last year to advance racial equity and environmental resilience.

  • The fund is part of a trend of increased commitments by corporates to promote D&I following the murder of George Floyd in 2020. The initiatives include a racial equity fund managed by RBC Global Asset Management launched by ServiceNow as well as companies tapping the IntraFi Network and CNote to help funnel deposits to financial institutions serving communities with historically limited access to capital. But Starbucks in this case has created a framework to select the community development financial institutions (CDFIs) it funds rather than working through an intermediary.

The company selected CDFIs for its Community Resilience Fund to achieve specific goals. 

During a NeuGroup Diversity and Inclusion Working Group session held during Black History Month (Feb.), presenters from NeuGroup member company Starbucks shared insights on a $100 million fund the company launched last year to advance racial equity and environmental resilience.

  • The fund is part of a trend of increased commitments by corporates to promote D&I following the murder of George Floyd in 2020. The initiatives include a racial equity fund managed by RBC Global Asset Management launched by ServiceNow as well as companies tapping the IntraFi Network and CNote to help funnel deposits to financial institutions serving communities with historically limited access to capital. But Starbucks in this case has created a framework to select the community development financial institutions (CDFIs) it funds rather than working through an intermediary.
  • The Community Resilience Fund commits Starbucks to investing $100 million by 2025 in small business growth and community development projects in communities of people of color. The first year focused on 12 US metropolitan areas and involved allocating funds to local CDFIs that will provide borrowers with access to capital, ongoing mentorship and technical assistance. In its first year, the fund successfully closed on $21 million in loans to seven CDFIs

Structure, tools and process. Starbucks team members Maggie Kellogg, a business analysis manager in treasury, and Amini Khanna, a government affairs and public policy project manager, led a discussion moderated by NeuGroup’s Andy Podolsky, director of new membership offerings and peer groups, that included the process Starbucks cross-functional team followed and the carefully designed structure of the project.

  • This was no impromptu effort. The initiative featured the time-honored management tools of a governance structure, strategic framework, due diligence and extensive communication to stay on course.  
  • The effort involved connecting over 10 internal functions, outside entities (including third-party advisors, CDFIs, partners and national civil rights and sustainability stakeholders) and the community to achieve tangible results rather than a statement of broad goals to demonstrate their support of D&I efforts.

Direct control. Starbucks’ effort stands out in part because of the company’s decision to directly manage the fund and not rely solely on the strong list of outside firms that coordinate and make impact investments easier for corporations. While those groups are extremely helpful, valued and used by Starbucks, the company saw this project as another opportunity to adopt a hands-on effort and work directly with its communities. 

  • Ms. Kellogg said, “We wanted to form these direct partnerships with CDFIs to have greater visibility and influence as to how our specific requirements and goals for the program could be achieved.”
  • The discussion included an overview of how Starbucks filtered the broad list of potential investment opportunities using input from expert partners, and a detailed impact questionnaire. Members also discussed the implications of pursuing projects (like this one) that seek to include both D&I and environmental aspects, a combination that few companies have been able to integrate in a single effort. 
  • “Racial equity and environmental and climate justice in general are very much intertwined,” Ms. Khanna said. “We know that CDFIs are beginning to incorporate the environmental angle into their operations and impact strategies.”

Lessons learned. Key lessons learned by Starbucks included the importance of spending time to build, maintain and expand internal and external relationships, recognize that CDFIs can be very different and require customized solutions, and the importance of adhering to tight governance while maintaining an ability to nimbly adjust on the fly. 

Read More Read Less
Contact Us

Tailoring Investment Policies to Suit the Size of the Cash Stockpile

For treasurers at acquisitive mid-cap companies with limited cash, short maturities and liquidity are critical. 

The size of a company and how much cash it has on hand play key roles in shaping corporate investment policies, with the breadth of investment options in a policy closely correlated with the amount of cash—i.e., the more cash, the more options.

  • That takeaway emerged at a late fall meeting of NeuGroup for Mid-cap Treasurers during a session on investment policies featuring a presentation by a treasurer who had previously worked at cash-rich Fortune 500 company and recently moved to a smaller firm in a different industry.

For treasurers at acquisitive mid-cap companies with limited cash, short maturities and liquidity are critical. 

The size of a company and how much cash it has on hand play key roles in shaping corporate investment policies, with the breadth of investment options in a policy closely correlated with the amount of cash—i.e., the more cash, the more options.

  • That takeaway emerged at a late fall meeting of NeuGroup for Mid-cap Treasurers during a session on investment policies featuring a presentation by a treasurer who had previously worked at cash-rich Fortune 500 company and recently moved to a smaller firm in a different industry.

Conservative investments. Answers to three poll questions asked during the session indicated that mid-cap companies generally follow a conservative investment path:

  • Only 18% said their companies invest in riskier corporate bonds.
  • A 54% majority invest in bonds rated A- or higher (see chart), with 27% investing in paper rated BBB+ or higher, and none in BBB or below.
  • Most respondents, 55%, invest in debt with maturities of two years or less, 27% between two and five years, and none over five years.

Dry powder. The members’ conservative investment approach likely reflects mid-cap companies having less cash to invest and needing to keep that cash very liquid.

  • One member had previously worked at a technology giant, putting its tens of billions of dollars in cash to work in investments around the world, with maturities up to five years, while hedging those exposures. It’s different at the mid-cap employer he works for now.
  • “In my current role, my goal is to keep the cash liquid as a dry powder, so we do not go out more than 90 days” in the event M&A opportunities emerge, he said. Targets may be private companies “and those transactions can close quite quickly.”

Arm’s length. The session leader noted her company’s “authorization matrix” which outlines when the treasurer and CFO must approach the board for approval on investment decisions, and the need to update it because now, “We have to run to the board for many things that weren’t necessary in my old company.”

  • As a company grows, those authorizations need to be expanded, she said, so treasurers have more decision-making power.
  • A peer said his company’s investment policy is approved annually by the audit committee, eliminating the need to inform the board unless investments fall outside the policy’s parameters.
  • Another member whose committee meets quarterly and sends the report and minutes to the board or audit committee for review, suggested that when the session leader adds headcount, she may want to form an internal investment committee.
  • Another member uses an asset manager to choose individual bonds that meet the criteria of the company’s policy, which also details concentration limits, minimum qualifications and other factors. “We use Clearwater Analytics to give a top-down review on whether the manager is in compliance or not,” he said.

Portfolio monitoring and construction. The session leader said she reviews the portfolio monthly with the CFO and recommends opportunities to liquidate certain positions, especially corporate bonds. Tactical asset allocation is a quarterly exercise, and treasury annually considers the portfolio’s long-term asset allocation on an annual basis as a part of budget decisions. The firm’s cash portfolio is divided into three parts:

  • Overnight bank deposits are designated primarily to cover payroll and day-to-day expenses.
  • A “reserve” layer comprises bank-brokered corporate and municipal bonds that are held to maturity. This reserve bolsters returns somewhat and is aligned to one- and two-year corporate projects in the pipeline.
  • A third stage is less liquid corporate bonds that provide higher returns over the next three to four years. “You’ve got a well laid out process,” commented a peer.
Read More Read Less
Contact Us

Russia Sanctions and Counter-sanctions: Treasury Prepares for the Unknown

NeuGroup’s Feb. 28 emergency session on the implications of Russian bank sanctions helped treasurers share challenges and learn from others’ real-time responses.

The crisis in Europe has the potential to wreak havoc on global payments systems, and the stakes are high. Many multinational companies have Russian operations and relationships with local banks (for payroll at least) that may be on the sanctions list. These corporates are therefore sitting on potentially trapped cash. Others own stakes in Russian companies; we saw BP and others already pull out. So the most immediate problems are how to get money into and out of Russia and making payroll.

NeuGroup’s Feb. 28 emergency session on the implications of Russian bank sanctions helped treasurers share challenges and learn from others’ real-time responses.

The crisis in Europe has the potential to wreak havoc on global payments systems, and the stakes are high. Many multinational companies have Russian operations and relationships with local banks (for payroll at least) that may be on the sanctions list. These corporates are therefore sitting on potentially trapped cash. Others own stakes in Russian companies; we saw BP and others already pull out. So the most immediate problems are how to get money into and out of Russia and making payroll.

Dearth of information. Operating with scarce official guidance from regulators and their advisors and banks, treasurers were scrambling this week to make sense of sanctions imposed over the weekend. At a Monday, Feb. 28, emergency meeting of NeuGroup’s extensive global network of finance and treasury executives, over 35 finance leaders from some of the world’s leading multinationals had more questions than answers. In this second session about the Russian crisis since the start of the month, participants had a unique chance to share information and discuss how they’re responding in real time.

An information vacuum leads to misinformation. The immediate concern was that the US and European authorities have not provided unequivocal guidance on what corporate activities are covered by the sanctions. Paul Dalle Molle, a former banker who led the session, noted this is typical in a crisis and that authorities “have only begun to imagine what guidelines and exceptions to publish.” And corporates’ typical “interpreters”, auditors, consultants and banks, were themselves struggling to understand the implications, and as events continue to unfold at extreme speed, they are unlikely to catch up.  

One participant reported treasury is getting conflicting information from its banks about cross-border and local payments. In addition, members were concerned about how quickly banks can update their systems to block payments to and from sanctioned institutions. “Where we pay out, we have control, but we don’t have control over where we’re being paid from,” one NeuGroup member said.

Getting money in and out. US and European companies were of course aware of an imminent crisis, and many had begun to take cautionary steps. But the speed with which the crisis unfolded, and the harsh sanctions imposed by the global community, put many at great risk. For example, one member said her company thought it had until March 22 to move money out of banks that have relationships with correspondent banks on the sanctions list, but had just learned that date may have been moved forward to March 14. Another member pointed out that the sanctions, possibly including the calendar for phasing them in, is not the same for each sanctioned entity. 

Making payroll. Another big concern is how companies can pay local employees. This was not because Russians are in the midst of a run on their banks – the central bank can pump in an endless supply or rubles – but because (1) their bank may be on the sanction list; (2) their employees may have accounts at sanctioned banks.  Some companies are asking employees with accounts at banks on the sanctions list to switch banks.

Russian supply chain. At least one corporate has stopped making all ruble payments within the country to avoid violating any sanctions. Another treasurer said his company is “getting requests from large international suppliers to ‘guarantee’ our Russian affiliates’ payments.”

Alternatives to SWIFT? In addition, there was a lot of concern about making payments into Russia without SWIFT and on the local payment system. Part comforting, part wishful thinking, “there’s a belief that the SWIFT sanctions will be selective and will spare some of the main banks in Russia that are not blacklisted,” offered one participant, adding that his main bank in Russia believes it will be able to conduct business within the guidelines. The European Union said Wednesday it was excluding seven Russian banks from the SWIFT, but stopped short of including banks handling energy payments.

As in the first NeuGroup session on the crisis, members discussed the possibility of using the Chinese payment system, CIPS, as a legal alternative. “Obviously this would be done, if necessary, only through non-sanctioned banks,” said Mr. Dalle Molle. “This process would be cumbersome and expensive, but feasible, he said.

In-flight payments. The uncertainty was particularly troubling to one company that sent a big payment from the local entity of a foreign bank to the US-based entity. “We saw the money has left our account,” the treasurer said, “but we still haven’t seen it land in our US account.” The issue of settlement risk was also raised within the context of outstanding ruble hedges. “You certainly have to evaluate your exposure,” said one member.

Countering counter-sanctions. “The big risk is counter-sanctions and what those look like,” said one of the treasurers on the call. “Counter-sanctions could range in importance from being merely disruptive to the freezing of assets to prohibiting companies to operate in the country, so everyone is attuned to this topic,” said Mr. Dalle Molle.

Asking the right questions. Absent clarity of guidance, the most important thing treasurers can do is ask the right the questions and compare notes with each other. Immediate questions may include:

  • How to make payroll in rubles? For example, how to figure out whether employees have accounts at sanctioned banks?
  • How to pay employees fleeing Ukraine?
  • How to pay local suppliers, who are beginning to demand payment guarantees?
  • Is it still possible to pay dividends out of Russia—and for how long?
  • What’s the exposure to outstanding ruble hedges?
  • Can working through US-owned banks facilitate the payments process?
  • How will the partial cut-off from SWIFT impact the payments system?
  • What counter-sanctions may be imposed, and what might be their impact?
  • What exceptions to the sanctions will be permitted by US and EU authorities?

The bottom line. As companies cope with these immediate issues, we see more of them asking a more fundamental question: whether the best option is to exit the market entirely.


NeuGroup will hold a special session on Russia sanctions on Friday, March 4. And for the foreseeable future, we will hold Russia sessions each Monday at 11:00 ET / 16:00 GMT / 17:00 CET.

Read More Read Less
Contact Us

Crunch Time: Extreme Uncertainty Raises the Stakes for FP&A

To become strategic business partners, FP&A leaders must provide data-driven insight to support critical decisions.

Like the pandemic, the crisis in Ukraine is forcing companies to rethink their business and financial plans. While the worst financial repercussions of the sanctions are within Russia, the impact of the crisis goes far beyond. Spikes in oil prices and inflation are throwing into question companies’ annual budgets, changing forecasting assumptions and making it imperative that FP&A realizes its potential as a strategic advisor to the business.

To become strategic business partners, FP&A leaders must provide data-driven insight to support critical decisions.

Like the pandemic, the crisis in Ukraine is forcing companies to rethink their business and financial plans. While the worst financial repercussions of the sanctions are within Russia, the impact of the crisis goes far beyond. Spikes in oil prices and inflation are throwing into question companies’ annual budgets, changing forecasting assumptions and making it imperative that FP&A realizes its potential as a strategic advisor to the business.  

A seat at the table. Sitting at the intersection of financial planning and business performance analysis and reporting, FP&A plays a critical role in ensuring senior leaders understand the financial impact of their business decisions. So it behooves FP&A professionals to have a high degree of business acumen. At a recent meeting of NeuGroup for Mega-Cap Heads of FP&A, one member stressed the importance of a deep understanding of how the company drives revenue: “You have to understand that from a business lens, if FP&A is not driving the company forward, you could get shut out.”

Under pressure. FP&A’s role as a strategic partner is elevated in times of crisis because it must rerun P&L and cashflow forecasts with new inputs and provide data-driven decision-making support so leaders can still meet their performance objectives. The unfolding situation in Russia, for example, affects multinational companies’ strategic growth, long-term cash forecasting and ROA calculations for projects and other efforts. FP&A teams should work with the business to reassess the impact of risk on their planning and forecasting.

Building a collaborative culture. Getting the business to work with FP&A requires the recognition that FP&A can add tremendous value. That’s a message that does not necessarily resonate immediately with commercial and operational partners. The key to success, according to members at the session, is to start at the top. If leadership sees FP&A as a valuable asset and relies on data-driven insights to make strategic decisions, that will have a substantial impact on the company’s culture.

  • The FP&A leader of a large tech company said he actively sought to support the company’s vice presidents with analysis of strategic business drivers. Now, “the VPs often say, ‘I need to get my finance partner in here’ before they feel comfortable making any decisions.”
  • Another member, who has FP&A team members sitting on boards of all R&D groups at the company, said the successful collaboration stems from a desire the CFO had in the company’s early days to foster a culture that depends on insights stemming from strategic driver analysis.
  • “And now we’re part of strategic process discussions, we have a seat at the table that’s not just finance-related,” she said. “That’s a key part of the culture we built: Most senior staffers are not making big decisions without their finance person right there in the room.”

Creating the right engagement model. FP&A’s success as partner also depends on how the function interacts with business leaders. Ideally, the finance organization constructs a delivery model that aligns with how the business operates and provides such valuable services that business leaders come to depend on them. Here are some questions to consider:

  • Should finance dedicate full-time staff to focus on building a trusting relationship with different business leaders, so they are invaluable when planning and analyzing performance?
  • Should FP&A establish a center of excellence (COE) to enable a more institutionalized engagement model with its internal customers? If so, it has two options:
    • It can spin off tactical data collection, aggregation and reporting activities, so that the rest of the team can focus on high-value work, like business partnering and driver-based analysis and planning.
    • It can also rationalize and automate more activities such as report generation and establish a high-value FP&A and analytics COE, which can amplify the expertise of a smaller number of business experts and data scientists.

The talent obstacle. One potential drawback of both models is the impact on the career path of the COE’s staff. One of the members at the meeting explained that her team created a COE to handle all tactical activities. However, the COE was dismantled after eight years due to issues with employee retention.

  • “Staff didn’t see a career path because they were just running the reports and not really knowing the color of the data,” she said.  Another member noted that “employees can start to feel less relevant. It’s almost like they’re considered second class citizens within the organization.” An emerging solution to this problem is to place COEs inside global business services organizations that can offer attractive career paths.

Finance SWAT teams. An alternative to establishing a COE is to assemble, focused teams on an as-needed basis to handle specific projects.

  • “We’re taking people who are capable, who have some capacity, who like to do something like compensation analysis, and we ‘outsource’ them to go spend two weeks or so working on a project for another team,” one member said.
  • “We’re taking some teams that are seasonal, and instead of a month of downtime, we basically outsource them, and they’re loving it,” this member added. This works particularly well with younger staff. “They’re hungry, young professionals who want to soak it up. It’s more of a SWAT team than a COE.” Because the new hires don’t know as much about the business or the FP&A function, “they come at it from a completely different lens,” which has proved beneficial.

Maintaining relevance. No matter how successful FP&A is in building a strong brand in the organization, sometimes the mood changes when growth stalls and cost cutting becomes critical. One member said that at his company, FP&A used to be fully integrated into the business, cost-cutting had reduced it to a fraction of what it once was. Chronic underfunding has prevented FP&A from updating any of its tools for nearly a decade.

  • He said the organization “used to have agency and be an influential part of running the business, and is now making ‘doughnuts’ every day,” he said. As a result, “we’re finding that our resources aren’t there for strategic discussions, they aren’t helping to drive the business, they aren’t helping to influence decision-making. All of our resources are doing very mundane, transactional, outdated work.”

It’s time to make a move. FP&A is facing a unique opportunity to prove its value and the faster the better. As companies attempt to navigate the volatile business environment, management  is likely to welcome support from business-savvy and data-driven FP&A teams. In addition, internal development, like cloud-based ERP implementations, are opening up new possibilities to change how work is done.

  • One member has partnered with the company’s CFO to undergo “a comprehensive modernization,” by adopting cloud-based SAP’s S/4 Hana as part of a “go-fast program to change things.”

The coronavirus crisis instigated massive changes in how FP&A plans and forecasts. It also revealed how important it is to bring together business and financial leadership. With the global economy once again reeling, FP&A must step up.

Read More Read Less
Contact Us

Market Disruption Ahead: The Future of Treasury Technology

Survey data shows treasury is moving to the cloud but still leaning away from the tech direction finance is heading.

NeuGroup Peer Research data shows that while finance organizations are rapidly embracing advanced analytic tools, robotic process automation (RPA) and machine learning, treasury teams—which are moving rapidly into the cloud—appear convinced that treasury management systems (TMSs) will remain the centerpiece of treasury technology despite market disruption that suggests otherwise.

Survey data shows treasury is moving to the cloud but still leaning away from the tech direction finance is heading.

NeuGroup Peer Research data shows that while finance organizations are rapidly embracing advanced analytic tools, robotic process automation (RPA) and machine learning, treasury teams—which are moving rapidly into the cloud—appear convinced that treasury management systems (TMSs) will remain the centerpiece of treasury technology despite market disruption that suggests otherwise.

  • That analysis provides context for a key takeaway of the 2022 NeuGroup Member Agenda Survey: Treasury is fully committed to the move of finance organizations to cloud-native applications.
  • The majority of respondents (57%) currently have more than 40% of their applications in the cloud. And 40% of them expect to have more than 80% in the cloud in the next 12-24 months—double the 20% at that level now.
  • And as the charts below show, 77% of respondents said they will have fully implemented a cloud-native TMS in the next year or two. Meanwhile, 78% of broader finance organizations expect to be implementing or piloting cloud-based ERPs in that time frame. Call that alignment.

Market disruption. However, that more than three-quarters of respondents see themselves implementing any sort of TMS in the next two years suggests to some observers, including Nilly Essaides, NeuGroup’s managing director of research and insight, that most treasury teams aren’t yet sold on so-called composable finance that will allow them to combine best-of-breed fintech automation tools that connect directly to an ERP through intelligent APIs. 

  • For example, “You can get a cash forecasting module that just does AI-enabled forecasting. It goes all around the ERP and picks pieces of data and then feeds them  through an algorithm that produces a forecast,” Ms. Essaides said.
  • “The 77% TMS figure shows treasury is going its own way while finance overall is moving in the direction of RPA, advanced analytics and this composable finance world,” she added. “It’s going to be very tough to justify why you have a TMS if there’s already an analytics tool you can just plug into your data. Why do you need your old system?”
  • It’s important to note that TMS vendors are reconfiguring their solutions to align with this more modular approach. For example, the FIS family of treasury technologies now offers an analytics module. Other vendors are incorporating AI and ML and APIs into their architecture.
    • “So perhaps the traditional TMS will evolve into more collaborative applications that rely on core, common functionalities to deliver treasury automation,” Ms. Essaides said.

A road to harmony. The charts above show the high percentage of finance organizations—including but not limited to treasury—that in one to two years plan to pilot or implement machine learning (86%), advanced analytic tools (91%) and RPA (83%). “What’s happening is that finance is adopting all these different technologies,” Ms. Essaides said. And one school of thought is that treasury can harmonize better with the broader finance org by borrowing its instruments.

  • “What we need to do going forward is really take advantage of what the finance organization has already bought in terms of analytics and master data management and machine learning,” one survey respondent told NeuGroup Insights. “You pull that in and give it a treasury story, a use case. And if you end up pulling all these standalone functionalities embedded in an app into treasury, you don’t need a treasury management system.”

Of course, not everyone shares that view of the future—or wants to give up on TMSs. But the winds of change are blowing in the direction away from single systems and solutions and toward a future of automation, apps and APIs. And the forces of market disruption will only pick up speed from here.

Read More Read Less
Contact Us

Talking Shop: How Often Do You Assess Counterparty Risk?

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: “How often do you assess counterparty risk?

  • “For your short-term investments such as bank deposits, what frequency has worked best for your team to measure/assess counterparty risk (e.g., daily to weekly, weekly to monthly, etc.) and what considerations were taken into account for determining frequency (e.g., CDS, credit ratings)? It would also be helpful if you could elaborate if you’ve changed frequency.”

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: “How often do you assess counterparty risk?

  • “For your short-term investments such as bank deposits, what frequency has worked best for your team to measure/assess counterparty risk (e.g., daily to weekly, weekly to monthly, etc.) and what considerations were taken into account for determining frequency (e.g., CDS, credit ratings)? It would also be helpful if you could elaborate if you’ve changed frequency.”

Peer answer 1: “We’ve had a long-standing practice of reviewing counterparty credit exposure twice per month, including CDS (credit default swap), ratings, exposures, stock price data, etc. Some information is reviewed quarterly (e.g., fundamental data/ratios from financials, CDS trends).

  • “While we will continue to review CDS at least twice per month, our more comprehensive reviews will move to at least monthly (rather than twice per month). We will adjust back to more frequent reviews if bank risk elevates.”

Peer answer 2: “We assess counterparty risk formally each month. During times of market dislocation, we enhance the governance/frequency.

  • “For the monthly review, we refresh exposures (broken out between cash and derivatives), CDS, credit rating and outlook, bank tier 1 capital, and our firm’s total assets (i.e. we can take more/less risk depending on our size).”

For more insights on counterparty risk, please read these articles:

Read More Read Less
Contact Us

Getting Off the Sidelines: A Treasurer’s Mission to Make Real Progress on D&I

ServiceNow Treasurer Tim Muindi joins NeuGroup’s Strategic Finance Lab podcast to discuss his decision to do more to promote diversity and inclusion and how finance teams can do better at recruiting and retaining Black candidates.

In this episode of NeuGroup’s new Strategic Finance Lab podcast, ServiceNow treasurer Tim Muindi shares what Black History Month means to him, challenges he’s faced during the course of a 23-year career when he’s often been the only Black person in a company’s finance department and steps treasury teams can take to improve diversity and inclusion.

ServiceNow Treasurer Tim Muindi joins NeuGroup’s Strategic Finance Lab podcast to discuss his decision to do more to promote diversity and inclusion and how finance teams can do better at recruiting and retaining Black candidates.

In this episode of NeuGroup’s new Strategic Finance Lab podcast, ServiceNow treasurer Tim Muindi shares what Black History Month means to him, challenges he’s faced during the course of a 23-year career when he’s often been the only Black person in a company’s finance department and steps treasury teams can take to improve diversity and inclusion.

  • In the interview with NeuGroup Insights editor Antony Michels, Mr. Muindi also discusses his role in ServiceNow’s $100 million racial equity fund managed by RBC Global Asset Management that aims to boost homeownership, affordable housing and entrepreneurship in 10 Black communities where ServiceNow employees live and work.

Please listen to the full podcast.

Read More Read Less
Contact Us

Treasury Reimagined

Treasury must reinvent its role within finance or risk losing significant head count.

By Nilly Essaides

Technological advances and growth in the use of shared services centers (SSCs) are threatening to strip treasury of much of its operational activities. As automation supplants manual work and low-value activities migrate to SSCs, treasury may lose relevancy and staff. The tidal wave of digital transformation sweeping treasury means that smart automations like AI will replace current systems and the people who work with them.

An existential threat. At a recent NeuGroup meeting, Poly’s treasurer Jean Furter shared a radical view of the future of the function: “In three to five years, 90% of treasury staff will be gone,” he said. “Too many treasuries are still in the tactical mode. If that’s all they do, they risk being automated away.”

Treasury must reinvent its role within finance or risk losing significant head count.

By Nilly Essaides

Technological advances and growth in the use of shared services centers (SSCs) are threatening to strip treasury of much of its operational activities. As automation supplants manual work and low-value activities migrate to SSCs, treasury may lose relevancy and staff. The tidal wave of digital transformation sweeping treasury means that smart automations like AI will replace current systems and the people who work with them.

An existential threat. At a recent NeuGroup meeting, Poly’s treasurer Jean Furter shared a radical view of the future of the function: “In three to five years, 90% of treasury staff will be gone,” he said. “Too many treasuries are still in the tactical mode. If that’s all they do, they risk being automated away.” 

Research conducted by The Hackett Group in 2020, meanwhile, projected that by 2025, 100% of the current work finance handles will be executed with 50% fewer FTEs. The caveat was that the overall workload will rise substantially as finance gets more involved with business and strategic activities.

While we may argue about the exact percentages, there’s no question treasury is exposed and it’s only a matter of time before the powerful trends reshaping the finance organization catch up with it.

The mass migration. Finance organizations are siphoning large chunks of time-consuming, low-value work away from core operations to highly digitized SSCs or GBS (global business services) organizations. By standardizing, automating and centralizing activities such as cash and general ledger accounting and credit and collections, finance is able to reduce process cost, while enabling end-to-end process management. Treasuries that own (or used to own) AP and AR are already feeling the squeeze. In fact, the majority of work handled by SSCs is finance related.

Choosing your destiny. That most treasury organizations have not embraced this vision of the future is evident in the results of the 2022 NeuGroup Members Agenda Survey (see chart above). Only 17% of respondents foresee transferring work to SSCs. If the nearly 70% who expect to see treasury persist as a standalone function are to be proven right, the function must take control of its destiny before leadership forces it to let go of a lot of operational activities.

  • The main reason we haven’t seen a more pronounced trend toward the migration of treasury’s tactical work is that the function is too small to find itself in management’s crosshairs. “Right now, companies’ primary motivation is to automate and centralize in order to reduce head count. Leadership is going after the biggest bang for the buck,” said the treasurer of one NeuGroup member company.
  • While there’s a distinction between SSC migration and pure automation (e.g., manual processes can also be transferred to low-cost locations), in practical terms, it does not matter whether a process is digitized and transferred to an SSC or automated and eliminated. In both cases, it no longer resides within treasury.

The danger of inertia. It can be easy to dismiss concerns about treasury’s slimmed-down future, in part because they are too threatening to contemplate, but mostly because most treasuries have not yet experienced precipitous declines in head count. On the contrary, many of our members are struggling to hire.

  • While automation will eliminate many treasury jobs, it does not mean treasuries will stop hiring. What will change is the profile of the people they hire. We already see this trend among our forward-looking members, as they try to recruit and develop staff with big-picture thinking and advanced digital skills.

Redefining treasury’s raison d’être. To be clear, we are not arguing that the treasury will disappear. We are saying that treasurers must figure out what the function will do when activities such as bank account management, cash positioning, short-term forecasting and reconciliation are automated and/or exported to an SSC. Whether treasury perseveres depends on how its leaders reposition the function’s role within the organization. “You have to position yourself as the source of insight and value,” Mr. Furter urges.

  • “Because of the specialized nature of treasury, for example, there will always be a capital markets group that needs the intellectual horsepower,” explained a respondent to the agenda survey. “Whereas on the [operations] side, that’s where we will see a deeper dive into automation and migration to SSCs; that’s where the head count will be reduced.”

Setting the right priorities. Treasuries have limited resources. If they spend too much time on perfecting ops processes, they won’t have the capacity to look higher, toward value creation and decision-support.

  • “You have to prioritize,” Mr. Furter said. Instead of producing a daily cash report, which rarely drives decisions or actions, do it weekly. “Just because real-time data is available, does not mean you need to spend weeks implementing it in your organization.” 

While it remains important to reduce manual intervention through automation, it’s even more important to demonstrate to leadership how treasury can contribute real value through the design and execution of the capital structure, collaborating with the business to drive working capital, and managing financial risk, for example.

  • According to Mr. Furter, “These are elements that end up having a tangible impact on shareholder value.”

A temporary situation. For now, treasury cannot completely escape its operational duties and may have staff dedicated to these activities for some time. In this hybrid state, treasury is pushing operational excellence at the same time it’s pursuing a higher level of value creation. However, as fintechs introduce new technologies, such as blockchain and digital assets that aim to replace legacy financial market operations, treasury will find itself in a different position.

Above and beyond: Redesigning the operating model. The future of the treasury function is not just about shedding low-value tasks to create strategic capacity. It’s also about instigating a fundamental shift in how finance is organized, e.g., realigning treasury and FP&A activities. It’s incumbent upon treasurers to think strategically and lead high-level conversations about how to juxtapose different elements of finance.

  • FP&A focuses primarily on the income statement, yet it is still responsible for activities that are integral to the balance sheet and capital structure, such as long-term cash and debt forecasting.
  • Most FP&A leaders do not see their forecast within the context of the company’s leverage capacity and targets. It makes more sense to (1) organize around the balance sheet and the income statement; and (2) dismantle departmental barriers to integrate the management of both. 

Cross-finance collaboration. Treasury leaders are on the right path. The majority of our survey respondents chose business partnering as their #1 objective for the year, by which they mean greater collaboration with other parts of finance.

  • “We continue to find ourselves touching lots of points in the finance organization, whether that’s tax or FP&A as well as legal; a lot of things that we decide upon have multiple impacts and stakeholders, e.g., creating trapped cash through the establishment of legal entities, or the impact of tax legislation on our ability to repatriate offshore cash,” one member said. Plus, “we’re partnering with legal on new share repurchase rules, and on cash forecasting with FP&A.”

Breaking the walls. Several trends will accelerate the dismantling of departmental silos. The rapid rise of digital assets and DeFi are forcing corporates to form cross functional task forces to study legal, tax, accounting, funding and payments implications. Plus, with surging inflation, treasury will have to work more closely with the business to determine how macroeconomic trends will impact the company’s ability to make good on its debt obligations or secure needed liquidity.

  • “There’s potential for more volatility going forward,” according to one survey respondent. So the partnership with FP&A is going to be very important.

Treasury of the future will look a lot different than it does today. Treasurers who continue to focus primarily on operational or tactical excellence may fail to establish their functions as valued partners in driving companies’ financial performance. Treasurers have a choice to make and ignoring the threats won’t make them go away.

Read More Read Less
Contact Us

Searching for Authenticity: How Corporates Select Diversity Firms

Members compare notes and names as they outline the process for picking minority-owned brokerage firms.

Authenticity and shared values are what many corporates prioritize when selecting diversity firms for capital markets transactions. That takeaway emerged at a meeting of the NeuGroup for Diversity and Inclusion working group last month featuring three panelists from different companies.

  • “In identifying firms to work with, the most important aspect to us is the authenticity of the firm,” one panelist said. That means reviewing the diversity of the firm’s workforce, the advancement opportunities for minority employees, the actual jobs held by minorities and the path to ownership, he said.
  • Another said they assess the quality of a firm by finding out “who is in the organization, by layer, by type of diversity group.”

Members compare notes and names as they outline the process for picking minority-owned brokerage firms.

Authenticity and shared values are what many corporates prioritize when selecting diversity firms for capital markets transactions. That takeaway emerged at a meeting of the NeuGroup for Diversity and Inclusion working group last month featuring three panelists from different companies.

  • “In identifying firms to work with, the most important aspect to us is the authenticity of the firm,” one panelist said. That means reviewing the diversity of the firm’s workforce, the advancement opportunities for minority employees, the actual jobs held by minorities and the path to ownership, he said.
  • Another said they assess the quality of a firm by finding out “who is in the organization, by layer, by type of diversity group.”
  • One treasurer said his company seeks out firms that “have the same values as us,” something you can’t assume is always the case. “What we found was there are firms out there that do not share the same values,” he said.

Go beyond recommendations. Getting advice on which firms peers recommend is a starting point and members do share lists of preferred diversity banks and brokers. But one treasurer said the only way to know if a firm’s values match the corporate’s is through interviewing and observing.

  • “We had a few interviews where the owner didn’t show up,” he said. Or cases where most of the people who came to the meeting were white males, with perhaps just one member of the minority group the firm represented.
  • “If they’re telling you they’re a minority firm and minorities are just 26% of the people who work there, something’s just not right. That helps you narrow the field.”
  • Another area of inquiry: community relations. “We like to look at the community events they’re holding. What types of programs do they have for the folks who don’t have the opportunity, what are they doing?” he said.
  • A diversity firm’s capital markets capabilities, of course, are also a factor assessed by corporates.

Representation and communication. Members often select equal numbers of Black-owned, Hispanic-owned and veteran-owned firms, as well as those owned by women. One treasurer said the types of minority firms he picks correspond to his company’s affinity or employee resource groups, some of which are based on race.

  • One member asked the panelists how often they meet or communicate with the diversity firms on their rosters. One panelist meets with them once a year. Another said once a quarter if not more, saying frequent dialogue strengthens the relationship and establishes a long-term partnership with the diversity firm.
  • Forging that relationship is especially important to another panelist when the diversity firm is selected to be a joint-lead manager on a deal.
  • In those cases, he wants to get to know the people on the debt capital markets and syndicate teams. “We want to have a comfort level with who we’re working with because we’re asking them to play the same role as the other joint leads.”

A growing space. All of the panelists noted the rapid growth of the diversity firm space and expressed a desire to expand the number of firms that participate in their deals. Another treasurer whose company is a leader in using diversity firms for debt offerings told NeuGroup Insights:

  • “We believe in investing for growth in this space through differentiated and meaningful economics and meaningful opportunity when possible—which also allows new firms to get an opportunity, albeit at lower fees. Investing for growth to us is defined by number of employees at the firm (look for growth), capital base of firm (look for growth), and performance on transactions.”
Read More Read Less
Contact Us

Spending to Save: Making a Case for Payments Fraud Prevention Tools

Turning to banks, internal auditors and ERM teams may help treasury teams overcome a dearth of fraud data.  

Payments fraud schemes hit 74% of companies in 2020, and two-thirds of treasury and finance professionals blame the pandemic for some of the increase in fraud at their companies, according to an AFP survey. Whatever the causes, the problem has made tools that can prevent scams more important than ever. But some treasury teams in need of those solutions are hitting a roadblock: Quantifying how much fraud the tools will prevent.

  • Members at a meeting of NeuGroup for Global Cash and Banking discussed how to build a business case for a new tool if the benefits of fraud prevention software would not be clear until it’s actually put to use. “A lot of the exercise is going to be theoretical,” one member said, which can be a hurdle when treasurers must convince traditionally data-focused leadership and IT teams to spare resources.
  • Some members recommended seeking answers by working with internal audit and risk management teams and the company’s bank group.

Turning to banks, internal auditors and ERM teams may help treasury teams overcome a dearth of fraud data.  

Payments fraud schemes hit 74% of companies in 2020, and two-thirds of treasury and finance professionals blame the pandemic for some of the increase in fraud at their companies, according to an AFP survey. Whatever the causes, the problem has made tools that can prevent scams more important than ever. But some treasury teams in need of those solutions are hitting a roadblock: Quantifying how much fraud the tools will prevent.

  • Members at a meeting of NeuGroup for Global Cash and Banking discussed how to build a business case for a new tool if the benefits of fraud prevention software would not be clear until it’s actually put to use. “A lot of the exercise is going to be theoretical,” one member said, which can be a hurdle when treasurers must convince traditionally data-focused leadership and IT teams to spare resources.
  • Some members recommended seeking answers by working with internal audit and risk management teams and the company’s bank group.

The bottom line. One treasurer said her company had several recent “very near misses” with business email compromise schemes requiring her to tell banks to pull back the company’s funds. Now she’s seeking third-party fraud screening tools that analyze a company’s accounts and flag any suspicious payments. Deutsche Bank and TIS introduced one such tool last year.

  • One corporate cash manager found a solution in fraud screening functionality within the company’s payment factory, FIS Payment Hub – Quantum Edition. He said the tool screens and holds payments if there is a new beneficiary or if the instructions changed since the last payment. The entity that initiated the payment would then verify if a two-factor authentication process has been completed and reapprove the payment for release to the bank.
  • The functionality required additional resources, but the member said, “given the ever-increasing fraud landscape, I believe the investment in tools to detect fraud in our systems and training are important and worth the investment.”

Help from the outside and inside. Some members are seeking advice on building a case for tools like these, concerned that some fraud may currently be flying under the radar, undetected. Those who have implemented payments fraud prevention tools recommended seeking assistance from:

  1. Banks. They have data on their clients’ previous fraud incidents, which can help establish a baseline for the level of fraud that could be prevented by a screening tool. One treasurer said he found success working with his bank to obtain fraud data from anonymous recaps of clients who have been scammed.
  2. Internal audit teams. One member suggested working with the company’s audit team instead of attempting to quantify theoretical, undetected risk. Treasury can make note of previous issues or near-misses that may have been flagged in an audit report, which can be used to build out a more robust business case for fraud prevention tools. “Never waste a good audit,” the member said.
  3. ERM teams. “If you have a fraud case that becomes a Wall Street Journal article or something, there’s a brand reputation connection, which tends to be flagged in the major ERM programs,” one member said. “If you can leverage what the ERM team have done, that can be helpful too.”
  4. Cybersecurity teams. The member working with FIS to implement solutions in the company’s payment factory added that it’s worth getting to know your company’s cybersecurity team. “We’ve had a lot of success bringing them in from an advisory perspective to talk about risks to not using a payment factory, using portals outside of our IP filtering or a VPN and the risk that that entails,” he said. “Get to know them, work with them, and they can help you build a more robust business case.”
Read More Read Less
Contact Us

Talking Shop: Disclosing Info to Ratings Agencies Before Earnings

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


Member question: “Does anyone in the group discuss quarterly earnings with the rating agencies before the press release?”

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


Member question: “Does anyone in the group discuss quarterly earnings with the rating agencies before the press release?”

Peer answer 1: “If there is news that we believe they should hear in advance of the earnings announcement, then we do meet with them in advance.”

Peer answer 2: “We haven’t been asked to discuss earnings right before press releases. However, a rating agency asked us to provide an updated cash flow forecast/debt paydown in a blackout window, and we complied with the request.”

Peer answer 3: “We verbally discuss key aspects of the results in advance if we expect them to take an action post earnings. We don’t share any presentation materials until after the earnings.”

Peer answer 4: “We had talked to them before earnings releases. We recently changed and now do it after earnings updates. They have not reacted negatively so far.”

Peer answer 5: “We would share information prior to the earnings release if we felt it was significant enough to impact our credit.”

NeuGroup Insights reached out to Jonathan Richman, a partner at law firm Proskauer, for his perspective on potential legal issues that may stem from disclosing information with rating agencies in advance of earnings.

  • “The big concern is Regulation FD, which prohibits advance disclosure of material nonpublic information (MNPI),” he said.
  • “However, an issuer can disclose MNPI to a rating agency before public disclosure if the rating agency has agreed to keep the information confidential and not use it before it has been disclosed to the market in general.”
Read More Read Less
Contact Us

How Companies Can Hire and Retain More Black Finance Professionals

Advice and insights on how corporates can better recruit Black candidates and support their career advancement.

Finance leaders and hiring managers committed to diversity and inclusion (D&I) and increasing the number of Black people on treasury and other teams reporting to CFOs need to embrace new ways to recruit and hire Black candidates while creating a corporate culture that welcomes Black employees, encourages them to stay and supports their advancement.

  • That’s among the key takeaways from comments by finance professionals speaking in recent NeuGroup meetings and during interviews marking Black History Month. Another important point: achieving D&I goals requires active engagement and consistent attention.

Advice and insights on how corporates can better recruit Black candidates and support their career advancement.

Finance leaders and hiring managers committed to diversity and inclusion (D&I) and increasing the number of Black people on treasury and other teams reporting to CFOs need to embrace new ways to recruit and hire Black candidates while creating a corporate culture that welcomes Black employees, encourages them to stay and supports their advancement.

  • That’s among the key takeaways from comments by finance professionals speaking in recent NeuGroup meetings and during interviews marking Black History Month. Another important point: achieving D&I goals requires active engagement and consistent attention.
  • “You really have to make an effort to hire, retain and grow diverse talent,” said one member who is actively recruiting Black candidates. “I think there’s an idea of, ‘oh, we will just hire more,’ and everyone takes their eyes off it and expects to see them 20 years later in an executive meeting. Actually, it’s about that entire process and not taking your hands off of it.”

HBCUs and beyond. Tim Muindi, treasurer of ServiceNow, said in an interview that finance leaders who say they’re struggling to find more Black candidates “are probably not looking in the right places. That’s usually the biggest hurdle. I start by asking, ‘where are you looking?’”

  • He added, “In most cases, you have to go meet them where they are. For me, being in the Bay Area, we want to add more Black professionals to finance, our eyes have to be wide open for potential opportunities, whether it’s in Detroit, Atlanta or wherever the case might be.”
  • As part of that approach, Mr. Muindi said ServiceNow has expanded beyond recruiting at a few schools to reaching out to more historically Black colleges and universities (HBCUs) and schools located in areas with larger Black populations.
  • Summa Simmons, director of treasury at Victoria’s Secret & Co., told NeuGroup Insights that large HBCUs attract heavy recruitment from the Big Four accounting firms, but “there are tons of budding accountants and finance professionals that don’t necessarily want to go to the Big Four and are open to other career tracks beyond public accounting.” She also recommends talent acquisition/recruiters look beyond the larger HBCUs, saying, “there are tons of great HBCUs, sometimes local to the city companies are hiring in.”
  • The treasurer who is actively recruiting Black candidates said she’s had great experiences working with HBCUs. “You’re playing the long game, you’re investing in them when they’re really young and growing through the organization,” she said. “You can’t hire someone at the director level with this path, but it’s been tremendous.”

Connecting with candidates. A number of members recommend working with the National Association of Black Accountants (NABA) and The Robert Toigo Foundation, industry groups that can help connect companies directly to potential candidates through job postings, mentorship and in-person job fairs and conferences.

  • For in-person or virtual job fair events, Ms. Simmons says it is important to have diverse recruiting teams. “Make sure you bring employees and associates that look like the people you want to recruit—I think that’s the biggest piece of it,” she said. “Find the diverse talent in the finance organization and get them on a rotational schedule supporting recruiting initiatives so your prospective candidates can have candid conversations.”
  • In recruiting Black candidates, the presence of people doing interviews who look like a candidate is “huge,” Mr. Muindi said. “The fact they can see somebody who looks like them in that role, it gives them a sense of belonging. They feel like, ‘This is a place I can go, start my career, grow my career and potentially even get to those senior levels.’ That really helps with that connection.”
  • Black and African American candidates can’t always tell if a company’s commitment to diversity is real, Ms. Simmons said. So there are a number of questions potential employees may ask to distinguish lip service from true commitment:
    • Is the appraisal system designed for employees to get direct and helpful feedback?
    • Is there a development plan that leaders work on with employees?
    • If employees express interest in promotions but don’t get them, are they getting meaningful feedback?
    • If the company is successful in attracting diverse talent, does it have a robust and inclusive initiative to help retain that talent?
    • When diverse candidates come in, are there mentorship opportunities?

Mentors, sponsors and allies. Mr. Muindi said that while he has had good experiences with mentors throughout his 23-year finance career, he has found sponsorship in short supply at more senior levels, defining a sponsor as somebody who will recommend someone else for opportunities—an essential part of rising through executive ranks.

  • “I think it’s challenging across the board, but I think it’s more challenging when you are a minority. In most cases, they don’t have anybody that they relate to on those higher levels and have a relationship with, so it becomes more difficult to find that sponsor,” he said.
  • Ms. Simmons, who leads Victoria’s Secret & Co.’s Black and African American inclusion resource group, said that it is also important to have allies at a company to foster a culture of true commitment to diversity and inclusion. To hear her thoughts on the importance of allyship, as well as what Black History Month means to her, please watch this interview excerpt.
Read More Read Less
Contact Us