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Talking Shop: Who Owns Global Workers’ Comp Insurance?

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

Context: Oversight of insurance—policies for directors and officers, property, cybersecurity, product liability and other risks—is among the responsibilities of many finance organizations in the NeuGroup Network. As for workers’ compensation coverage, one treasurer and NeuGroup member responsible for insurance at his current and former employer said, “my experience is that the department which is responsible for the overall corporate insurance programs would place/renew the policy.”

  • He added that workers’ comp “is usually part of the casualty placement—general liability, automobile, umbrella and workers’ comp.” However, claims are not filed through treasury where he has worked; they are filed by HR or by employees directly.

Member question: “Where in your organization does the management and ownership of global workers’ comp exist?”

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


Context: Oversight of insurance—policies for directors and officers, property, cybersecurity, product liability and other risks—is among the responsibilities of many finance organizations in the NeuGroup Network. As for workers’ compensation coverage, one treasurer and NeuGroup member responsible for insurance at his current and former employer said, “my experience is that the department which is responsible for the overall corporate insurance programs would place/renew the policy.”

  • He added that workers’ comp “is usually part of the casualty placement—general liability, automobile, umbrella and workers’ comp.” However, claims are not filed through treasury where he has worked; they are filed by HR or by employees directly.

Member question: “Where in your organization does the management and ownership of global workers’ comp exist?

  • “We are having a debate internally as to who should own workers’ comp globally. It is treasury’s opinion that HR/benefits should own this, but I wanted to understand where this exists in your organization.”

Peer answer 1: “I went through similar internal discussions a while ago. It used to be in treasury, but I moved it to workplace services (WPS). At that time, I found out the WPS organization had a nurse and an ergonomics professional to minimize claims. So I made the argument that this function would be best placed where the loss control operation is.

  • “We continue handlining workers’ comp insurance, but HR is in charge of collecting and managing all data. Our involvement is limited to renewing contracts with the broker; [another third-party] manages claims with WPS.
  • “Outside the US, workers’ comp is managed by HR.”

HR in charge: Seven peers said HR owns workers’ comp at their companies. Four of them offered additional information:

  1. “HR owns it; we have to work with them on rebalancing the collateral account based on coverage changes.”
  2. “HR owns, but per policy, treasury/the CFO must approve the policy and any funding requests for the deductible portion.”
  3. “HR owns; treasury evaluates and selects the insurance provider.”
  4. “HR owns it and works with risk management/treasury. However, at my past employer it was owned by treasury as part of a holistic risk management function. If workers’ comp is retained by HR, it demands a link with the risk management team/treasury as the global excess program must attach to the underlying workers’ comp program and HR’s choice of insurer matters.”

A company where treasury owns workers’ comp: “We place the insurance; claims are submitted to treasury/risk management electronically; we manage the claims with our internal/external partners; we help direct medical care; we facilitate back to work discussions with employees.

  • “Of course, there is communication with internal HR, legal and other teams as part of that coordinating process.”
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Digging Deeper: Finding New Metrics for Counterparty Credit Risk

Treasurers are adding new ways to measure the credit risk posed by their banks, new NeuGroup Peer Research shows.

The nearly overnight demise of Silicon Valley Bank jolted many corporate treasurers into taking a hard look at what metrics to include when assessing banks’ credit worthiness. New NeuGroup Peer Research shows many treasury teams are now going beyond the obvious to evaluate their counterparty credit risk.

Missing the signs. The urgency of this review and retooling is fueled in part by the realization, in hindsight, that there were red flags indicating SVB was in deep trouble. However, credit agencies and many others failed to recognize them, in part because they were not looking at the right indicators.

Treasurers are adding new ways to measure the credit risk posed by their banks, new NeuGroup Peer Research shows.

The nearly overnight demise of Silicon Valley Bank jolted many corporate treasurers into taking a hard look at what metrics to include when assessing banks’ creditworthiness. New NeuGroup Peer Research shows many treasury teams are now going beyond the obvious to evaluate their counterparty credit risk.

Missing the signs. The urgency of this review and retooling is fueled in part by the realization, in hindsight, that there were red flags indicating SVB was in deep trouble. However, credit agencies and many others failed to recognize them, in part because they were not looking at the right indicators.

Expanding the menu of measures. NeuGroup’s Best Practices in Assessing Bank Counterparty Risk Survey shows that 73% of companies that took immediate action in the wake of the SVB debacle planned to add new metrics to their risk models (see chart below).

Going beyond the obvious. Many treasuries already go beyond credit ratings when evaluating their exposure to banking partners. As the chart below illustrates, the most common additional measure (88%) is tracking credit default swap (CDS) spreads, and 43% of respondents also review bank deposit bases and stock prices. Notably, an equal percentage use “other” individual metrics that are tracked by fewer respondents.

Leading indicators of counterparty risk. Those “other” measures treasury teams are already reviewing to get ahead of bank failures, as well as metrics they plan to start monitoring, are listed in the bullet points below. These fall into three categories: market, structural and balance sheet indicators. Treasuries looking to build up their risk assessment capabilities should consider tracking some of the following:

Market indicators

  • 10-year bond spreads
  • Changes in bond spreads
  • Bloomberg default risk metrics
  • Implied rating based on bond spreads, if available
  • Market sentiment/news
  • Stock price performance vs. bank index
  • Countries of risk
  • Option-adjusted spread (OAS)
  • Credit valuation adjustment (CVA)
  • Dollar duration (DV01)

Structural indicators

  • Capital adequacy ratio
  • Structural liquidity
  • CAMELS rating (capital adequacy, asset quality, management, earnings, liquidity, sensitivity to market risk)
  • Liquidity coverage

Balance sheet indicators

  • Loan/deposit ratio
  • Long term deposit coverage ratio
  • HTM investments as a percentage of total asset size
  • Unrealized losses/tangible equity
  • Unrealized losses on HTM investments/shareholder equity
  • Commercial real estate ratio
  • Percentage of uninsured deposits
  • Percentage change in deposits quarter-over-quarter
  • Loss reserve/write-off assessment
  • Unrealized losses on HTM securities

Getting ahead of rating agencies. Seventy percent of treasuries ranked the performance of rating agencies at three or below, on a scale of 1 (lowest) to 5. The biggest criticism was that they are backward looking and slow to react to changing market conditions and are thus ineffective in producing early alerts on pending liquidity crises or keeping up with evolving market conditions.

As companies build up internal capacity to assess bank risk, they also expect the agencies to do a better job going forward. Specifically, they recommend rating agencies:

  • Improve the modeling of risk scenarios, particularly idiosyncratic exposures of specific institutions.
  • Take a firmer stance on key measures of safety, specifically asset/liability management.
  • Factor in robustness of bank risk management practices relative to industry standards.
  • Be more responsive to materially changing conditions.
  • Include risk on AFS/HTM in their analysis.
  • Include level of uninsured deposits and deposit diversification.
  • Run forward-looking scenario analysis based on insider information.
  • Offer greater transparency of analysis, e.g., explaining why SVB was not downgraded.

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Own Your Own Key: Cutting Out the Crypto Custody Middleman

Why one member set up cryptocurrency self-custody with Fireblocks instead of using a custodian.

When El Salvador officially recognized bitcoin as legal tender in 2021, one NeuGroup member company that does business in the country had to act quickly to figure out how to pay or be paid via bitcoin.

  • “If someone wants to pay in bitcoin, we couldn’t say no,” the member said at a recent meeting of NeuGroup for Digital Assets sponsored by Fireblocks. So the treasury team started a focus group to unite functions across finance and decide on the best course of action.

Why one member set up cryptocurrency self-custody with Fireblocks instead of using a custodian.

When El Salvador officially recognized bitcoin as legal tender in 2021, one NeuGroup member company that does business in the country had to act quickly to figure out how to pay or be paid via bitcoin.

  • “If someone wants to pay in bitcoin, we couldn’t say no,” the member said at a recent meeting of NeuGroup for Digital Assets sponsored by Fireblocks. So the treasury team started a focus group to unite functions across finance and decide on the best course of action.
  • The member, a treasury IT manager, implemented a self-custody solution using tools from software provider Fireblocks to set up a digital wallet owned by the member company.
    • Fireblocks, a digital asset security platform, offers proprietary software that helps build secure infrastructure for moving, storing and issuing digital assets. The cloud-based solution enabled the member company to own its own wallet and create a rules-based flow of approvals for all transactions.
  • Though no payments have been made in bitcoin since setting up the digital wallet, the corporate now has a standardized process to set up a new wallet for other cryptocurrencies—a process it’s already putting to use.

Why self-custody? A number of other multinationals that do business in El Salvador tapped services from crypto custodians offering secure storage of digital assets; or they use third-party providers who accept bitcoin payments and convert them to fiat for high fees. Initially, the member looked into custodial offerings from BNY Mellon—which uses Fireblocks technology in its crypto infrastructure—and Coinbase.

  • Custodial institutions assume the risk of holding crypto by retaining the so-called “key” to a user’s digital wallet. The key is a complex passcode that grants access to a wallet and cannot be recovered—if a wallet owner loses track of the key, all funds are permanently lost. Since custodians hold the key, a customer only needs the password to their account on the custodian’s website—which can be reset if lost.
  • BNY’s service did not launch in time for the company’s project, and the member decided to cut out an intermediary entirely because he couldn’t trust a third party like Coinbase with something that valuable—a decision that’s paid off in recent weeks.
    • “We would have complete exposure to those companies if something happened, so I had no interest in that,” he said.
  • “Not your key, not your crypto,” is an oft-repeated motto among self-custody proponents, and one that the member said, “really rings true.”

Custodial controls. The downside to self-custody, the member said, is that the corporate assumes all risks. Tight controls would be needed to ensure stakeholders have access to the digital wallet key in a controlled manner, the ability to approve payments and a reliable recovery mechanism to prevent loss of the keys.

  • Because payments are irrevocable and only need a wallet address, without the right controls a simple typo could lead to a complete loss of a payment.
  • “If we pay to a dead wallet, it’s gone,” he said. “But one thing that really appealed to us about Fireblocks is the robustness of what you can build for a control framework in one tool.”

How the custody setup works. After collaborating with other teams at the company to ensure an effective, secure digital wallet, the member set up a straightforward process using Fireblocks to accept or make digital payments.

  • “You can define layers of approval, including people from different groups signing off,” he said. “We used traditional payment controls as the model.”
  • Setting up the configuration for payment approvals required no coding on the member’s part. “Building the transaction flow was pretty simple,” he said. “As I was setting up rules I was like, ‘Wow it should be more complicated.’”
  • It all begins with a business group requesting permission, which is reviewed by its finance team; if approved, it then goes to treasury before execution. The process, shown below, is overseen by the company’s compliance team and owned by treasury.

Putting the wallet to use. Though El Salvador’s embrace of bitcoin was the catalyst to start the project, the company’s wallet has not yet been used, with no customers or vendors requesting payments via the cryptocurrency. Instead, another business line approached treasury with a need to support a different digital asset.

  • The model built in Fireblocks was easily applied to this use case. “We set up that team with roles for payment requests and approvals,” the member said. 
  • “It was really, really important to treasury that nobody thought we were the ones pushing crypto,” he said. “We are enabling the business, and the model has served us well.”
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FP&A Drives Finance to a Future of Data and Analytics

Steve Rosvold of CFO.University explores FP&A’s evolving roles and opportunities.

At a growing number of NeuGroup member companies, FP&A teams are taking on added importance by becoming a strategic partner of the business, leveraging data analysis skills to provide insights to cross-functional teams across the finance organization.

  • In our newest video, CFO.University founder and chief learning officer Steve Rosvold shares his excitement about FP&A’s expanding role, highlighting how analytical skills can provide finance organizations with a tremendous advantage.
  • Mr. Rosvold foresees FP&A teams playing a pivotal part in transforming the finance function by enhancing revenue management, gaining insights into pricing dynamics and seizing opportunities for growth.
  • To hear his full thoughts on how FP&A can transform finance, including closer collaboration with accounting, hit the play button below. And for a full conversation between Mr. Rosvold and NeuGroup’s Nilly Essaides, listen to his recent episode of the Strategic Finance Lab podcast on Apple and Spotify.

Steve Rosvold of CFO.University explores FP&A’s evolving roles and opportunities.

At a growing number of NeuGroup member companies, FP&A teams are taking on added importance by becoming a strategic partner of the business, leveraging data analysis skills to provide insights to cross-functional teams across the finance organization.

  • In our newest video, CFO.University founder and chief learning officer Steve Rosvold shares his excitement about FP&A’s expanding role, highlighting how analytical skills can provide finance organizations with a tremendous advantage.
  • Mr. Rosvold foresees FP&A teams playing a pivotal part in transforming the finance function by enhancing revenue management, gaining insights into pricing dynamics and seizing opportunities for growth.
  • To hear his full thoughts on how FP&A can transform finance, including closer collaboration with accounting, hit the play button below. And for a full conversation between Mr. Rosvold and NeuGroup’s Nilly Essaides, listen to his recent episode of the Strategic Finance Lab podcast on Apple and Spotify.
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SVB Shockwaves: Updating Bank Counterparty Credit Risk Strategy

NeuGroup Research survey results on the repercussions of the SVB collapse for corporates managing risk.

The immediate flurry of activity by corporates in the aftermath of Silicon Valley Bank’s first-quarter collapse has subsided. But as the second quarter draws to a close, new NeuGroup Research shows the crisis of confidence ignited by SVB will have long-lasting implications.

NeuGroup Research survey results on the repercussions of the SVB collapse for corporates managing risk.

The immediate flurry of activity by corporates in the aftermath of Silicon Valley Bank’s first-quarter collapse has subsided. But as the second quarter draws to a close, new NeuGroup Research shows the crisis of confidence ignited by SVB will have long-lasting implications.

  • Preliminary results of the Best Practices in Assessing Bank Counterparty Risk Survey reveal the crisis has triggered a reassessment of bank counterparty credit management at 81% of treasuries, and 69% are planning to make fundamental changes to how they mitigate bank credit exposures going forward. The chart below describes their key risk mitigation strategies.

Safety in numbers. The most common forward-looking strategy under consideration is greater deposit diversification. “We are increasing the number of counterparties to enable us to reallocate funds quickly within our risk limits, if needed,” wrote one respondent.

Safety in size. However, diversification comes with a caveat. In the “other” category, one respondent reported his company is planning to concentrate deposits with GSIBs.

  • The survey also found that 40% of treasurers who took immediate action redeployed funds into core banks, and 30% shifted deposits out of small banks.
  • Some excess funds were also diverted to government MMFs in the immediate aftermath.

Plan B. The next most popular medium- and long-term strategy treasuries are considering is hedging against operational risk by establishing a back-up cash management bank. That means not only selecting a partner but opening accounts, so there’s an immediate alternative for accepting and making payments.

  • Getting set up with an alternative institution requires internal work as well. “We’re adjusting internal platforms to more easily replace existing bank partners for key operational risk and customer financing programs,” commented another survey respondent.

Additional activities. Treasurers are taking other measures to backstop bank credit risk, including by increasing sophistication in selecting counterparties for derivatives transactions and maintaining a higher level of cash in government money market funds.

Thinking beyond deposits. Essential to planning risk mitigation strategies is the definition of exposure. Not surprisingly, 100% of members include deposit exposure, and 70% include exposures to in-the-money derivatives.

  • Next in line (58%) is exposure to investments in bank CP or other instruments. However, less than half are taking funding risk into account, and just 26% include their exposure to banks as customers in aggregating their risk.
  • With counterparty credit becoming a broader theme in this market environment, treasuries may have to reconsider how to better aggregate risk across exposures.
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A Mutiny Fizzles, the Challenges Endure for Corporates in Russia

Companies face pressure to reduce bank balances at Raiffeisen Bank, higher bank processing fees and new sanctions.

The dramatic showdown that unfolded in Russia over the weekend threatened to further complicate the challenges facing multinationals still operating in the war-torn region amid sanctions and countersanctions. Some are members of the NeuGroup for Russia-Ukraine Crisis working group, including companies that transport food commodities and medical supplies. One member trying to get ahead of the potential fallout from the apparent mutiny requested a session which took place Monday.

Companies face pressure to reduce bank balances at Raiffeisen Bank, higher bank processing fees and new sanctions.

The dramatic showdown that unfolded in Russia over the weekend threatened to further complicate the challenges facing multinationals still operating in the war-torn region amid sanctions and countersanctions. Some are members of the NeuGroup for Russia-Ukraine Crisis working group, including companies that transport food commodities and medical supplies. One member trying to get ahead of the potential fallout from the apparent mutiny requested a session which took place Monday.

  • Members who participated in the discussion have not yet noticed any change in business conditions because of the recent events. But they addressed several new and ongoing concerns.
  • For example, one food company believes new plantings and grain in warehouses have declined and expects the “grain corridor” to be shut soon. The member said the outlook calls for a worsening of the global food situation in Russia and Ukraine, both important suppliers. Also, there are rumors of a new tariff on fertilizers which could exacerbate the problem.
  • What follows are takeaways from the session distilled by Paul Dalle Molle, NeuGroup senior executive advisor, who leads the working group and moderated the group’s 26th gathering.

Lower bank balances. With the withdrawal of most Western banks, and in particular Citibank, multinationals have been relying on two remaining institutions, Raiffeisen Bank and Unicredit. For some time, Raiffeisen has required clients to lower month-end cash balances; now the bank is asking for daily balances to be kept very low.

  • Members have been complying by moving funds held at Raiffeisen to other bank accounts at small, unsanctioned Russian banks or international banks headquartered outside the EU and US and still active in Russia.
  • This process is familiar to members who faced the same requirements from Citi as it wound down operations in Russia.

Brokerage accounts? To keep balances low, banks have suggested companies open brokerage accounts so excess cash they hold at the bank can be swept nightly from the operating account on the bank’s balance sheet to the brokerage account managed by the bank.

  • This is a well-known and typical procedure throughout the world, only now being applied to Russia because banks are under so much pressure to reduce their Russian reserves.
  • However, even if members are OK in principle with this procedure, none present have opened the accounts because the required documentation was daunting—they decided the benefits were not worth the time and expense.

Declined payments. Members reported recent changes in how Raiffeisen is processing payments, declining those less than EUR 50,000, and rejecting some larger payments for unclear reasons. So far, it appears Unicredit is processing all payments normally.

Few exit ramps. Members report that, as usual, the only money exiting Russia is for intercompany trade invoice settlements verified through the normal bureaucratic process; there are no dividends nor capital repatriations.

  • There are rumors that Russia will impose a 10% or even a 50% tax on these types of payments, but so far members say all payments are coming through correctly. Processing fees from banks, however, have increased.
  • Members are still unable to repatriate funds from Ukraine.

Sanctions. Some recent new Western sanctions have forced companies to update their list of approved counterparties again and to interrupt or change previous sales already in process.

  • One member reports that new sanctions on raw material imports by their Russian affiliate will delay or diminish their production of goods that are otherwise compliant with sanctions.
  • Another noted that Russia has passed a new law allowing it to seize Western assets. Earlier this month, the Financial Times reported the Kremlin secretly ordered legislation to enable Western assets to be appropriated at reduced prices and is discussing even more draconian measures to fully nationalize companies, citing people familiar with the deliberations.

Russian share shortfall. Mr. Dalle Molle cited a report by Reuters this week that Deutsche Bank had uncovered a shortfall in the Russian shares that back depositary receipts the bank had issued before the Ukraine invasion.

  • The report says Deutsche Bank attributed the shortfall to a decision by Moscow to allow investors to convert some of the DRs into local stock.
  • This may not affect corporates operating in Russia directly but underscores global investors’ challenges in recovering trapped investments in the country’s companies.
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Accept Crypto as Currency? What Airbnb Asked Before Answering

Airbnb treasurer Brian Moore explains, in a video clip, the travel company’s cost-benefit analysis of cryptocurrency.

In January 2022, Airbnb CEO Brian Chesky received 4,000 responses from Twitter followers after asking for suggestions on what the travel company could launch that year. No. 1 on the list: crypto payments. Flash forward a year and a half, and Airbnb does not accept cryptocurrency from customers or use crypto to pay hosts. At least not yet.

  • In a video clip from a forthcoming Strategic Finance Lab podcast interview, Airbnb treasurer Brian Moore explains how the treasury team evaluated the idea by looking at both the need and, therefore, the potential benefit of accepting crypto as well as the requirements for managing it and the risks it would pose. Hit the play button below to hear the factors Airbnb weighed before deciding—for now—not to take the plunge.

Airbnb treasurer Brian Moore explains, in a video clip, the travel company’s cost-benefit analysis of cryptocurrency.

In January 2022, Airbnb CEO Brian Chesky received 4,000 responses from Twitter followers after asking for suggestions on what the travel company could launch that year. No. 1 on the list: crypto payments. Flash forward a year and a half, and Airbnb does not accept cryptocurrency from customers or use crypto to pay hosts. At least not yet.

  • In a video clip from a forthcoming Strategic Finance Lab podcast interview, Airbnb treasurer Brian Moore explains how the treasury team evaluated the idea by looking at both the need and, therefore, the potential benefit of accepting crypto as well as the requirements for managing it and the risks it would pose. Hit the play button below to hear the factors Airbnb weighed before deciding—for now—not to take the plunge.
  • Airbnb found that the unmet need for crypto was very small. Also, “We have looked at the all-in costs to accept, hold and pay in crypto and those costs still run high relative to the other currencies we manage,” Mr. Moore said in a follow-up conversation. “The volume of derivatives appears to be relatively small compared to volumes in the spot market, so availability to hedge and the cost to do so could be an issue,” he added.
  • But stay tuned. The crypto landscape is changing fast and world-class companies that directly face consumers know that they can’t afford to rule anything out. “We look at all aspects of payments for customer improvement—currencies, payment alternatives for both hosts and guests,” Mr. Moore said. “We will continue to monitor the developments of digital assets and their use for transactional commerce (not just trading) to determine what steps we will follow.”
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Best of NeuGroup Insights, First Half of 2023

Technology, the banking crisis and uncertainty about interest rates created challenges and opportunities for treasury, FP&A and other finance teams, reflected in these top-10 posts, which include a podcast and a video.

Telling topics. The 10 most popular posts from NeuGroup Insights from the first half of 2023 provide a clear window into how finance teams throughout the Office of the CFO—such as treasury and FP&A—have stepped up this year and managed new, complex risks posed by the banking crisis and the debt ceiling drama, among other challenges.

Technology, the banking crisis and uncertainty about interest rates created challenges and opportunities for treasury, FP&A and other finance teams, reflected in these top-10 posts, which include a podcast and a video.

Telling topics. The 10 most popular posts from NeuGroup Insights from the first half of 2023 provide a clear window into how finance teams throughout the Office of the CFO—such as treasury and FP&A—have stepped up this year and managed new, complex risks posed by the banking crisis and the debt ceiling drama, among other challenges. 

  • To read the full email, please click here.
  • The articles, a video and a Strategic Finance Lab podcast also show how NeuGroup members across our network of peer and working groups are embracing technology and transformation. For some, that means figuring out how artificial intelligence tools like ChatGPT (listen to the podcast) may further disrupt finance as it provides opportunities to elevate the function and make it a more powerful strategic partner within organizations.
  • In addition, these most-viewed offerings from the past six months showcase NeuGroup’s commitment to extend the power of our process beyond treasury, to teams including FP&A—featured in the first featured story, by Nilly Essaides, NeuGroup’s director of research and insight, who launched NeuGroup for Heads of FP&A.
  • You’ll also find a story that speaks to NeuGroup’s global perspective by founder and CEO Joseph Neu about the evolving, post-pandemic role within multinationals of Asian regional treasury centers, based on insights from a meeting of NeuGroup for Asia Treasury in Singapore.

Sign up for the email here, and subscribe to the Strategic Finance Lab podcast on Apple or Spotify.

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High Rates Boost Allure of Upgrades to Investment Grade Ratings

Companies on the cusp of IG may want to push for an upgrade and sacrifice some flexibility amid higher interest rates.

The surge in interest rates to 15-year highs has treasury teams at companies with credit ratings on the brink of investment grade (IG) grappling with an important decision: Should they push to achieve IG status or maintain the financing flexibility of being just below IG—an easier choice when Fed Funds rates were near 0% vs. 5% today.

  • One treasurer attending a recent meeting of NeuGroup for Life Science Treasurers said she is planning to lobby the ratings agencies to upgrade the company to IG for the first time, in large part to help lower financing costs when the acquisitive corporate next needs to tap the debt markets.

Companies on the cusp of IG may want to push for an upgrade and sacrifice some flexibility amid higher interest rates.

The surge in interest rates to 15-year highs has treasury teams at companies with credit ratings on the brink of investment grade (IG) grappling with an important decision: Should they push to achieve IG status or maintain the financing flexibility of being just below IG—an easier choice when Fed Funds rates were near 0% vs. 5% today.

  • One treasurer attending a recent meeting of NeuGroup for Life Science Treasurers said she is planning to lobby the ratings agencies to upgrade the company to IG for the first time, in large part to help lower financing costs when the acquisitive corporate next needs to tap the debt markets.
  • “We don’t have any maturities for a while, but the cost of debt is different and access to the debt market for high yield is changing too,” she said.
  • Jacques Ouazana, head of US ratings advisory at meeting sponsor Societe Generale, said current circumstances make arguing for an upgrade a sound strategy. “With high-yield becoming more expensive, there’s more of an incentive to get higher [credit ratings]. The environment is different now.”

The quest for investment grade. The treasurer, who is new to the role, shared that her company has straddled the line between IG and high yield for over a decade and had worked with Moody’s and S&P to remain below the threshold. This helped the company maintain flexibility to finance acquisitions without worrying about a credit downgrade—a real concern for corporates rated IG.

  • The treasurer will have to make an argument for an upgrade not only with the rating agencies but with the company’s audit committee, which has historically been in favor of staying high yield.
  • Another member told her, “In a period of high volatility, there is a good case for wanting to be IG, especially if you will need capital in the next couple of years. It adds another tool to the toolkit.”
  • Mr. Ouazana said different rate cycles call for new approaches. “Shifting the narrative toward more conservative financial goals can be exactly fine,” he noted. “You can point to those tangible differences and adapt.”

Mind the gap. Societe Generale director of debt capital markets Rob Grammer, who also attended the session, shared analysis of the relationship between ratings and cost of funds in a follow-up exchange with NeuGroup Insights (see chart below).

  • Mr. Grammer explained that when there is an inverted yield curve in the US as there is now, there is a greater difference in yield than spread between bonds issued by upper-end high-yield corporates versus low-end IG, due to the duration mismatch of the indices.
  • The IG benefit becomes more pronounced when yields are high and the yield differential is high, as they are currently. “When the BB index was trading at 3-4%, it didn’t really matter if the differential between BBB and BB was 200 basis points. The situation now is that yields are elevated and the differential has increased,” he said. “We also expect HY to underperform IG over the next year, so that gap should continue to grow.”

Proceed with caution, consider options. Though yields may favor IG corporates in the near future, the flexibility provided by a high-yield rating remains a significant consideration—especially for companies in the life sciences industry, which often engage in M&A deals financed with debt, raising the risk of a downgrade.

  • Some leveraged finance bankers at another recent NeuGroup meeting provided a counterpoint to the argument for credit upgrades, suggesting that companies can still explore innovative debt financing options to make deals with IG rates while remaining in the high-yield space.
  • As noted by NeuGroup founder Joseph Neu after that meeting, “There has been so much debt market innovation with private credit sources and private issuance options options, growth companies can postpone their public straight debt IPO and IG rating journey. Those who wish to retain flexibility by being unrated or rely on convertible or leveraged finance markets can therefore do so and not seek an IG out of the gate.”

The waiting game. Another member shared a strategy he executed in a previous role, holding off on negotiating an upgrade with the ratings agencies until the company could move up multiple steps up to be mid-tier investment grade, as he feared the repercussions of a downgrade back to a high-yield rating.

  • “If you issue bonds at IG and then fall to high yield, they’re going to trigger an automatic sell, bond investors are going to be really unhappy with you and future capital market raises will be more visible even if you move back to IG,” he said.
  • “After downgrades, I’ve seen some clients struggle to return to investment grade,” Mr. Ouazana said. “It’s mostly been about stability and staying where you want to be. But now we are in an environment where interest costs and free cash flow have tightened. The last 10 years have been about taking on more risk and potentially sacrificing ratings, but I think it is the beginning of a new era.”
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Finding a Post-M&A Legacy Bank Account Benefit in SVB’s Failure

A multi-beneficiary account opened amid SVB’s demise may help ease future M&A legacy bank account pain.

Silicon Valley Bank’s failure in March set off a mad scramble at corporates with funds at the bank, including one NeuGroup member company that found itself exposed to risk from legacy SVB accounts inherited through M&A deals. A solution the company adopted, suggested by one of its main banks, may offer some relief to the pain caused by legacy accounts that many treasury teams endure during M&A integrations.

  • The company hopes the concept of a single, multi-beneficiary account it opened to accept payments for entities with SVB accounts will work for future acquisitions, shortening the time legacy bank accounts must remain open to accept payments and eliminating the need for multiple new accounts to replace the old ones.

A multi-beneficiary account opened amid SVB’s demise may help ease future M&A legacy bank account pain.

Silicon Valley Bank’s failure in March set off a mad scramble at corporates with funds at the bank, including one NeuGroup member company that found itself exposed to risk from legacy SVB accounts inherited through M&A deals. A solution the company adopted, suggested by one of its main banks, may offer some relief to the pain caused by legacy accounts that many treasury teams endure during M&A integrations.

  • The company hopes the concept of a single, multi-beneficiary account it opened to accept payments for entities with SVB accounts will work for future acquisitions, shortening the time legacy bank accounts must remain open to accept payments and eliminating the need for multiple new accounts to replace the old ones.

Accept on behalf of. The risk faced by this member of NeuGroup for Tech Treasurers arose from acquired companies using SVB accounts to accept payments from their customers. The initial fear—before the Biden administration said it would make all depositors whole—was that payments made to those acquired accounts might never be accessed by the parent company.

  • The refreshingly simple solution the member’s bank proposed was to quickly open a multi-beneficiary account for the parent company that, through an addendum, named the specific, acquired entities receiving payments as beneficiaries.
  • That allows funds that would have gone to the SVB accounts to instead go directly to the parent’s account at its main bank. And because the parent company already has accounts with the bank, the KYC process took less time than opening a new account in the name of an acquired entity.
  • Customers of acquired companies were told to make payments to the new account, which could accept payments for entities named in their contracts. And even if some customers persisted in making payments to the original entity, the multi-beneficiary account allowed the bank to accept the funds and place them in the parent’s new account.
  • “Pay on behalf of structures have existed for a long time,” the treasurer said. “This is the same idea, just accept on behalf of.”

Broader M&A applications. The SVB crisis’ silver lining for this corporate is the opportunity to apply the multi-beneficiary solution broadly as it does more M&A deals. “If we have an acquisition and want to move quickly, then we can use this going forward,” explained the treasury team member who worked with the bank to open the new account.

  • He sees the potential for significant time savings in closing legacy accounts that formerly needed to remain open to accept payments because acquired entities are named in contracts that take time to change.
  • “A lot of times, we want to close the other accounts but treasury has no control because the contracts are out there for one or two years unless sales and legal move quickly to change them,” he noted.
  • In the future, all legacy accounts will be channeled into the multi-beneficiary account, simply by adding the acquired entities to the list of beneficiaries via an addendum.

Overcoming the tax obstacle. In the past, this company opened new accounts for each entity of an acquired company before the legacy account was closed, a process that could take years, potentially resulting in an inefficient proliferation of bank accounts.

  • For many corporates, a hurdle to using a multi-beneficiary account has been resistance from the tax department. But given the SVB situation, treasury at this company was able to move forward quickly. “Tax was pushed off because of the urgency,” the treasurer said. “We basically told tax to figure it out. We needed to get a handle on the financial crisis.”
  • In addition to working closely with tax and legal teams, the member who opened the multi-beneficiary account recommends peers reach out and talk to their banks and find out if they offer the solution. His company’s good relationship with its large banks facilitated the process of opening the account and starting to use it, he said.

Will virtual accounts also solve the problem? Another member of the tech treasury group is considering using virtual accounts to confront the legacy account conundrum. NeuGroup Insights will explore that idea in a future post. But here’s the basic idea, according to the member:

  • “The concept is to move banking from the target’s bank (SVB, for example) to a virtual account with our banking partner before integration,” he said. “The focus is on virtual accounts because of their flexibility to manage during and post-integration. This is not a formula for all acquisitions, but there are advantages” for smaller, acquired companies, which tend to bank with regional and small financial institutions.
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Talking Shop: How Many Pages Is Your Internal Audit Charter?

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


Context: International standards followed by The Institute of Internal Auditors (IIA) require that companies review their internal audit (IA) charters annually. An IA charter provides organizations with a “blueprint for how IA will operate” and helps audit committees (ACs) “clearly signal the value” they place on IA’s independence, according to the IIA. The professional association says an IA charter should at a minimum define:

    • IA’s purpose within the organization.
    • IA’s authority.
    • IA’s responsibility.
    • IA’s position within the organization.

    One thing the IIA does not specify, however: an ideal number of pages for an IA charter. So one member of NeuGroup for Internal Audit Executives reached out to his peers to benchmark:

    Member question: “How many pages is your IA charter? Our old one was eight pages, and my team submitted a draft for 16 pages, pulling from the IIA standards. This seems like overkill and we reduced it to six pages—now under review—but I wanted to compare with others.”

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


    Context: International standards followed by The Institute of Internal Auditors (IIA) require that companies review their internal audit (IA) charters annually. An IA charter provides organizations with a “blueprint for how IA will operate” and helps audit committees (ACs) “clearly signal the value” they place on IA’s independence, according to the IIA. The professional association says an IA charter should at a minimum define.

    • IA’s purpose within the organization.
    • IA’s authority.
    • IA’s responsibility.
    • IA’s position within the organization.

    One thing the IIA does not specify, however: an ideal number of pages for an IA charter. So one member of NeuGroup for Internal Audit Executives reached out to his peers to benchmark:

    Member question: “How many pages is your IA charter? Our old one was eight pages, and my team submitted a draft for 16 pages, pulling from the IIA standards. This seems like overkill and we reduced it to six pages—now under review—but I wanted to compare with others.”

    NeuGroup Insights
     asked the member why the length of an IA matters. “Since the IA Charter is the basis for managing the relationship of IA with the Standards and with the audit committee, it needs to be crisp and to the point,” he wrote.

    • “It is like a policy of sorts; the larger the policy the more one has to comply with. But largely, I would not want to give my AC chairman or CFO a 16-page document to read word for word, when the point can normally be made in four or so pages.”

    Peer answers on IA charter length, ten respondents:

    • Seven pages: 20%
    • Four pages: 30%
    • Three pages: 40%
    • Two pages: 10%

    Elaboration from members who answered seven pages:

    • “We also have an appendix with the charter matrix that includes our charter deliverables and time frames for each deliverable.”
    • “The last page is mostly the signatures. We modeled it after the IIA’s standard and had just completed the [external quality assessment or EQA], and got some advice and feedback from that review as well.”

    EQA context: The IIA says an IA charter should require the chief audit executive to periodically report the results of its quality assurance and improvement program to senior management and the AC, and to obtain an external quality assessment (EQA) of the activity at least once every five years.

    • The member who asked the charter questioned explained: “The primary reason to have this EQA is so that, in the AC charter and the audit reports, you can reference that you are in compliance with the IIA standards and conduct audits accordingly, professionally. It adds credibility to the quality of the work.”
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    SVB, Stress Tests and Stigma: Bank Treasurers on Lessons Learned

    Liquidity, collateral, the Fed’s discount window and regulators spark talk following the collapse of Silicon Valley Bank.

    The banking crisis of confidence sparked by the collapse of Silicon Valley Bank (SVB) in March has pushed many members of NeuGroup for Regional Bank Treasurers to revisit, review and—in some cases—rethink aspects of liquidity stress testing and contingency funding plans. Among the most discussed topics: where collateral is pledged, communication with regulators and the stigma of using Federal Reserve borrowing programs like the discount window.

    Liquidity, collateral, the Fed’s discount window and regulators spark talk following the collapse of Silicon Valley Bank.

    The banking crisis of confidence sparked by the collapse of Silicon Valley Bank (SVB) in March has pushed many members of NeuGroup for Regional Bank Treasurers to revisit, review and—in some cases—rethink aspects of liquidity stress testing and contingency funding plans. Among the most discussed topics: where collateral is pledged, communication with regulators and the stigma of using Federal Reserve borrowing programs like the discount window.

    • Bank treasurers shared lessons they have learned and other post-crisis insights at their spring peer group meeting sponsored by Morgan Stanley in May. Bank treasury team members discussed liquidity stress analytics at a session later in the month. Following are some key takeaways from the discussions.

    Liquidity and concentration risk. For one member, SVB’s implosion underscores the need to pay special attention to concentration risk and set deposit size limits when performing liquidity stress testing on large depositors. That’s because a sudden decision by big depositors to withdraw funds could have an outsized impact on the bank—as happened at SVB. In response, this bank treasurer used SVB as a tool to amp up his stress testing.

    • “If you haven’t done it, it’s worthwhile for your liquidity stress test to stick in the balance sheet of one of the banks that failed,” he advised. “We said if we had SVB’s deposit base, what would our liquidity framework have required us to hold in liquid assets?”
    • His bank designs its liquidity stress testing around the requirements of Federal Reserve Board Regulation YY, which the member said puts significant focus on an institution’s concentration of funding sources.

    Contingency funding plans: know what to do. Bank treasurers and their teams need to have absorbed and repeatedly practiced the steps laid out in contingency funding plans and playbooks long before a crisis emerges. Planning and practice can’t take place once trouble arrives. For some members, the goal is to make the execution steps so ingrained that they don’t need to consult the plan.

    • “If you have to look at your contingency funding plan in a moment of crisis, you probably aren’t prepared to execute it,” one bank treasurer said.
    • In the wake of the stress caused by SVB, this treasurer looked at his bank’s contingency plan and realized “we pretty much did everything; and part of that is because we’re always testing, we do regular exercises, we’ve kind of developed muscle memory around our contingency funding plan. We know what to do.”
    • That included immediately positioning the bank to make use of the Bank Term Funding Program the Fed established in response to the crisis by pledging securities, although it didn’t access the BTFP for funds. The BTFP values collateral assets like Treasuries at the full price paid, not the current market value.
    • For another treasury team, using so-called tabletop exercises to simulate emergency scenarios as well as reacting to an actual event where contingency funding wasn’t ultimately needed also proved useful post-SVB.
      • In that chaotic period, contingency funding and daily meetings for reporting became necessary. “The value was convening all of the working groups, pulling those teams together and having them at the ready,” a member on this team said.

    Closing times and collateral choreography. NeuGroup member banks came away from the SVB experience with a deeper understanding of the importance of being able to tap liquidity from a variety sources at different times of the day—and the ability to move collateral to get that liquidity quickly.

    • “Know where the collateral is and know the cutoff times,” one treasurer advised, referring to when various funding facilities close up. Another member said, “It became clear to us that we don’t spend enough time thinking about intraday liquidity and temporal mismatches.”
    • Timing is part of the challenge and knowing where to go if the bank suddenly needs liquidity. “You start worrying about when desks are going to close,” one member said, echoing a common theme, particularly about when Federal Home Loan Bank windows close.
    • One treasurer said his team has “regular communication with our [Federal Home Loan Bank] and they’ve educated us on what we can expect to get at certain times of the day; we can’t call them up and borrow our whole line, and we don’t expect to be able to.”

    Go to the Fed window? The SVB crisis changed one treasurer’s view of turning to the Fed’s discount window if necessary. Since March, his bank has dramatically increased the number of loans pledged at the Fed after learning “they are much more willing to work with you on electronic collateral” than he was aware.

    • “At the end of the day, you hope to never have to go to the Fed, but if you have something late in the day, it’s really the only option,” the treasurer said. And “if you don’t have some collateral and you have something that happens late, you’re kind of out of luck.”
    • This member said there should be no stigma attached to going to the discount window late in the day if the bank pledges to repay the Fed as soon as its Home Loan Bank opens in the morning.
    • Other members said the stigma will stick unless the Fed takes concrete action to destigmatize use of the window. If you use it, one member said, “regulators will be on you.”

    The value of repo. One member recommended his peers position themselves to use the repo markets to access liquidity in times of crisis. But adding this arrow to their liquidity stress quiver may require that bank treasurers help educate regional bank regulators, he said. “A lot of midsized banks don’t actively use repo, so regulators of these banks aren’t as familiar [with repo] as large bank regulators,” he said.

    • He noted that “when we put securities as [hold to maturity], the first consideration is establishing repo lines that use them as collateral to turn into sources of funding.” His bank has repo traders, part of an operational team with “lots of experience pledging securities.”
    • He also recommended that peers who have not already done so look into the General Collateral Funding (GCF) repo program run by the Fixed Income Clearing Corporation. It allows anonymous borrowing “as long as you have collateral,” the member said. “We did a test during this [crisis] period and we borrowed against all the collateral we have there, which is probably 10% of assets, in like 15 minutes.”
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    FedNow’s July Debut: New Focus On Instant Payment Use Cases

    What corporates are saying about the Fed’s instant payment system and what it may mean for them.

    Blockchain proponents may be promising a bright future of limitless payments made in seconds, but traditional payments infrastructures are providing real-time alternatives today. Next month, the US Federal Reserve will launch FedNow, a payments system that enables USD payments of up to $500,000.

    • The service will join the RTP network, a real-time payment platform owned by The Clearing House and launched in 2017, as an instant payments option. At its inception, RTP had a limit of $25,000 per payment, which has gradually increased to $1 million now.

    What corporates are saying about the Fed’s instant payment system and what it may mean for them.

    Blockchain proponents may be promising a bright future of limitless payments made in seconds, but traditional payments infrastructures are providing real-time alternatives today. Next month, the US Federal Reserve will launch FedNow, a payments system that enables USD payments of up to $500,000.

    • The service will join the RTP network, a real-time payment platform owned by The Clearing House and launched in 2017, as an instant payments option. At its inception, RTP had a limit of $25,000 per payment, which has gradually increased to $1 million now.
    • The two systems also offer a number of expanded capabilities compared to payments made via wire or ACH, including 24/7 access, immediate settlement and fund availability, a notification of confirmation once a payment goes through and no ability to revoke a payment after sending.
    • At a recent meeting of NeuGroup for Payments Strategy sponsored by Citi, FedNow SVP and head of payments products Dan Baum and The Clearing House SVP of product development and strategy James Colassano answered questions and discussed the systems’ use cases—which may be limited by low values relative to wire transfers.

    Early innings. NeuGroup’s Jerry Olivo, who heads the payments group, said instant payments are going to be big business, with 400 million payments at a total value of $430 billion already processed through RTP. “There are many use cases already identified, but this is by no means a mature market,” he said. “There will be many, many more changes to come, and it’s important to get ahead of the curve, because we’re still in early innings.”

    • RTP’s network covers 330 banks, including all in the bulge-bracket tier, reaching a total of 60% of demand deposit accounts in the US. FedNow is launching with 120 pilot banks and will expand over time.
    • In the session, Mr. Baum said FedNow’s research shows there is already market demand for more accessible instant payments, so the team’s primary focus was on launching with full credit capabilities—the ability to make a payment. “First, we have to create the reach, then we’ll be in the business of use cases and value creation.”

    Expanding use cases. RTP’s traffic in the business-to-business space jumped after the company raised the limit to $1 million. Mr. Colassano notes an uptick in vendor payments to suppliers made after wires close, as well as cash concentration payments from subsidiaries to a central corporate account. The fastest-growing use case, he said, is for employee payroll, especially payments to gig workers.

    • Another evolving use case, from a product perspective, employs the systems’ “request for payment” functionality, in which one user can send a payment request to another account. This could work for regular bill payments to a utility company, sparking the interest of one member who works at an app-based service provider.

    Corporates’ concerns. With current transaction value limits, some potential uses of instant payments aren’t quite ready for prime time. The first use case mentioned by a NeuGroup member at the session was for opportunistic M&A deals, which could be made quickly to capitalize on favorable conditions for an acquisition. One problem: $1 million isn’t enough to acquire a company, let alone $500,000.

    • Both RTP and FedNow representatives indicated that transaction value limits are likely to increase, but could not provide details on the timing or amount, saying they will evaluate system limits as use cases expand.
    • Another member shared that the irrevocability of real-time payments would be something of a challenge for his company, citing a strict central controllership as an obstacle to adopting the tools. “It puts a lot of pressure on setting up that payment, because once it’s gone, it’s gone,” he said.

    Looking ahead: beyond payments. In addition to raising volumes, another update corporates should anticipate is if—or when—the instant nature of settlement technology is applied in the securities space, Mr. Olivo said.

    • “It’s over a longer time horizon, but it will be massive,” he said. “Right now, if you go buy bonds or equities, you have to wait two days for settlement in most instances. If real-time securities and cash settlement is applied to that environment, settlement will eventually occur in two seconds rather than two days.”
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    Visualize, Itemize, Prioritize: Growing Through Cost Reduction

    FP&A at one company supports self-funded strategic investments by “relocating” expenses to growth projects.

    In this challenging economic environment, many companies are cutting costs. However, depending on how they are executed, budget-tightening efforts can backfire by sabotaging top-line growth. At one NeuGroup member company determined to avoid that, leadership adopted a unique mindset. Instead of making arbitrary or across-the-board cost cuts, it is reassigning or “relocating” expenses to free up funds for growth projects.

    • In 2021, the corporate set ambitious four-year financial targets for EBITDA, sales and EPS growth. “Our challenge was how to consistently invest in our long-term strategy and transformation agenda, while delivering on our financial commitments,” explained the company’s SVP of FP&A at a recent meeting of NeuGroup for Heads of FP&A.

    FP&A at one company supports self-funded strategic investments by “relocating” expenses to growth projects.

    In this challenging economic environment, many companies are cutting costs. However, depending on how they are executed, budget-tightening efforts can backfire by sabotaging top-line growth. At one NeuGroup member company determined to avoid that, leadership adopted a unique mindset. Instead of making arbitrary or across-the-board cost cuts, it is reassigning or “relocating” expenses to free up funds for growth projects.

    • In 2021, the corporate set ambitious four-year financial targets for EBITDA, sales and EPS growth. “Our challenge was how to consistently invest in our long-term strategy and transformation agenda, while delivering on our financial commitments,” explained the company’s SVP of FP&A at a recent meeting of NeuGroup for Heads of FP&A.
    • Meeting that challenge meant deciding whether current spending items should be kept or cut. “Instead of relying on last year’s budget as the baseline, we started with the assumption that all expenses must be reassessed,” she said.
      • “Our objective was to accelerate our growth by redirecting resources to the most significant long-range plan (LRP) priorities and areas where being best in class is critical to our success.”
    • Prior to launching this self-funding growth initiative, new or additional investments had been included in the budget for each area. “That did not provide us with a good way to look across the company to prioritize which investments have had the largest impact.”

    Getting the VIP treatment. In collaboration with the senior leadership team (SLT), FP&A constructed a three-pillar process of visualization, itemization and prioritization, or VIP.

    • The first pillar involves visualizing investment opportunities that are aligned with the company’s LRP and targeted at boosting economic profit and shareholder value.
    • “The goal was to produce an exhaustive list of investment options that can be prioritized once funding capabilities become clearer,” the member said.
    • This stage took 10 weeks and included weekly discussions to envision what’s possible for the company, and where it needs to invest to become best in class.
    • With the help of an analytics tool, the core team went through each member’s investment proposals and produced an exhaustive list of possible areas for strategic growth.
    • This was not an easy task, according to the member. “Every senior leader had his or her investment projects in mind.” However, it was made easier by a clear mandate from the CEO for the SLT to find alignment.

    Itemizing expenses. Concurrently, FP&A leaders for each function worked with their business partners to build a list of every P&L spend item over $10,000. While this sounds like a low threshold, “the savings can add up,” the member said. In addition, the increased visibility revealed legacy expenses “that just kept recuring year after year, which managers did not even know about.”

    • The eight-week itemization stage involved creating a granular categorization of all expenses for each functional leader. Then, each function delivered a hard copy of every expense line item in its P&L. “We created a 150-page consolidated binder for all of the functional areas.”
    • The purpose was to identify expenses that can be relocated to fund growth projects. The core team and SLT went through the compiled data in a three-day meeting and decided which expenses should be kept, cut or reassigned.

    Tangible results. The exercise paid off: In both 2021 and 2022, VIP yielded over $100 million in savings. “It was lots of small stuff that added up,” explained the member.

    • Examples include not using external recruiters in HR. “We are also closing out facilities and transitioning into small hubs to support a fully virtual workforce.”
    • While the annual planning process occurred in parallel with this special project, “we were able to leverage the prioritization in preparing next year’s budget.”
    • In 2022, the process went more smoothly. “The first time, we had to deal with a lot of messy data. Much of the cleanup work carried over to support better analysis in 2022,” she said.
    • Preparing for a possible third round in the future, she expects data quality to be even higher.

    Success factors. Having gone through this process twice, FP&A has learned several important lessons to apply going forward.

    1. Start with growth. “We worked back from defining the growth areas’ investment requirements to how to fund those requirements.”
    2. Immediately reinvest. VIP incorporates some elements of zero-based budgeting, or ZBB. In particular, the “starting-from-zero” aspect. To avoid the pitfall of generating savings and not reinvesting them in top-line growth, “we relocated the savings right away to growth projects and the functions started to spend them. By putting this discipline around investments, we ensured that the funding would be prioritized even if other budget tightening occurred.”
    3. Convene a tight group. The decision-making process was handled by a very small group: the SLT and five FP&A staff. Leaders had to be able to present their own expense items and answer questions. “With a larger group, it would be harder for leaders to keep the enterprise mindset, which was critical to the exercise,” said the member.
    4. Be very specific. During round one, leaders were allowed to be a little vague about where they could find savings. “We called those the ‘go-get areas.'” For example, an executive would tell the group that he or she could likely save X% from reducing supplies expense, but they would not materialize. The second time around, “we were much stricter on those. Savings had to be visible.”

    Next steps. Whether there’s a third round of VIP or not, “the expectation is that after a couple of rounds, the organization will have stronger policies and procedures to reduce unnecessary expenses before they are spent,” the member said. While progress has been made, there’s more to be done.

    • “The goal is for this to be an every-couple-years exercise as there are significant new investment opportunities to fund.”
    • While this is an intense and time-consuming project, the member said FP&A staff now ask to be part of the core team because participation provides them with a unique opportunity for visibility with the SLT. “Where else can a manager interact directly with top executives?” the SVP of FP&A said.
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    Wanted: Strategic CFOs Who Drive Revenue, See Risk Holistically

    The founder of CFO.University envisions finance teams that use analysis skills to drive sales while taking a wide view of risk.

    In the newest episode of NeuGroup’s Strategic Finance Lab podcast, Steve Rosvold, the founder and chief learning officer of CFO.University, shares a vision of the future for chief financial officers and the teams they manage, including FP&A. It’s a future where finance organizations use their expertise at analysis to mine insights from data and add more strategic value to corporates, in part by focusing on pricing, revenue growth and forecasting.

    • That, Mr. Rosvold says, requires CFOs and other finance leaders to move beyond mindsets built around costs, audits and historical facts and figures and embrace softer skills and storytelling that help finance teams influence other stakeholders.

    The founder of CFO.University envisions finance teams that use analysis skills to drive sales while taking a wide view of risk.

    In the newest episode of NeuGroup’s Strategic Finance Lab podcast, Steve Rosvold, the founder and chief learning officer of CFO.University, shares a vision of the future for chief financial officers and the teams they manage, including FP&A. It’s a future where finance organizations use their expertise at analysis to mine insights from data and add more strategic value to corporates, in part by focusing on pricing, revenue growth and forecasting.

    • That, Mr. Rosvold says, requires CFOs and other finance leaders to move beyond mindsets built around costs, audits and historical facts and figures and embrace softer skills and storytelling that help finance teams influence other stakeholders.
    • Listen to the podcast now on Apple and Spotify.
    Steve Rosvold, CFO.University

    In the interview with NeuGroup’s Nilly Essaides, Mr. Rosvold also discusses how skyrocketing interest rates and recent bank failures have underscored the need for finance leaders to take a more holistic view of risk management that goes way beyond banks.

    • He says finance teams must collaborate with other departments to evaluate every risk that could potentially impact the organization’s financial objectives and overall strategy.
    • CFO.University is an online professional development community that offers courses, content and tools designed to help chief financial officers hone their skills and succeed. Before launching it in 2017, Mr. Rosvold spent nearly two decades at Cargill and served as CFO of food brand ConAgra Malt.

    In addition to listening to the the Strategic Finance Lab podcast, you can watch a “CFO Talk” video produced by CFO.University of Mr. Rosvold interviewing Ms. Essaides on topics including transformational change management.

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    Plugging Into ChatGPT To Improve Qualitative Investment Analysis

    A portfolio manager at a forward-thinking tech company seeks an edge by tapping the power of generative AI.

    Turning the power of generative artificial intelligence (AI) into a competitive edge by using tools including ChatGPT is a top priority of one member of NeuGroup for Cash Investment. He has begun using the technology’s ability to analyze massive amounts of text using natural language processing, with the goal of improving qualitative investment analysis.

    • That sets his company apart: While many finance orgs are on the automation bandwagon and want to leverage the wonders of AI and machine learning, not many have committed to finding uses for generative AI right away.

    A portfolio manager at a forward-thinking tech company seeks an edge by tapping the power of generative AI.

    Turning the power of generative artificial intelligence (AI) into a competitive edge by using tools including ChatGPT is a top priority of one member of NeuGroup for Cash Investment. He has begun using the technology’s ability to analyze massive amounts of text using natural language processing, with the goal of improving qualitative investment analysis.

    • That sets his company apart: While many finance orgs are on the automation bandwagon and want to leverage the wonders of AI and machine learning, not many have committed to finding uses for generative AI right away.
    • Some finance professionals fear security breaches and other potential risks presented by the technology. Many financial institutions prohibit staff from using ChatGPT and some corporates are following suit.
    • The member embracing generative AI underscored the need for companies to implement strict controls, guardrails and governance processes.

    SEC filings and beyond. “On the qualitative analysis side, this is where I see the most potential for generative AI like ChatGPT,” the member said at the cash investment group’s first-half meeting sponsored by DWS. “You can run SEC filings through a large language model with key topics and themes—you can do that seamlessly.”

    • He also envisions using the technology to analyze corporate earnings call transcripts, the Fed’s Beige Book and a database of Fed speakers.
    • The company’s senior leadership is pushing the entire corporation, not just finance, to lean into generative AI. In addition to using tools made by third parties, the member said the company will develop some AI tools itself.
    • The member does not plan to use generative AI chatbots for quantitative analysis, forecasting or reporting. The reasons include concerns about accuracy and limitations on the technology’s ability to search HTML or PDFs.

    Alternatives. Treasury and finance teams without the stomach, budget, skills or leadership support to integrate generative AI into their internal tech systems have options if they want to analyze data like the member planning to mine insights from giant collections of documents. That’s the view of Matt Thomas, head of the cash investment group as well as NeuGroup’s digital assets working group.

    • Microsoft Office 365 subscriptions, Mr. Thomas noted, include access to Power Automate, which can parse documents for keywords. Microsoft is a major investor in OpenAI, the company behind ChatGPT.
    • A representative of DWS said the asset manager is blocking some AI tools including ChatGPT due to risk. He said he’s pushing for in-house development of software leveraging AI, which requires having developers embedded within finance teams.
    • Another member of the cash group said analyzing drivers for forecasting by using generative AI would be a key advantage, “giving you an actual basis for the forecast as opposed to gut feel.” He mentioned interest income forecasts and guidance on OIE (other income/expense).
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    Finding a Remedy for Bank Account Pain: Centers of Excellence

    The benefits of one member’s journey to a center of excellence as it manages rapid growth in revenue and bank accounts.

    Across roughly a decade, one NeuGroup member company tripled its revenue, partly through heavy M&A activity. But the core, global corporate treasury team remained at about 40 people—loading some of them with extra work, very little of it being the strategic initiatives today’s modern finance orgs want to focus on.

    • As acquisitions and bank accounts started to stack up, the treasury team needed help, and by pushing out manual and repetitive tasks to employees at a center of excellence (COE) in India, it has been able to adapt to the company’s fast-moving growth without expanding the size of the internal team.

    The benefits of one member’s journey to a center of excellence as it manages rapid growth in revenue and bank accounts.

    Across roughly a decade, one NeuGroup member company tripled its revenue, partly through heavy M&A activity. But the core, global corporate treasury team remained at about 40 people—loading some of them with extra work, very little of it being the strategic initiatives today’s modern finance orgs want to focus on.

    • As acquisitions and bank accounts started to stack up, the treasury team needed help, and by pushing out manual and repetitive tasks to employees at a center of excellence (COE) in India, it has been able to adapt to the company’s fast-moving growth without expanding the size of the internal team.
    • An associate director of treasury and an assistant treasurer presented on the company’s COE journey at recent meetings of NeuGroup for Global Cash and Banking, sponsored by ION, and NeuGroup for European Treasury, sponsored by TIS, highlighting the project’s objectives, obstacles and outcomes.
    • “We need more insightful people on the treasury team. Not more staff to do the bread and butter, but more people with insight,” said the assistant treasurer. “We can’t add value if senior managers are looking at SAP every day and doing password resets.”

    The problem. The company had been on what the associate director called a buying spree, acquiring a company a week at some points. “Guess what? That is a giant headache,” he said.

    • As the acquired companies added more bank accounts to manage and track, the existing business also continued to grow. What had been a consistent 300 or so “local” bank accounts rose close to 1,000 because of all the M&A accounts treasury swept up. These are accounts that by nature are not on systems or part of standard processes, posing the greatest risk to the company.
    • “The leadership realized that the size of the balances and number of accounts was big enough to cause some concerns and needed greater oversight. With possibly hundreds of millions sitting in accounts and a lack of visibility, it was a big concern,” he said.

    First step: goals. The end-state desired by treasury was to continue managing the activities of the company’s six main banking partners, with four key objectives for the bank activities managed by the COE in India:

    1. Implementing state-of-the-art technology to facilitate bank account management, payments, bank connectivity and balance reporting on M&A accounts.
    2. Ability for the COE to make urgent, manual payments to reduce dependency on online portals.
    3. 100% real-time visibility to acquired accounts globally.
    4. Managing bank signers by improving the process to track and review signers.

    Simplifying signers. One of the project’s most critical aspects was implementing a bank account management (BAM) system to address visibility and signer management issues.

    • Before the project, treasury had a master Excel sheet, updated monthly, to track signers for all accounts. Sometimes, an employee gone for weeks might still be reflected as a signer on the sheet.
    • The COE transitioned to using TIS to track global bank accounts and signers, centralizing and streamlining these processes. The tool has been linked to Workday, which manages employee information, enabling real-time updates on employee status and facilitating better planning for account closures and activity transitions.
    • Treasury and the COE also developed service level agreements to ensure defined timelines and accuracy. A collaborative approach to managing access rights and approvals across various banking platforms ensures efficient control and accountability.

    TIS to centralize payments. TIS is also going to help alleviate the reliance on online bank portals, consolidating payment functionality, allowing central connectivity, controls and reporting.

    • The COE also adopted ServiceNow, which has integrations into TIS, as a workflow tool for general requests and payment requests.

    Real-time visibility. Before this project, treasury was manually collecting month-end bank statements to view balances. The COE now collects daily statements, with daily reporting for accounts that consolidates the data in a central hub.

    • Through the improved visibility, the associate director said treasury gained better control over cash and could plan ahead for month-end and quarter-end activities, as well as reduce any potential fraud risks.

    Of course, like every big project, there were bumps along the way. They included technology delays, people turnover and budget considerations. It’s still a work in progress, but as the COE matures, treasury continues to see benefits to using teams in low-cost locations.

    • “If your expectations are clear, if you are hesitant but hopeful, in the end, it’s worth it. Otherwise, I don’t know how we’d be able to manage all of the accounts,” the associate director said.
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    Debt Limit Deadline Dialogue: Risk, Revolvers, Fiduciary Duty

    Finance teams discuss liquidity, parking cash, the big economic picture and treasury’s role as the clock ticks to June 1.

    Bank deposits, the safety of money market funds (MMFs), de-risking balance sheets, fiduciary duty and revolving credit facilities are among the topics dominating recent discussions among NeuGroup members about liquidity and the possibility of the US government defaulting on its obligations if a deal to raise the debt ceiling isn’t reached by June 1.

    Watching and waiting. The vast majority of treasurers are talking to fund managers and bankers, doing scenario planning and preparing to take action if necessary. Few have said they are making moves or shifting course. “We’re all watching each other’s behavior and it doesn’t seem to be changing all that much,” one treasurer said at a debt ceiling session for members of NeuGroup for Technology Treasurers.

    Finance teams discuss liquidity, parking cash, the big economic picture and treasury’s role as the clock ticks to June 1.

    Bank deposits, the safety of money market funds (MMFs), de-risking balance sheets, fiduciary duty and revolving credit facilities are among the topics dominating recent discussions among NeuGroup members about liquidity and the possibility of the US government defaulting on its obligations if a deal to raise the debt ceiling isn’t reached by June 1.

    Watching and waiting. The vast majority of treasurers are talking to fund managers and bankers, doing scenario planning and preparing to take action if necessary. Few have said they are making moves or shifting course. “We’re all watching each other’s behavior and it doesn’t seem to be changing all that much,” one treasurer said at a debt ceiling session for members of NeuGroup for Technology Treasurers.

    • “We are having some conversations with our banking partners to see what kind of deposits they can take if we want to move funds out of our government [MMFs] and into just deposits with the banks,” said another treasurer.
    • “I could have sworn we just had conversations where people were afraid to put their money in banks,” a third member said, referring to the stampede out of deposits into MMFs as the banking crisis of confidence unfolded. “And now you can’t put your money in money market funds!”
    • He said that half-jokingly: He and others are hearing from fund managers that government MMFs have limited or no exposure to treasury bills that could be adversely affected by a technical default. Managers are also telling members that that a significant portion of government MMF assets are invested in the repo market and agency debt.

    Deposit decisions. Finance teams at corporates considering keeping more cash in bank deposits may want to look beyond large, US GSIBs. One treasurer said some big US banks don’t want deposits, noting the relatively low interest rates they’re paying. One option: non-US banks. “We’ve parked money with BNP, Mizuho—they are all clamoring for dollar deposits in the US,” he said.

    • Another treasurer agreed. “We just put a six-month time deposit with Mizuho. Great rates. They want to fund their lending business. It makes a lot of sense.”
    • Others are going the other direction. The collapse of SVB left a “bad taste” for one member, whose company is cutting down on deposits and favoring government MMFs and commercial paper (CP).

    Advice on revolvers. At the end of a discussion on the liquidity of the CP market in times of crisis, one treasurer broached a topic few members have said they are discussing internally as the debt drama plays out: tapping revolving credit facilities. This member’s unequivocal advice to peers: use your revolver when necessary.

    • “Draw on your revolver,” he advised. “Don’t think whether or not you should do it. You draw it. People get caught by always trying to avoid that. Don’t worry about the cost. If there’s a day where A1/P1 [CP] can’t get done, I’d draw on the revolver and sit on that cash and wait for it to clear. When you see trouble brewing, don’t wait.”
    • In a follow-up interview, he recalled the onset of the pandemic, when some companies drew on revolvers. Some of those that didn’t draw wanted other short-term bank funding. “Too many companies waited to see what would happen with developments on Covid and the impact on their businesses before doing something.
      • “The banks were prioritizing their client lists to determine in what order those companies may receive funding because they couldn’t fund everyone’s requests at the same time. I do not want to be fighting other companies for liquidity. Take the risk off the table early,” he said.

    The bigger picture. One treasurer who has already “de-risked the cash investment side” of the balance sheet is now using a “wider aperture” to examine what will happen to the broader market in the event of a liquidity squeeze. Her team is doing scenario modeling and conducting stress tests, forecasting what would happen to interest rates and currencies, for example. “We are more concerned about wider market reactions,” she said.

    • Cash is also not the main concern of another treasurer. But he’s somewhat worried about what will happen if the federal government—a major customer of his company—can’t pay bills on time. Other treasurers have raised the same concern.
    • His company has enough liquidity to withstand a short-term interruption. But “that would be extremely detrimental to so many metrics that we think about, with regard to DSOs and collections. That’s the bigger risk with the government being such a large client of ours.”

    Treasury and fiduciary duty. Members at the tech session rejected the idea of using any major market dislocation as an opportunity to pick up extra yield. At least one member of a different group has expressed interest in buying one-month treasury bills in the event of a technical default by the US government.

    • “From a fiduciary responsibility, even though you can pick up yield, if you go after some specific T-bills, I don’t think we’re paid to do that,” one treasurer said. “I don’t think that’s the right call.”
    • Echoing that sentiment, another treasurer said, “Our job is not to chase yield and chase the bids. We leave that to Goldman and JPMorgan and their cash trading desks. Our job is to de-risk our actual balance sheet, so that’s what we’re trying to do.”
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    Preparing for the Worst in the Debt Ceiling Showdown

    As June 1 draws close, treasury teams need to consider how a default might affect liquidity and what to do now.

    Treasury Secretary Janet Yellen repeated on Monday that if the debt limit isn’t increased or paused, the US will probably be unable to pay all its bills as early as June 1. And while the worst case scenario of a default seems unlikely, few observers see a quick fix to the problem, despite Tuesday’s meeting between President Biden and House Speaker Kevin McCarthy.

    What, then, should treasury and finance teams be doing to prepare for the extreme volatility and market dislocation that would almost certainly be sparked by a default following a failure to raise the debt ceiling?

    • Although answers to that question can be debated, it is incumbent upon treasury leaders—some still coping with liquidity concerns raised by the banking crisis—to consider, discuss and address the issue now if they haven’t already. That means digging into the potential implications for corporate funding sources such as commercial paper (CP), as well as cash investments like money market funds (MMFs).

    As June 1 draws close, treasury teams need to consider how a default might affect liquidity and what to do now.

    Treasury Secretary Janet Yellen repeated on Monday that if the debt limit isn’t increased or paused, the US will probably be unable to pay all its bills as early as June 1. And while the worst case scenario of a default seems unlikely, few observers see a quick fix to the problem, despite Tuesday’s meeting between President Biden and House Speaker Kevin McCarthy.

    What, then, should treasury and finance teams be doing to prepare for the extreme volatility and market dislocation that would almost certainly be sparked by a default following a failure to raise the debt ceiling?

    • Although answers to that question can be debated, it is incumbent upon treasury leaders—some still coping with liquidity concerns raised by the banking crisis—to consider, discuss and address the issue now if they haven’t already. That means digging into the potential implications for corporate funding sources such as commercial paper (CP), as well as cash investments like money market funds (MMFs).
    • One member at a recent meeting of NeuGroup for Tech Treasurers sponsored by Standard Chartered Bank has been preparing for volatility and default risks. “We are having conversations about how to diversify our liquidity,” the treasurer said. His team is also discussing holding higher cash balances as a liquidity hedge and keeping more cash in foreign currencies vs. converting it into USD.

    Diversifying with prime funds. The banking crisis has driven many corporates out of deposits into government MMFs, which may hold Treasury bills. The member discussing liquidity diversification is considering the resulting concentration of risk. “This may be the time to shift some cash into prime funds,” he said at the meeting, referring to funds that invest in corporate debt securities, including CP. “We are looking at the potential accounting implications.”

    • He elaborated in a follow-up email: “We are already overconcentrated in government MMFs. If there’s a run, the funds will look to the reverse repo market to fund redemptions. If that operationally seizes, I want to have alternatives, rather than assume that it can’t happen. That’s why I’m putting some short-term liquidity in prime funds and banks.”

    Prime counterpoint. A member of NeuGroup for Cash Investments agreed about diversification, but not about using prime funds: “Most of the government money market funds can access the Fed’s reverse repo [facility]; most of their liquidity is there. If there is a default, there will be volatility across all sectors, including a prime fund. The prime fund putting up gates and fees is more likely than a government MMF breaking the buck.”

    • He added, “We have a variety of funding sources—deposits, repo and MMFs—and that is the best way to prepare” for a possible default. Another member of the cash group said, “There is really no place to hide if the US defaults on its debt. I think any change to what has been the universally considered ‘risk-free asset’ will raise the risk of other assets equally or even more, except perhaps non-US sovereign debt.”
    • Asked to respond, the member putting some cash in prime funds said, “I’m not trying to protect the fair value of the assets so much as making sure I don’t need to be a fire sale seller if we need cash. I’m assuming during a distress period, my customers may not be able to pay me.
      • “I want to be able to pay our bills even if collections dry up. Yes, the risk of other assets will increase. I just want to be sure I can get to a few weeks of cash through multiple channels, in case one channel seizes up.”

    The CP calculus. At a session held Monday on the debt ceiling for members of NeuGroup for Mega-Cap Assistant Treasurers, one AT told peers his company is “positioning ourselves so we don’t need the CP market around the end of the month. We’ve been essentially raising additional cash in advance of that.”

    • His company doesn’t typically use overnight CP, preferring longer tenors. “So we’re just issuing a couple months out and making sure that in prefunding any maturities, we have very little between now and the end of June.” In response to a question, he and other members said only a prolonged disruption in the CP market would raise the possibility of drawing from revolving credit facilities.
    • The AT’s company will likely leave some cash that would otherwise go into MMFs with its main bank to cover the “max days’ outflows, to the extent we see weirdness impacting government money market fund liquidity—which we don’t expect,” he said. “We just think it’s prudent to forgo a little bit of interest to make sure we have money in the system.”
      • That said, the member observed that government MMFs are reducing risk by shortening duration and avoiding Treasury bills. “We have no more concerns about government money market funds than we do about the banking sector these days,” he said, noting his high degree of faith in his main bank, a GSIB.

    T-bill opportunity? The avoidance of Treasury bills by some investors may create opportunities for others. One member of the cash investment group raised the possibility of buying one-month T-bills, recently yielding more than 5.5%. “If you know your liquidity, honestly,  buying the one-month bill is a relatively interesting trade,” the member said. “If it hits a high enough yield for a few days of technical default that can be compelling,” he added.

    • Other members raised doubts about taking advantage of any market disruptions. “Given the high degree of risk, there are no real opportunities on the corporate side from my perspective,” one said.
    • Someone else said it’s a matter of deciding “whether you think there will actually be a payments delay in any of those T-bills.” Another question: will T-bills pay accrued interest if not redeemed on their maturity date? Most members doubt they will, as T-bills do not pay interest, but rather are purchased at a discount to par.
    • One AT said his company took advantage of similar market conditions during the debt ceiling crisis in 2011. He has a little less confidence in a resolution this time but added, “It will be interesting to watch and there may be some very attractive yields available.”
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    A Cybersecurity Policy That Adapts to the Time and the Place

    Dark web monitoring and burner phones are among the ways members are minimizing risk in the modern world.

    In a world increasingly plagued by ransomware, and now the threat of AI-driven mischief fueled by the rise of large language models like ChatGPT, it’s time for cybersecurity policies to adapt with the times, according to members of NeuGroup for Enterprise Risk Management.

    Dark web monitoring and burner phones are among the ways members are minimizing risk in the modern world.

    In a world increasingly plagued by ransomware, and now the threat of AI-driven mischief fueled by the rise of large language models like ChatGPT, it’s time for cybersecurity policies to adapt with the times, according to members of NeuGroup for Enterprise Risk Management.

    • At the group’s first-half meeting, one member shared their experience leading a company-wide initiative to create a comprehensive cyber risk policy. A guest in attendance who works at a management consulting firm that supports cybersecurity initiatives at multinationals and government agencies offered additional insight.
    • In addition to “derisking,” the guest said that he’s seen the company’s work on cybersecurity help clients save money on insurance. “If you have the right programs in place, you actually have a counterweight and can negotiate.”

    Clear guidance on existing tools. The first step is to take a look at every tool the company uses, the presenting member said. Multiple members in the session discussed the importance of addressing risks associated with cloud-based ERP systems, which are commonly used but can also be vulnerable to cyberattacks.

    • “It’s important to consider the details on the arrangement with your cloud service provider,” the member said. “You really have to have a lot of monitoring and protecting when you have those systems—we are pretty segregated in our systems.
      • “We have had breaches, but we have been able to keep them contained as a result.”
    • The guest at the consulting firm shared a story about a company he was familiar with but was not a client. He said the business had done everything right to set up a cybersecurity policy, but didn’t properly vet its cloud provider, which had a breach resulting in the disclosure of customer names.
    • “That’s why we have dark web monitoring, so we can notice any servers or domain names for sale by malicious actors,” he said. “So we can tell our clients, you’re fine, but your supply chain has a problem.”

    Auditing with a fine-tooth comb. But it’s not as simple as vetting every tool that the company itself employs. Apps can be easily accessed and downloaded by individuals, which creates exposure to a number of risks business leaders may not even know about.

    • One member said that the messaging app WeChat was being used by treasury employees to collaborate on projects, but the company hadn’t granted access to the app. “Our external auditors even wrote me a note that there was a typo—’WeChat.’ They didn’t know what it was!”
    • “Legal is often the last to know about these things, which is where the risk is,” the presenting member said. “The people that can protect you from a threat might not know it exists, they don’t know what to protect us from.”
    • The solution, she said, is to closely monitor all employees and the tools they use, especially ones connected to the internet.

    International footprint, international policies. For companies with a global footprint, it is also important to establish policies that account for differences in risk across regions, and employees who travel to high-risk parts of the world as geopolitical tensions rise.

    • One member has guidelines requiring that specific apps are turned off during flights to certain countries; other companies issue encrypted burner phones and laptops, which typically include less sensitive information on hard drives, for travel to riskier regions including China, Russia and Eastern Europe.
      • “We have several countries that we do specify burner requirements,” the presenting member said. “But we only have so many PCs and phones lying around that are ready.”
    • Having regional risk policies is also important for data breach reporting, which countries regulate differently. In the US, a proposed SEC rule would require public companies to inform shareholders within four days of determining a cybersecurity breach was a “material” incident.
      • “It’s very important to have a plan for a breach in place ahead of time,” said the guest. “We go in before there’s a problem, and we just want to know what the environment is. I’ve heard that some data breaches can take 25-30 days before they are back up.”
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