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Justin Jones In Banking, Cash & Working Capital

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.

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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Justin Jones In Cash & Working Capital, FP&A

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 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.

Start with growth. “We worked back from defining the growth areas’ investment requirements to how to fund those requirements.”
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.”
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.
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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Justin Jones In Risk Management, The NeuGroup Insights Interview

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.

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.

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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Justin Jones In Investment Management, Technology

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.

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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Justin Jones In Banking, Treasury Management

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.

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:

Implementing state-of-the-art technology to facilitate bank account management, payments, bank connectivity and balance reporting on M&A accounts.
Ability for the COE to make urgent, manual payments to reduce dependency on online portals.
100% real-time visibility to acquired accounts globally.
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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Justin Jones In Cash & Working Capital, Risk Management

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.

“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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Justin Jones In Cash & Working Capital, Risk Management

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.

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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Antony Michels In Cyber risk, Risk Management

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.

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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Antony Michels In Technology, Treasury Management

Data Boot Camp and Beyond: Boosting Treasury’s Tech Skills

Treasurers must elevate their staff’s data and technology IQ—and figure out the best ways to do that.

The flurry of finance automation initiatives is presenting new challenges for finance leaders. Traditional roles, in cash ops, FX and cash forecasting among others, are being reshaped as manual work is supplanted by automation. Be it a new TMS, a planning solution, cloud ERPs or AI, the tech and data skill requirements for finance professionals are expanding and not everyone is prepared.

Automation abounds. At the May meeting of NeuGroup for Tech Treasurers, nearly every member reported being engaged in a technology transformation project. Some are implementing a new TMS or replacing existing ones that have become obsolete. Others are in the throes of an SAP S/4HANA implementation. Still others are experimenting with AI and RPA.

But no matter how advanced the technology is, it will not yield expected results if people do not know how to use it. That means upskilling existing staff and/or hiring new employees who are data and technology savvy.
One treasurer said he approached his contacts at giant asset manager BlackRock to find out who they are hiring. “They told me they are bringing in people with degrees in data and computer science,” he said. “The question is how can treasury, with more limited resources, hire such talent?”
The answer is that treasurers need to think outside the box, e.g., hire people who know more about data than finance and offer them development opportunities.
“I brought in a data scientist at the manager level,” one member said. “We’re going to teach him corporate finance and let him manage a small portfolio of cash,” he said.

Building tech savviness. In conjunction, or in lieu of attracting new employees, treasurers are working to enhance the data and technology IQ of existing staff. “Not everyone can make the transition,” one member said. So it behooves treasurers to increase the tech skills of their teams.

One large tech company’s treasurer sent staff through an online boot camp to learn how to program in Python. He found the online training, from a company called DataCamp, user-friendly. “We made this a kind of competition for the first three months,” he said. By gamifying the process, he encouraged staff to participate.
The experiment is working. “We have been using Python script to replace peripheral systems,” he said. Their first project involved building code for keeping track of and analyzing cash investments. “We are planning to do the same for bank accounts and FX,” the treasurer said.
The leap may not be as large as some may imagine. “If you have people who can build macros in Excel or use Power BI, this is one step beyond,” he said.
Asked whether he faced any resistance, the treasurer said: “The team loved it.”

Maintaining engagement. Augmenting employee IQ about data and tech is critical in the immediate sense, but it also has long-term benefits. In a tight labor market, treasurers say they are struggling to find qualified candidates.

“We are competing with banks and asset managers with much deeper pockets, so maintaining engagement is a constant challenge,” one member said. As tech companies mature, the old stock incentives are no longer as attractive.
When growth is slow and turnover low, there are also fewer promotion opportunities. “You need to do other things,” another treasurer said. For example, pay for business school, build new skills, and offer development opportunities to help employees move forward in their careers.

In companies with slower growth or ones that mastered the art of scalability, “you are going to see people leave. You have to expect and accept that,” this treasurer said. “It’s the way things are.”

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Justin Jones In Cash & Working Capital, Crypto

Crypto for Corporates: Stablecoins and the Future of ‘DeFi’

A Strategic Finance Lab interview with Custodia Bank’s Caitlin Long and a video featuring Accenture’s Duane Block.

Many finance professionals at multinational corporations remain skeptics about cryptocurrencies, including stablecoins. No wonder: Fraud charges tied to the collapse of FTX as well as two stablecoins losing their dollar pegs—Terra and USDC—have fueled well-founded fears about the world of digital assets in the last year. But that’s not the whole story.

- There are numerous, sound reasons treasury and finance leaders need to dig deeper and learn more about stablecoins, and how they and cryptocurrencies like bitcoin could offer corporates more payment options as the future of finance becomes the present.

NeuGroup members who share that view spoke about potential applications of stablecoins, from customer-facing uses to potentially purchasing them as an inflation hedge in emerging markets, at a recent session of NeuGroup’s Digital Assets Working Group, which will have its inaugural in-person meeting on May 23-24, sponsored by TaxBit and Fireblocks.

Caitlin Long and Duane Block. To help shed more light on what can seem like an opaque, complicated topic, we offer insights from two esteemed experts on the digital asset landscape: Caitlin Long, founder and CEO of Custodia Bank; and Duane Block, Accenture’s digital currency lead for North America.

You can hear Ms. Long’s interview with NeuGroup founder and CEO Joseph Neu in a Strategic Finance Lab podcast by heading to Apple and Spotify. She shares her belief that the worlds of traditional finance and blockchain-based decentralized finance, or DeFi, are at an inflection point—and how a bank like Custodia could serve as a bridge between the two.
She and Mr. Neu also discuss stablecoin use cases for corporates, the long-term potential of crypto and blockchain technologies, and Ms. Long’s ongoing face-off with the Federal Reserve around the business model of the Wall Street veteran’s newest venture, Custodia.
And in a video clip you can watch by hitting the play button below, Mr. Block explains what actually happened following the collapse of Silicon Valley Bank that caused USDC to lose its peg, and why the token may have actually emerged from the crisis more stable than before. Mr. Block says it’s crucial to look at the assets that back a stablecoin, as some like Tether (USDT) aren’t as transparent as others.

A Strategic Finance Lab interview with Custodia Bank’s Caitlin Long and a video featuring Accenture’s Duane Block.

There are numerous, sound reasons treasury and finance leaders need to dig deeper and learn more about stablecoins, and how they and cryptocurrencies like bitcoin could offer corporates more payment options as the future of finance becomes the present.

You can hear Ms. Long’s interview with NeuGroup founder and CEO Joseph Neu in a Strategic Finance Lab podcast by heading to Apple and Spotify. She shares her belief that the worlds of traditional finance and blockchain-based decentralized finance, or DeFi, are at an inflection point—and how a bank like Custodia could serve as a bridge between the two.
She and Mr. Neu also discuss stablecoin use cases for corporates, the long-term potential of crypto and blockchain technologies, and Ms. Long’s ongoing face-off with the Federal Reserve around the business model of the Wall Street veteran’s newest venture, Custodia.
And in a video clip you can watch by hitting the play button below, Mr. Block explains what actually happened following the collapse of Silicon Valley Bank that caused USDC to lose its peg, and why the token may have actually emerged from the crisis more stable than before. Mr. Block says it’s crucial to look at the assets that back a stablecoin, as some like Tether (USDT) aren’t as transparent as others.

Embracing stablecoins. Some corporates have expressed increased interest in stablecoins since the collapse of Silicon Valley Bank, in part because the company that issues USDC expanded its partnership with BNY Mellon—a subject addressed by Mr. Block.

A member of NeuGroup’s digital assets group who works at a crypto-native company that has only used bitcoin said that her team is now exploring uses for USDC, which the company plans to onboard as its next digital currency.
A different member said the payments company where they work recently started accepting some stablecoins and then converts them immediately to fiat currency.
A third person at the session laid out her long-term hope for stablecoins in the form of a question: “Do they have potential applications to reduce FX volatility in countries with hard currencies?”
- The member who works at a crypto-native company said it is the “dream of stablecoin, and one of the main use cases going forward,” which the company is in the “very early days” of exploring. “It’s something all of us would like to see,” she said.

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Justin Jones In Cash & Working Capital, Technology

Driving Payments Innovation: Treasury’s Collaborative Approach

How one member’s forward-thinking team within treasury fuels payments innovation and business success.

Finance organizations reaching their full potential can play a critical role as companies explore new products, services and business models. That’s happening at one NeuGroup member company where a dedicated treasury team partners with products and payments groups to lead innovative banking and payments infrastructure initiatives that better support business requirements.

At the inaugural session of the NeuGroup for Payment Strategy working group, representatives from sponsor Citi co-presented with a member of the corporate’s dedicated treasury team on the keys to a payment project’s success.

How one member’s forward-thinking team within treasury fuels payments innovation and business success.

At the inaugural session of the NeuGroup for Payment Strategy working group, representatives from sponsor Citi co-presented with a member of the corporate’s dedicated treasury team on the keys to a payment project’s success.
Following the session, NeuGroup founder and CEO Joseph Neu said all finance orgs should have individuals or a team within treasury to serve this role, a point embraced by members.

A dollar’s journey. The company’s dedicated treasury team focuses on designing end-to-end efficient money flows, starting the moment funds leave a customer’s account—“the journey of the dollar,” as the member called it.

To improve the payments infrastructure, the team collaborates with all stakeholders along the way, including business lines, cash management, corporate finance, accounts, payments and product engineering.
The team’s projects include enabling payments in specific regions, eliminating inefficiencies in money flow and enabling faster payment rails from collection to disbursement.
- “The projects vary, but anything that touches money flow or bank accounts is something we get involved with and help structure a solution,” the member said.
The team also gets involved if the company wants to introduce a new form of payment, meaning treasury will need to solve for risks—a cross-functional issue.
- “First of all, identify what you’re trying to achieve, and then work with the stakeholders,” the member said. “Structures like these would have several other stakeholders like tax and legal. Other teams would get involved who could define parameters around business needs and regulatory requirements.”

The need for payments innovation. A payment executive at Citi said the increasing digitization of businesses and the rise of direct-to-consumer models reflect the need for treasury teams to be involved early in the process of payments innovation.

He highlighted the importance of managing counterparty risk, establishing strong relationships with payment providers, acquirers, and banks and having the right payment infrastructure in place—tasks that may not get done properly if treasury isn’t involved early in the process.
“One best practice we’ve seen in the organization is to at least have a digital lead sitting in treasury who understands the entire ecommerce landscape and the considerations the payments teams are looking at,” he said.
A member of Citi’s treasury and trade services group, emphasized the need for proper budgeting for corporates looking to support this role. “It can’t just be a side job, otherwise it doesn’t get the focus it requires,” he said.

Agile planning. Having clear objectives at the start is crucial, but the member also stressed the importance of flexibility to adapt to changing business requirements.

“Identify the guardrails within which you are operating and then identify what you’re trying to solve for,” he said. “It may not be possible to solve for everything, and that’s okay.”
If flexibility is built into the project from the start, it can evolve not only to accommodate unforeseen challenges, but also to change as technology improves—which is crucial in the rapidly shifting technological landscape.
- “You can always make changes if your infrastructure is scalable, resilient and flexible,” he said.

After the session, Mr. Neu added that payments is just one area where treasury needs to play a key role as companies adapt to change. Corporates may benefit from a policy where finance is informed about every new product, service and business model, as is the case with new legal entities and accounts.

“But whether the business benefits depends entirely on what treasury does when so informed,” he said. “Are they helping the business succeed with the go-to-market strategy and ensure it can scale, with enterprise level controls being layered on as it does? Or do they just say no? The former defines success, the latter makes the business sorry treasury got involved.”

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Justin Jones In Cash & Working Capital, Technology

Flexing Front Office Tech Muscle to Aggregate and Analyze Data

Using Tableau to collect and aggregate data, a Salesforce treasury manager sidesteps IT to build a cash dashboard.

Having a dashboard showing where all a corporate’s cash is invested, how much yield it’s generating and the company’s exposure to numerous counterparties—on a daily basis—is not just a dream for one member of NeuGroup for Cash Investments. Cam Bowen, senior treasury manager at Salesforce, impressed peers at the group’s first-half meeting sponsored by DWS last week by presenting a dashboard he built himself that does all that and more.

His accomplishment validates the idea that technology developed by front office finance professionals who take matters into their own hands rather than wait for internal IT departments to come to their aid can help finance teams report valuable analytics to senior executives and the C-Suite faster and more efficiently.

Using Tableau to collect and aggregate data, a Salesforce treasury manager sidesteps IT to build a cash dashboard.

His accomplishment validates the idea that technology developed by front office finance professionals who take matters into their own hands rather than wait for internal IT departments to come to their aid can help finance teams report valuable analytics to senior executives and the C-Suite faster and more efficiently.
Carlos Fernandez, a DWS coverage support specialist for Corporates & Insurance, praised the company: “By adopting cloud infrastructure and DaaS (data-as-a-service), Salesforce is moving forward with diminishing lines between technology and the front office to quickly create views and dashboards without dependency or need for time-consuming and costly IT projects.”
One of the members wowed by the presentation added, “The project highlighted that treasury orgs don’t need a large, dedicated team of data scientists to unlock insights from their own data.”
Mr. Bowen said, “We built this all, front office. If we had waited for the IT team to build some of this, we’d still be waiting.”

Self-built, self-serve and mobile. To build the global cash dashboard, Mr. Bowen taught himself how to use Tableau, the data visualization tool owned by Salesforce. “I used Tableau Prep to aggregate our data,” he explained. The so-called ETL (extract, transform, load) tool allows the company to refresh its data, daily, in less than two minutes.

Daily dashboard updates let Salesforce group cash across regions and obtain better summarized information about the location of its funds, overall allocations and how much it has with each counterparty.
Also, “all of the dashboard views filter the other views, so I can see, for example, how much a region has in money market funds,” he said. (This function of toggling data and diving deeper into a specific area is called drilling down.)
“I would describe this dashboard as self-serve,” he added. “Users can go in and answer any question they may have about our cash.” See the charts below for some of the views offered by the dashboard.
“If you go into an entity, you can see what cash it has, what it’s yielding, what currency it’s in, etc.—all at the click of a button,” he said. “When the SVB crisis hit, our AT knew within minutes how much cash we had. She didn’t need to go to us first before going to the CFO.”
- That ability, said one peer, shows the dashboards “provide near real-time visibility into cash balances, counterparty exposures and earned interest rates”—something many corporates do not have.
A mobile app means the Salesforce cash dashboard is available on a smartphone, a feature the peer described in glowing terms: “The ability to access and analyze this mission-critical data on one’s mobile phone from anywhere, anytime (i.e. the tarmac while waiting for one’s airplane to take off) is a game-changer.”

How it works. Mr. Bowen provided NeuGroup Insights with this synopsis of how the system he created operates:

“Our TMS on a daily basis sends out an email with the cash balances, and these are downloaded daily to our shared drive.
“Monthly Excel yields per account are kept and are updated on a monthly basis.
“Tableau Prep adds yields to each account and adds a group counterparty field based on an ‘if contains’ logic because the report out of the TMS sends local branch bank names.
“FX rates are piped into our TMS; but if not, that would be easy enough to use a Bloomberg pull in Excel to build into the workflow.
“Once the Tableau hyper file is updated, we post the Tableau workbook with the dashboard up to our Tableau server.”

Peer perspective, self-enablement. One member of the group who found the dashboard presentation extremely compelling offered several takeaways, including:

“By leveraging Tableau Prep, Salesforce was able to combine, shape and clean its bank data, which saves countless hours of manual work typically performed in Excel or other spreadsheet solutions.
“The Salesforce team was able to use JOIN clauses and other low-code Tableau scripts to combine bank data from dozens of disparate sources and present that financial information in an elegant series of robust data visualizations.
“By leveraging their existing TMS and creating a daily balances report, Salesforce reduced the friction involved in logging into individual bank portals in order to obtain the latest financial information.”

Mr. Fernandez of DWS summed up the big picture significance of Mr. Bowen’s technology feat: “As treasury and cash management professionals, an ability to pivot and adjust to a heightened demand for transparent reporting is key in today’s environment. The Salesforce cash dashboard is an excellent example of how leading organizations are empowering self-enablement.”

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Justin Jones In FP&A, Technology

Model Partners: FP&A Helps the Business Plan Through Modeling

In tough times, FP&A is transitioning to a forward-looking stance to support smart business choices.

Inflation, anemic growth, market volatility and belt-tightening are top of mind for FP&A leaders. In a recent survey of NeuGroup for Heads of FP&A, members revealed they are putting great emphasis on collaborating with the business.

Specifically, they are using modeling and scenario planning to help operational leadership make informed decisions on how to plan for a difficult environment by reducing costs and/or grabbing potential growth opportunities. As the chart below shows, 94% of respondents have either adopted these practices or plan to in the next 12-18 months.

In tough times, FP&A is transitioning to a forward-looking stance to support smart business choices.

Specifically, they are using modeling and scenario planning to help operational leadership make informed decisions on how to plan for a difficult environment by reducing costs and/or grabbing potential growth opportunities. As the chart below shows, 94% of respondents have either adopted these practices or plan to in the next 12-18 months.

Time to look forward. The combination of these data points tells an important story about the critical role FP&A plays in helping companies withstand economic instability while improving results through better decision support.

Scenario planning and modeling enables meaningful conversations with business partners seeking to eke out savings and make savvy investments in continued growth.
To this end, 75% of those surveyed plan to adopt advanced analytics solutions, and half are looking to implement machine learning tools.

With the help of these new technologies, FP&A teams will be able to offer better advice to their business partners. That trend is reflected in members’ plans to embrace a more forward-looking approach to planning and forecasting.

Sixty-seven percent of respondents expect to adopt predictive analytics this year; the same number also intends to transition to rolling forecasting.

The bottom line: The business challenges ahead are elevating the role of FP&A as a strategic advisor to the business. So this is an opportunity for FP&A teams to build credibility by producing actionable, forward-looking insight and leveraging new technologies to improve modeling and analytics.

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Justin Jones In Cash & Working Capital, Talking Shop

Talking Shop: Retailers Read Credit Card Tea Leaves

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: How much consumers spend and how they pay for what they buy are critical topics for members of NeuGroup for Retail Treasury trying to manage risk and run forecasts amid fears of recession and abundant economic uncertainty.

Retailers are closely tracking data showing a slowdown in spending while at the same time parsing info on purchases made with credit cards as the Fed continues to raise interest rates to curb inflation. And not all the signs point in the same direction. So they’re also comparing notes and sharing what they know with other NeuGroup members to get a ground-level view—one that we’re sharing with other members and our readers.

Retailers are closely tracking data showing a slowdown in spending while at the same time parsing info on purchases made with credit cards as the Fed continues to raise interest rates to curb inflation. And not all the signs point in the same direction. So they’re also comparing notes and sharing what they know with other NeuGroup members to get a ground-level view—one that we’re sharing with other members and our readers.

Member question: “Has anyone else here seen a large uptick of credit card usage among your customers this year so far? We’ve seen historically high levels of credit card use at our stores and I was wondering if others are experiencing the same and what they’re attributing to this trend.

“We’ve heard that inflation might be a key factor but wanted to sense check with this group.”

Peer answer 1: “Overall card usage is stable for us this year, but there is a shift from debit to credit as stimulus has dried up and consumer finances generally tighten.

“When you start seeing articles like the one on Bloomberg about consumers using buy now/pay later for groceries, you can be pretty sure the squeeze is on. Between inflation, lower tax refunds, job losses, it doesn’t seem too surprising that credit usage is up.”

Peer answer 2: “We are heavy on debit acceptance and since Covid we did experience a shift to credit. Our credit penetration grew 3% to 4% from pre-pandemic levels. The rate of increase has stabilized over the last few months.

“The shift to credit has been most noticeable in the rewards categories, which as you know, increases your cost of acceptance.”

Member response: “It sounds like for most our peers, credit usage has rebounded to pre-pandemic levels but for the off-price and discount segments, there has been a larger increase in credit usage that can be attributable to inflation, exhaustion of government stimulus, and job losses in certain regions/sectors.

“It’ll be interesting to see how long our customers can sustain this until they reach their credit limits. We’ll also keep talking to our card issuing banks and card brands on this topic.”

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Justin Jones In Technology

Wringing Every Drop From a Tight Treasury Technology Budget

Maximizing the potential of existing tools and current employees depends on detailed plans and open communication.

Technology budgets for treasury teams have always been tight, and high inflation and low corporate earnings are making it even harder to get new funding. At a recent meeting of Women in NeuGroup, members shared tips on maximizing resources for tech solutions. Two messages came through clearly: treasury teams should make sure they’re using every functionality in existing systems, and a system is only as effective as the staff’s ability to use it.

Peer group leader Julie Zawacki-Lucci, who led the session sponsored by TIS, summarized the point that a number of members agreed upon: “Treasury teams have to look at different initiatives through a global lens, and then toggle down to the details of managing talent and effective communication to affect change.”

Maximizing the potential of existing tools and current employees depends on detailed plans and open communication.

Peer group leader Julie Zawacki-Lucci, who led the session sponsored by TIS, summarized the point that a number of members agreed upon: “Treasury teams have to look at different initiatives through a global lens, and then toggle down to the details of managing talent and effective communication to affect change.”

Process mapping for efficient use of existing tools. When one global director of treasury stepped into the role, she quickly sat down with the treasury’s IT engineering team and mapped out the flows of funds. “We looked at where money flows from treasury and into banks, and from banks into treasury,” she said.

“I looked at what we were doing, and said, ‘Oh no, we have to automate confirmations and payments, and we have to have straight-through processing,” she said. “I asked around, I gathered everyone’s pain points at a high level, and saw that our treasury management system was highly underutilized.”
Without needing to get approval to purchase a new solution, she was able to streamline processes simply by fully employing tools the team already had.
This process, the member said, can also help to eliminate redundant technologies so resources can be diverted to more useful efforts. “You never want to have a solution in search of a problem,” she said.

Deploying all tools. Another member shared a similar story—her team was using only Excel in its cash forecasting process, but saw that the FP&A team used Hyperion, a planning, forecasting and analytics solution from Oracle that she described as “Excel on steroids.”

Because Hyperion is similar to Excel, it was an easy tool to learn and didn’t cost a dollar, as treasury only needed to work with the FP&A team to gain access to the tool.
It wasn’t smooth sailing for long, though, as FP&A switched to a different tool three years later, forcing treasury to learn an entirely new system. The transition was a laborious two-year process; treasury eventually hit the eject button and went back to Excel.

Marketing change. The fact that staff were not able to come up the learning curve for the new FP&A tool fast enough speaks to another of the session’s lessons: the need for effective change management to help employees learn new skills faster. “Change management is just about effective communication, and understanding how you’re affecting the person on the other side of whatever it is that’s being changed,” one member said.

The first step in a change management process, she said, is to listen to employees’ needs before implementing any new tool. “It’s just common sense that technology teams should not be telling the users what they need—it should be a partnership,” she said. “It’s always a ‘we,’ never an ‘I.’”
A creative approach one member took when transitioning to a new TMS was to start a bimonthly newsletter for the team. “It was just two pages; the first page gave everyone an idea of what we were working on and what they should focus on,” she said. “And the second had this section called the Education Corner, so I could reiterate things like what is netting, cash pooling and bank account management, and how to do them in the TMS. It really helped with acceptance and utilization.”

Technology advocates. Successful adoption isn’t possible without a team that has the right skills, another member said. She added that effective technology skill sets require “independent study among employees, or prior experience in the tools.”

One technique she’s employed is to find “super users” at the company, employees who have bought into the solutions, know how to use them effectively and use them frequently.
These individuals don’t only help justify the tech solutions’ budget, but can also be deployed to “upskill” coworkers who may not yet understand how to get the best from them.
“I was very successful with upskilling treasury employees with no technology background,” she said. “We had people volunteer to learn these tools, and some of them even became super users themselves.”

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Justin Jones In Diversity & Inclusion, The NeuGroup Insights Interview

Finding Career Success: Embrace Change, Understand Yourself

PwC principal Kristen Michaud discusses her career path from biology to finance, and what she’s learned along the way.

In the latest episode of NeuGroup’s Strategic Finance Lab podcast, Kristen Michaud, a principal in PwC’s Finance Transformation group, joins NeuGroup’s Julie Zawacki-Lucci to discuss what they’ve learned from decades in finance—and advice they wish they’d received earlier in their journeys.

In the podcast, which you can listen to now on Apple and Spotify, Ms. Michaud discusses her career path, beginning with a biology degree and possible plans for medical school—until her fascination with finance and technology took her to IBM, GE Capital and now PwC.

In the podcast, which you can listen to now on Apple and Spotify, Ms. Michaud discusses her career path, beginning with a biology degree and possible plans for medical school—until her fascination with finance and technology took her to IBM, GE Capital and now PwC.
Ms. Zawacki-Lucci compares notes with Ms. Michaud and shares her insights from a decade and a half working in treasury at CVS and Hasbro. And she talks about the benefits for some working mothers—including herself—of remote and hybrid work models.

Kristen Michaud
Principal, PwC

The conversation, which was recorded during Women’s History Month, also gets into the challenges of balancing a family and personal life, especially for women with children or who plan to have them.

“I knew at some point I wanted to have children, so I thought I should probably get my MBA done before I wanted to have kids, right?” Ms. Michaud says. “And so that was probably one of the harder decisions: Do you have enough work experience to go get your masters or do you wait?
“Early career, I used to worry about always having a plan. What I’ve realized now that I’m older is that, I look back, and those things kind of naturally happen and they happen at the right time.”

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Justin Jones In Banking, Risk Management

The Big Picture Beyond Banks: A Holistic View of Counterparty Risk

A good risk management system requires a list of all exposures, according to CFO.University’s Steve Rosvold.

The Silicon Valley Bank crisis raised concerns for many corporates around bank counterparty risk—but counterparty risk goes beyond just banks, as companies are also exposed to the actions of customers, vendors and investors. In order to effectively manage these risks, it is essential for a finance team to adopt a holistic approach that tracks all sources of exposure.

That’s one takeaway from an upcoming episode of NeuGroup’s Strategic Finance Lab featuring Steve Rosvold, founder and chief learning officer of CFO.University, a professional community of business leaders, companies and advisors that trains and develops future CFOs.
Mr. Rosvold’s career includes nearly two decades in finance at Cargill, before he became CFO of ConAgra Malt.

A broader look at risk. Interest rate hikes and bank failures have sparked what Mr. Rosvold calls a “rude awakening in risk management in general,” as cash has become more expensive and financial institutions less reliable.

In a video you can watch by hitting the play button below, he stresses the need for finance organizations to analyze the exposure of “everyone you’re doing business with,” and encourages companies to establish a risk charter.

A good risk management system requires a list of all exposures, according to CFO.University’s Steve Rosvold.

That’s one takeaway from an upcoming episode of NeuGroup’s Strategic Finance Lab featuring Steve Rosvold, founder and chief learning officer of CFO.University, a professional community of business leaders, companies and advisors that trains and develops future CFOs.
Mr. Rosvold’s career includes nearly two decades in finance at Cargill, before he became CFO of ConAgra Malt.

In a video you can watch by hitting the play button below, he stresses the need for finance organizations to analyze the exposure of “everyone you’re doing business with,” and encourages companies to establish a risk charter.

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Justin Jones In Risk Management, Talking Shop

Talking Shop: Bank Counterparty Risk: Does the Branch Matter?

Context: The crisis of confidence ignited by the flameout of Silicon Valley Bank prompted finance organizations at multinational corporations to ask a plethora of probing questions about bank counterparty risk and the safety of corporate cash. Though some questions have been answered and appropriate actions taken, ongoing fears around midsized regional banks like First Republic are causing treasury teams to continue to seek guidance from peers and subject matter experts about the way forward.

Those experts include several former bankers who now offer their insights to NeuGroup members, including Jerry Olivo, former head of intraday liquidity at Citi treasury, who provided the first answer to the member question below.

Those experts include several former bankers who now offer their insights to NeuGroup members, including Jerry Olivo, former head of intraday liquidity at Citi treasury, who provided the first answer to the member question below.

Member question: “When assessing counterparty risk, do you analyze at the level of the bank group or at the level of the individual branch where the cash deposits are held?

“We are preparing a counterparty risk analysis report and our treasurer asked whether we should be looking at the bank level or at the individual branch level, where we actually have our deposits. Curious to learn how others look at this.”

Jerry Olivo, NeuGroup Senior Executive Advisor: “Your counterparty risk should usually be at the bank legal entity level rather than at the branch level. If the branch is outside of the US, you should review account terms and conditions to determine if there are conditions that would limit recourse to the US bank entity of which it is a part. I believe that’s rare, but I have seen it.”

Peer Answer 1: “Unless the branch falls under a banking subsidiary under a different name but the same holding parent bank and there is corporate separateness, in my opinion, there is not much benefit to looking at it at the branch level.

“We developed a counterparty risk dashboard for each banking partner that tracks deposits and pulls five-year CDS market spreads and bank-specific credit ratios. If you have an investment portfolio and invest in bank CDs or CP or short-term bonds, I recommend you go a level deeper and look at your [financial] investment security exposure with any of the banks as well.”

Peer answer 2: “Ditto as the responses above—you do not need to go down to the branch level, because an individual branch will not default. For high risk countries, we do look at it on a country basis, because it’s possible that a bank could declare default in a specific country (but rare, and that would likely only be if the whole country was in crisis and the bank was being forced to default there, e.g., a Venezuela type situation).”

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Justin Jones In FX, Technology

Automation Pumps New Life Into a FX Trade Life Cycle

Automating trade operations lets treasury focus on strategy and understanding economic drivers of FX exposures.

“Automate the operations, unlock the strategy.” That concise phrase encapsulates the transformational and holistic approach to consolidating and managing data, including exposures, at high velocity within the FX trade life cycle adopted by one NeuGroup member company. And the phrase served as a subheading for a presentation made by a manager in the company’s global treasury FX risk management group at the fall meeting of NeuGroup for Foreign Exchange 1.

“It has been a tremendous help to automate it,” the member said of the FX trading process. “Because most of our operations are automated, we can focus on strategy, understanding the current macroeconomic environment, and managing the P&L.”

Automating trade operations lets treasury focus on strategy and understanding economic drivers of FX exposures.

“It has been a tremendous help to automate it,” the member said of the FX trading process. “Because most of our operations are automated, we can focus on strategy, understanding the current macroeconomic environment, and managing the P&L.”

Exposure forecast model (EFM). The risk management team has an exposure forecast model designed by two full-time software developers that makes use of IBM’s Planning Analytics system (TM1/PA) to transform its “global supply chain data and business planning infrastructure into a foreign currency perspective so that the global treasury team can manage the consolidated FX risk” for the corporation, according to the member’s presentation.

The EFM consists of three parts shown in the presentation: input, analysis and output. The output phase consists of:
- Sourcing exposures
- Trading company exposures
- Inventory exposures
The data is then migrated into the company’s hedge position model (HPM) in the IBM system.

The trade life cycle. As the infographic below shows, there is a purposeful, circular relationship between the EFM, HPM, booking system, and live market data. For this example, the company executes new trades using the Bloomberg Terminal and those trades are automatically processed and confirmed by the trade booking software system. The company’s back office manages FX settlements and collateral issues before the trades are entered into SAP S/4HANA.

During the session, the member demonstrated end-to-end, real, live FX trades, using the company’s connected systems.

Less time, more value. In a follow-up interview, the member outlined the benefits of the system. “We have drastically minimized non-value-added work across the global FX team. Things such as (1) exposure consolidation; (2) designating a trade against an exposure; (3) auto-NDF fixing with counterparties; (4) confirming, matching, and settling of FX trades (~80% automated by total outstanding notional volume in USD equivalent); (5) tax reporting on financial derivatives; (6) and lastly, minimizing the amount of manual errors,” he said.

“Don’t get me wrong—these steps are critically important, but it has been a tremendous help to automate it, allowing us to focus more on managing the P&L.”
He said the biggest benefit is that the “automated systems enable us to ‘compete’ an order filled with multiple counterparties. So instead of negotiating an unfavorable price with a single bank, we deploy the order (privately) to various banks, ‘competing’ the second, more profitable component of the FX deal, the forward points.
“The best part is that while the banks are competing against each other, it gives us time to analyze their bids or offers relative to the indicative price. That way, we know exactly how much they are profiting off the deal and, more importantly, how much we saved by competitively dealing away the second part of the order. This could have taken hours of negotiation in the past, but now it takes only a few minutes.”

Deeper dive. The member’s team trades the FX forward components separately: spot rate first, then the forward points. “Some corporates leave orders with a bank to take advantage of market spot volatility (we do this). When a bank fulfills a spot order, we can roll the done spot deal into forwards with that specific bank or compete it with multiple banks,” he said.

“Essentially, the bank has won the spot component of the deal, but they must be competitive to win the rest (the forward points). Automation has helped make these conversations/negotiations easier because we can bid forward points to any bank in our credit facility,” he added.
“Spot risk has been neutralized via the order fill. The mechanics before automation were messy, but now it’s simplified, expedited and straightforward.”

Words to the wise. “When implementing this across our global FX team, we were careful to automate specific processes in our operations with intentional human intervention,” the member said. “For example, the hedge designation process can only be kicked off when each trade is confirmed and matched. After our back-office reviews this step, our system will retrieve that input and automatically run the hedge designation process.

“Not only does this allow our automated operational flows to comply with the requirements of our audit and controlling groups, it also ensures that each trade fulfills the intended risk management strategy,” he added.
“As financial risk managers, we aim to minimize FX volatility and protect the P&L,” he said. “Still, we must also identify efficient processes and streamline our systems to support our key objective. Additionally, we must ensure our software developers understand what needs to be done for a successful program. Without their help and continued support, none of this would be possible.”

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Justin Jones In Cash & Working Capital, Crypto

Speed, Stablecoins and the Future of Payments with Caitlin Long

A Wall Street veteran and crypto proponent sees stablecoins as an opportunity with real-world uses for corporates.

Stablecoins—along with the entire world of cryptocurrency—have taken some lumps lately. That includes: faltering demand for two prominent players, BUSD and USDC; risk warnings about the digital coins from Fed vice Chair Michael Barr; and growing scrutiny and concern from the SEC, Congress and the Bank of England.

Does all that mean finance teams at multinational corporations that need to keep up with developments in the payment space should turn their backs on the coins pegged to other assets like the dollar? Absolutely not is the emphatic answer from Caitlin Long, a Wall Street veteran and self-professed “bitcoin evangelist” making a name for herself at the intersection of banking, crypto and the future of payments.

In a video you can watch by clicking the play button below, Ms. Long—the founder and CEO of Custodia Bank—tells the story of a non-crypto company that seized a time-sensitive market opportunity in China and earned $2.6 million by using a stablecoin. That would not have happened if the company had to rely on traditional banking channels, she says.

“This is real-world stuff,” Ms. Long says in the video. She believes this kind of opportunity will become more common, especially with stablecoins available for deposits and withdrawals at non-US banks like Xapo. “If you have an opportunity where you need to move money really fast, you’re going to turn to a stablecoin.”

“This is real-world stuff,” Ms. Long says in the video. She believes this kind of opportunity will become more common, especially with stablecoins available for deposits and withdrawals at non-US banks like Xapo. “If you have an opportunity where you need to move money really fast, you’re going to turn to a stablecoin.”

The promise of Custodia. Ms. Long’s resume includes 22 years of corporate finance experience, with stints at Salomon Brothers, Credit Suisse and Morgan Stanley. She’s a Wyoming native who founded Custodia in her home state in 2020 to function as a safe bridge between the worlds of traditional finance and blockchain-based decentralized finance.

Though not yet operational, the bank plans to function as a non-lending special purpose depository institution, which means it will hold 100% cash reserves. She says that will essentially eliminate any concerns around the counterparty risk of working with a new, small bank.
Custodia Bank has received its certificate of authority to operate as a state charter bank, which allows it to offer custody services for bitcoin and ether, which it plans to launch shortly. But getting approval for also banking US dollars is a separate issue.
To hear more about Custodia, including Ms. Long’s struggle to get the bank’s business model approved by the Federal Reserve, please be on the lookout for an upcoming episode of the Strategic Finance Lab podcast, featuring an interview by NeuGroup founder and CEO Joseph Neu.

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