Best of NeuGroup Insights, H1 2024

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First-half hits. The 10 best NeuGroup Insights posts from the first half of 2024 speak clearly to the value of individual treasury and finance professionals connecting with peers to share insights about their successes in a variety of areas. The posts also showcase the power of practitioners banding together to discuss and confront common challenges and pain points (involving banks, tech, trapped cash, etc.) and compare notes on possible solutions.

In other words, these stories in many ways embody the value proposition of the NeuGroup Network itself.

Below, you’ll meet members explaining how they devised a net investment hedging program, established an in-house investment management operation, implemented SAP’s risk module, and transformed treasury by cutting the tech stack.

One of the most-viewed stories this year features members of NeuGroup for Global Cash and Banking joining forces to pressure banks to make more progress on digital signer portals. Their shared goal: to relieve the extreme pain of dealing with the inefficiencies of tracking and updating signers on bank accounts.
We also offer up a very personal account (told in a video and Strategic Finance Lab podcast) of one treasurer’s decision to step away from a job he loved to spend more time with his daughters. Finding a successor he believed in made it possible.
Finally, there’s no escaping AI—so we include a tale of IT auditors sharing learnings as they hunt for use cases.

Here, in chronological order, are the 10 posts we deem the cream of the crop based on popularity (page views) and, in a few cases, our informed perspective on what matters most. You can find many more insights, videos and podcasts on our website.

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

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

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

To read the full story, please click here.

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

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

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

To read the full story, please click here.

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

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

Bopreals are dollar-denominated but can be purchased with Argentine pesos at the country’s official FX rate. They can only be used to pay outstanding invoices for goods delivered before December 12, 2023.
The bonds offer an attractive option to corporates with limited ways to get money out of Argentina. One of the more popular, called a blue-chip swap, carries an unfavorable, unofficial exchange rate and requires companies using it to wait another 90 days until accessing the country’s official FX market.

To read the full story, please click here.

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

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

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

To read the full story, please click here.

Mr. Nesper’s total trust in Andrea Noseda’s abilities provided the confidence to leave a job and company he loved.

After years of thinking about leaving a company and a job he loved to spend more time with his family, former HP Inc. treasurer Zac Nesper found the right internal person to succeed him: Andrea Noseda, a treasury novice back when he hired her for a capital markets role four years earlier (today she’s an expert).

In a new NeuGroup video you can watch by hitting the play button above, Mr. Nesper shares how Ms. Noseda progressed to the point where, after she interviewed for the position, HP named her treasurer in June 2023. It was an outcome he called one of the greatest joys of his career.
Mr. Nesper provided support during a transition period, while also serving as CFO of the company’s Strategy and Incubation business unit. He left HP at the end of 2023 to begin what his LinkedIn page describes as a career break and personal goal pursuit.
“I hit a point where I just was like, my kids are only going to be in the house for three more years, and I have this crazy hunger to just spend time with them,” he says in the video. “I’ve got this personal desire to step out, but beyond that, I don’t want to stand in somebody else’s way.”

To read the full story, please click here.

The race for leveraging generative AI as a strategic advantage is on, but the ground must be tilled before the field yields results.

Large language models (LLMs) like ChatGPT and Microsoft Copilot have swept through the corporate landscape as many companies have licensed or built their own internal instance of the technology. Early adopters in organizations are getting their hands dirty with this new tool, but those in the know realize that their house—the underlying data on which AI models are built—must be in order before they can make the AI revolution a reality.

Ed Barrie, a finance technology expert and the co-founder of Treasury4, recently told NeuGroup Insights, “AI and machine learning are only as good as the underlying datasets they’re being applied against. I’m skeptical about some of the use cases that do get talked about in the industry—unless you have a really rich dataset and much more granularity to then drive those insights.”
At a recent session, many members of NeuGroup for IT Auditors shared that this point rings true: for now, the use cases for generative AI are limited. Corporates must have a plan to obtain large quantities of high-quality data before they can fully realize the efficiency gains promised by AI and machine learning.
One member named two places where “the rubber should hit the road” for companies: “In the automation of task work, especially in the building out of sampling and testing methodologies; and in building the LLM using audit data to provide summaries, analysis and trending risk assessment data.”

To read the full story, please click here.

In a late March poll, Capital Markets members expected one, two or no cuts—a view increasingly held by the market.

On the same day in late March that the Federal Reserve signaled it still expected to cut interest rates three times this year, almost none of the members of NeuGroup for Capital Markets polled at their spring meeting sponsored by HSBC believed that would happen. Call them prescient, perhaps: the poll came weeks before March jobs data and Wednesday’s hot inflation report pushed more investors and economists to revise expectations for the number and timing of cuts.

One cut or two? Or none? As the graphic above shows, 96% of members on March 20 said they do not expect the Fed to reduce interest rates by more than 50 basis points this year. Assuming each cut is 25 basis points, one-third said they expect one cut, 44% expect two and just 4% expect three cuts.

The federal funds rate today is in a range of 5.25% to 5.5%, so three cuts would bring it down to 4.5% to 4.75%.
Perhaps most striking is that 19% of those polled that day said they expected no cuts at all in 2024. That possibility generated headlines last week when Minneapolis Federal Reserve Bank President Neel Kashkari said if inflation data continues to move “sideways,” the Fed may not need to cut rates.

To read the full story, please click here.

Designing a structure to help FX hedging effectiveness, address tax and regulatory issues, and reduce leakage.

Establishing centers of excellence or global capabilities centers is one way a growing number of multinational corporations are transforming themselves into more efficient enterprises that tap skilled talent in overseas markets with lower labor costs to perform value-added services. These corporates must make decisions about where to locate the centers, their functional currencies, how to fund them and how they invoice the parent or subsidiaries.

Many NeuGroup member companies have set up these centers in India, introducing exposure to the Indian rupee, often requiring the use the non-deliverable forward market to hedge. NDFs are offshore dollar-settled currency derivatives.

To read the full story, please click here.

Reducing SMA assets and DIY cash investing helps one corporate save money while boosting returns and efficiency.

Establishing an in-house investment management operation that reduces fees paid to external asset managers and gives treasury more responsibility and flexibility in investing cash may not be common outside of mega-cap, cash-rich tech companies. But the numerous benefits it brings are definitely within reach of at least some smaller companies.

That was among the key takeaways from a presentation by a member of NeuGroup for Cash Investments at the group’s spring meeting. The session revealed that with the proper tools and support from senior executives, setting up an in-house investment management arm is feasible for companies with less cash to invest.

To read the full story, please click here.

In one year, GE HealthCare achieved a treasury transformation, reducing the tech stack and onboarding a new team.

When GE HealthCare was tasked with spinning off from GE, the treasury team saw an opportunity to create a new organization constructed with a “fit-for-purpose” approach that included rebuilding the technology stack with off-the-shelf solutions that accomplish specific tasks—rather than the far-reaching, customized tech tools used pre-spin-off.

In 12 months, GE HealthCare implemented nine new technology systems—down from 36 legacy solutions—and won an Adam Smith Award for Best Treasury Transformation Project. The spin was completed in January 2023.
At a NeuGroup treasurers symposium sponsored by FIS, global treasury operations leader Aditi Agarwal, accompanied by assistant treasurer Peter Claus-Landi—two former employees of GE Capital who helped build treasury at the new company—dove into the keys to success and achieving both efficiency and effectiveness.
“If you want to predict the future, you need to create it, and we created our future for ourselves,” Ms. Agarwal said. “We aimed to build something that wasn’t a Ferrari but not a minivan either—just fit for purpose.”

To read the full story, please click here.