What’s on International Treasurers’ radar screen this week.
With several NeuGroup peer group meeting behind us, this week’s editorial meeting brought up a bevy of story ideas that International Treasurer will be exploring in the coming weeks and months. Much of this content originates from the NeuGroup Treasurers’ Group of Thirty (T30) as well as the FX Managers’ Peer Group meetings, the latter of which was a summit meeting of the two FX groups. Here are brief takes on what’s to come.
Trapped cash
Companies for years have struggled with the issue of freeing trapped overseas. Indeed, this is something certain banks have made a priority: Do a better job helping customers deal with this perennial international treasury issue. Unfortunately, there have been few great advances or one-size-fits-all solutions in this area. To help treasurers work with banks to find better trapped cash solutions, we will be looking at ideas being considered and putting a spotlight on the most important problem countries.
Optimal funding patterns
With capital market access about as good as it’s ever been, corporates can return to thinking about optimizing their funding choices and issue tenors. We’ll look at the kind of analysis that can be explored to rationalize refinancing decisions and help ensure that treasurers come closer to an “efficient frontier” in relation to maturity profile and fixed-floating mix.
Basel III and credit pricing
Bank credit access and pricing have also enabled optimizing principles to come to the fore. 5 year renewals are evidently obtainable now and without much, if any, price premium. This leads many treasurers to question the impact of Basel III on credit pricing, which many banks touted as a reason longer tenors would remain relatively pricey. If the pricing impact of Basel III has been displaced, certainly it must return as banks are required to put aside more capital to comply with new Basel III rules. Further, might certain banks be relinquishing to competitive pressure on credit pricing, only to become more desperate (and annoying) in their attempts to make up for that with pleadings for other business? Also, is there any truth to the idea that European banks which are further along in implementing Basel rules might have a leg up in their ability to calibrate credit pricing to regulatory demands?
Balance sheet forecasting
What stood out from The NeuGroup’s FX Managers’ Peer Groups summit was the extent to which balance sheet exposure management programs warranted attention. It used to be that everyone was fixated mostly on cash flows, at least once their foreign exchange programs reached a certain maturity. Prolonged volatility in FX rates has certainly been a catalyst for this. As a result, FiREapps continues to catch on like wildfire, with more and more member companies reporting that they are working with this exposure and risk analytics solution provider. FiREapps, of course, has been beating the drum on the need for its solution set, which is aimed more at the balance sheet. This makes it timely to reexamine the FiREapps offering and get an update on progress with its development of cash flow exposure management tools to complement its balance sheet offering.
Hedging programs and new business
The financial crisis had a big impact on all business to be sure, but for many companies managing through and surviving afterward meant a complete change to the business model. With hedging risks in mind, International Treasurer will take a look at how treasury manages this change and what impact it will have on the company’s hedge accounting. For some tech businesses, for example, that business model change has meant a much higher proportion of subscription-type sales versus boxed software. And others are moving more toward the Internet and selling direct to consumers via on-line stores. This also has big implications for treasury, as they contend with changes in revenue recognition, on the one hand, and thousands of smaller transactions, in many different currencies, vs. maybe just a few, as they go more direct on the other. These transactions create new kinds of exposures.
Hedge performance measurement
Another subject from the FX Summit IT will explore is performance measurement and concept of giving treasury credit for reducing risk. One member who presented on this illustrated how the risk reduction rate recognizes the value of adding stability to planning and execution earlier in the hedge process.
Editor’s note: This post title was ammended to reflect pre-publication changes.