By Ted Howard
It’s 2018, now what? President Trump is coming up on his first anniversary later in January and it’s been a first presidential year like no other. For some it’s been dark days, for others a new dawn. And for probably all, a lot of head shaking and head scratching. But despite all the hullabaloo, things are changing, and for corporate treasuries the next year will see a lot that concerns them, including tax reform, regs, FX volatility and Brexit, just to name a few.
Thus, to start the January issue of iTreasurer, we take a tour of some of those topics and what may be in store for treasurers in the year to come. One of the larger questions wrapped inside the coming tax reform bill—and perhaps flying under the radar for all but corporate finance teams—is cash repatriation.
Some $2.6 trillion in US corporate profits is sitting in overseas bank accounts, about half of it in cash. What will companies do with that money? Recent press reports and other research indicate cash returned to shareholders and dividends. For now, that leaves the sizeable number of NeuGroup members with a lot of cash parked overseas sitting on the sidelines waiting for reform outcome before making future investment decisions.
In our “Anticipated Exposures” section, we discuss the importance of creating a cash culture within companies, which means raising awareness of cash and cash management; improving visibility and forecast accuracy; and driving cash efficiencies and overall cash management performance. Also, how regional treasury roles need to punch more than their weight, which means getting a more well-rounded treasurer in the position. Also, a look at how cash will continue to trickle back to prime money market funds in 2018 (trickle being the operative word).
Our meeting briefing this month is for the Assistant Treasurers’ Group of Thirty or AT30. At its meeting in September in Palo Alto, the group discussed treasury organization, planning for tax reform and cyberattacks. Also, what a hard Brexit means for multinationals, cash forecasting for when business lines are changing and talent rotation programs.
Then we take a look at a model developed by Societe Generale that can help companies decide whether it’s worth it, when extending duration, to issue one long bond or two or three shorter-duration bonds. What the bank has come up with is a comparison model “that shows var1ious permutations of what kind of tenors to issue and the cost differences between them.”
The goal of the duration extension calculation model is to allow users to compare the associated costs of issuing long bonds vs. multiple short bonds (which combined, would match the duration of the long bond).
Finally, we take a look at the pain that can result from trying to reconfigure a company’s often tangled, outdated and cross-purposed systems and processes into something simple and straightforward. “For companies using multiple treasury systems, banks and other providers of whatever they need or want, things can be very complicated. Like a juggling act that includes plates, knives, forks, chainsaws and a live kitten, treasury’s tool box can get overwhelmingly complex. Thus, the department’s strong urge to simplify and streamline,” write the authors.
Enjoy the issue.