By Ted Howard
In the November issue of iTreasurer, we start with a discussion of what’s to become of treasurers. That’s because the role of treasurer is in the midst of a change, according to many participants at NeuGroup meetings this year. With the coming of automation, machine learning, and AI, there is speculation that the day of the long-standing, tenured treasurer could be coming to a close, to be replaced by a passing generalist. Perhaps this was always where treasury was headed, given leaner and leaner treasuries and the too-often used refrain of “doing more with less.”
Well, technology is starting to nip at the heels of the job. So far it’s low-level automation, but it’s perhaps only a matter of time before robots learn the higher-level stuff, and need only a well-supported generalist to manage them.
In November’s “Anticipated Exposures,” we discuss how recent scandals are leading to a redoubled effort to introduce an ethics code into the mostly unregulated foreign-exchange (FX) market. The complete code was published in May 2017 but now regulators are looking to strengthen it. Also, there’s a look at how longer annual reports hide important details that over time have a big impact on a company’s stock price. Researchers say companies have put so much information into their earnings reports and yearly 10-Ks that analysts and investors overlook important details. Finally, data has now climbed to the top of the worry list for corporate executives.
We go over some of the mounting concerns about a “no-deal” Brexit. In order to prepare investors as much as possible, the International Swaps and Derivatives Association and several other financial-industry associations recently published a detailed report about the likely impact of no deal on the over-the-counter derivatives market, leaving corporates with plenty to think about.
This month’s NeuGroup peer group summary is from the first-half Global Cash and Banking Group. At the meeting, GCBG members considered how to incorporate the unpredictable into cash forecasts and tax reform’s implications for pooling, and heard more on what data science has to offer. Members also exchanged information and frustrations on a variety of tech issues, such as electronic payments and lockboxes. Also, host and sponsor C2FO’s top data scientist explained the firm’s methodology for tackling data-related issues.
We discuss hedging, specifically hedging rollovers, finding the hedge sweet spot, and how new hedging guidance provides benefits. For rollovers, the Federal Reserve’s anticipated rate increases will likely erase much of the earnings corporates gain from recent tax cuts, an outcome that could be lessened by applying forward-starting hedges soon. As for the sweet spot, corporate treasuries, especially in the US, tend to use options in limited situations, but new research by Standard Chartered concludes that mixing options into a layered-forwards hedging strategy significantly reduces foreign-exchange volatility. We explain a little bit about how new hedge accounting guidance can make net investment hedges even more attractive.
Finally, we discuss capital allocation based on recent results from NeuGroup Peer Research’s cross-group survey.