By Ted Howard
Happy New Year to our readers and welcome to the January edition of iTreasurer. We lead off the issue with a look at discussion points for 2019 NeuGroup meetings, then get into other aspects of treasury that don’t really have a specific year; they’re just current. This includes treasury management systems, talent, organization and more.
In “What Treasurers Will Be Talking About in 2019,” we discuss a late 2018 topic poll and what items treasurers are thinking about in 2019. Capital structure and planning was No. 1, which makes sense. Tax reform in many cases has generated extra cash, so what is done with it is critical. Mainly it must be working and benefiting the company and shareholders, otherwise activists will not hesitate to offer their own ideas. As for benefiting the company, many MNC treasurers are zeroing in on return on invested capital or ROIC as the best way to measure the company’s ability to create value. Companies are also looking at repurchase and dividend programs. Meanwhile, tax reform itself, its impact and its scope are still being examined.
Technology was the second top topic. There is lots to digest in 2019. Robotics and machine learning capabilities are growing and with that the hopes for artificial intelligence. Treasuries will be spending the next year and beyond seeing what mundane tasks they can fob off on bots and algos. This could of course ultimately reshape the treasurers’ role. As for treasury tech, 2019 could also see the beginnings of a TMS “fracture” as traditional offerings break up into smaller (defined-purpose) pieces, with visualization and data management rising to the fore. As Joseph Neu notes, “In simple terms, treasuries are coming around to the same realization reached by other corporate functions: To become data-driven, they need to create separate ‘data lakes’ and data warehouses to capture raw data in native formats without truncation and then structure it for defined purposes, such as feeding cash forecasts and risk analysis.”
In our “Anticipated Exposures” section, we discuss how in a world awash with risks, a quiet but top risk cited by corporate finance execs is attracting and retaining talent. Also ranking high are how size matters when it comes to corporate treasury departments performing various functions outside of core treasury, and finally, how an increased concentration of shareholders with longer-term goals may lessen the need for major capital structure changes driven by activist investors.
In this month’s NeuGroup peer summary, we discuss some of the top takeaways from the Assistant Treasurers’ Group of Thirty’s second-half meeting. Members discussed how developments at home, abroad and in technology are prompting more US-based multinational corporations (MNCs) to tweak existing in-house banks (IHBs) or begin creating one. In “No Tax Reform Impact on Notional Pooling,” we discuss how despite that lack of impact, risks related to using the structures remain. Next, we take a look at that often thorny issue of share of wallet with relationship banks. And finally, we share Bloomberg’s view of TMS, along with a glimpse of what systems will look like in the future.