By Ted Howard
Let’s start with the elephant in the room: we’re changing our name. With this August issue of iTreasurer, we introduce our new name of NeuGroup Insights. iTreasurer will still exist in some way, shape or form, but we feel the new name better reflects our mission of distilling valuable information shared by members, sponsors and solution providers at the meetings, discussions and networking events we facilitate.
As for the stories in this issue, first we discuss the long-bemoaned FASB Financial Instruments-Credit Losses standard. Companies grumble about it for an “obvious reason,” writes NeuGroup founder Joseph Neu. “The standard’s ‘current expected credit loss’ (CECL) guidance impairs assets and requires banks to set aside more capital as a buffer.” The goal of CECL is that companies should recognize losses as soon as they realize that they’ll occur—”which may mean always.”
In our Anticipated Exposures stories, we discuss how, with the current expansion having just passed 10 years, corporates are prepping for a downturn—even though most US businesses have a positive outlook for the domestic economy. Also, a bill seeking to improve cybersecurity is being reintroduced in Congress. It is attempting once again to bolster public companies’ cybersecurity defenses by requiring them to tell regulators whether any of their board members are cybersecurity experts or explain why that isn’t necessary. Finally, there’s a story from a discussion at NeuGroup’s Tech20 Treasurers’ Peer Group meeting where backtesting by sponsor SocGen showed that since 1990, a 10-year floating strategy was cheaper than a fixed-rate strategy 100% of the time, with average savings of around 3%.
We also look at the feast or famine nature of revenue and cash flow at life sciences companies. The discussion related to the challenges of capital allocation and structure at companies that one day may resemble the Incredible Hulk but could then revert to being a not-so-incredible Bruce Banner after an unsuccessful drug trial.
Our peer group takeaways are from from NeuGroup’s Asia groups for CFOs and treasurers. At their spring meeting in Shanghai, members of the AsiaCFO group discussed the implications of China’s social credit system, the growing pressure on finance teams to gather and analyze data for business units, what multinational corporations need to know about robotic process automation, and more. Meanwhile, in Singapore, members of the Asia Treasurers’ peer group (AsiaTPG) discussed treasury’s role in M&A integration, risks to finance posed by humans, cybercrime, getting money out of China and more.
In “Balancing CFar and EaR to Optimize FX Hedges,” John Hintze discusses a new Bloomberg offering that helps FX practitioners manage foreign-exchange (FX) risk. The new product measures currency fluctuations’ impact on cash flow and earnings and enables a more targeted FX hedging strategy.
Finally, we discuss a recent takeaway from NeuGroup’s Assistant Treasurers’ Leadership Group that revolves around determining what cash level piques the interest of activist investors.