What’s on International Treasurer’s radar screen.
This week’s editorial discussion revisited a number of familiar themes. One steadily growing theme is the realization that treasury management as a discipline is jumping to a new plane in the aftermath of the financial crisis. For example, this was the theme of a recent webinar by Treasury Strategies, “Treasury 3.0: Treasury as the Financial Nerve Center.” Part of the new treasury is becoming more enabled by technology to respond proactively and strategically, rather than be in the more traditional fire drill mode.
Drawing on the post-crisis lesson book, treasurers should also be in a position to make better sense of big events and their impact—as they happen—so as to get ahead of the curve on exposure. Proving that old is new again, we are reminded of the “Treasury as Infoserver” concept International Treasurer promoted in the mid-1990s
Emerging risk as source of ERM dissatisfaction
Seeking to get ahead of the curve on exposure via better mechanisms to flag emerging risks is also highlighted in a recent Oliver Wyman/Financial Times survey. The key conclusion of that survey is that “despite significant investments in improving their risk management capabilities in the three years since the financial crisis began, most executives still rate their companies as ‘ineffective’ or only ‘moderately effective’ at incorporating emerging risks into their decision-making.”
This conclusion dovetails with the “Financial Nerve Center” theme for treasury: both treasurers and their firms need to better integrate information about emerging risks into their decision-making. This is interesting given ongoing discussions about risk oversight in the NeuGroup’s peer groups. No new layers of risk oversight, including board level committees, will help with emerging risk gaps in management decisions without a change of approach—and investment in information systems.
Venezuela bond offering
Close on the announcement of Venezuela’s new bond issuance, the first since last October, members of The NeuGroup’s Latin American Treasury Managers’ Peer Group (LATMPG) were engaged in conversation about how much of an allocation to seek. It will be interesting to see in the post-mortem phase to what extent the nature of this offering and the allocations to multinationals prove to be any different than prior issues, despite talk of the allocations being radically different this time.
Hedge accounting
We will be following up on the latest thinking on new hedge accounting guidance coming out of Norwalk from the Financial Accounting Standards Board (FASB). What we have heard is that recent fears about new language curbing hedge accounting eligibility for hedges of anticipated intercompany FX exposures will not be coming to fruition. MNC hedgers should still remain vigilant, but it appears the FASB board members are inclined to let the widespread practice of hedging the FX risk on anticipated intercompany payments continue to be eligible for hedge accounting.