Issues on International Treasurer’s radar screen this week.
Peer group discussion items formed the bulk of our editorial discussion. We started with a major theme emerging from the development of the Treasurers’ Group of Thirty (T30) fall meeting agenda. Interestingly, there was mixed reaction to topics involving the impact of Dodd-Frank implementation. While most treasurers want to discuss the impact, there are those that feel it will be too much of a guessing game to warrant actionable information until much later than this fall.
FinReg = drag on recovery
Risk quants will also say that this guessing game is impervious to risk analytics, since political and regulatory risk is the most difficult to price. Without risk pricing, it’s harder for modern financiers to work up a risk appetite, which is why so much cash is still sitting on the sidelines.
US Treasury Secretary Geithner expressed concern about this sentiment during a talk this week, where he also promised swift resolution and clarity on FinReg rulemaking. Unfortunately, he is not in a position to deliver on such a promise, given the extent of rulemaking and the need to stand up to multiple major new regulatory bodies. Thus, the outcome Geithner fears is seen in the T30 treasurers’ reactions: FinReg will be a drag on economic recovery, as market participants will be inclined to wait and see what actually happens. Still, on certain issues ranging from ratings requirements to credit support on derivatives transactions, most treasurers want to be proactive rather than sit on their hands.
LatAm SSC polling
A comparing of notes on shared service centers (SSC ) in Latin America is a topic of discussion in The NeuGroup’s LatAm Treasury Managers’ Peer Group. This signals ongoing interest in regionalizing finance administration and certain treasury operations to scale for expected growth and the absence of guidance treasurers trust from consultants and business managers advocating SSCs. It is certainly better to poll finance professionals who actually have regional SSCs (where they have them, why and would they put them there again?) than to listen to people who don’t know any better (if Venezuela is on their list, it is probably a sure sign).
Justifying No ERM
Finally, a discussion among NeuGroup peer group treasurers regarding the makeup of their firms’ ERM programs revealed almost more about the justifications that were employed to shelf the launch of such programs. While no one advocates ignoring risk management, there continues to be valid criticisms of the cost/benefit of overlaying an additional risk management framework in the name of ERM. It will be interesting to see how long these justifications hold up, as risk governance regulations and best practice incentives continue to evolve.