By Ted Howard
This month in iTreasurer we discuss capital structure, improving your counterparty risk analytics, the state of payments and how one treasury management system provider is energizing its product line with new offerings. In between are discussions on how companies should announce cyber breaches, low rates’ impact on pensions and how prime money market funds continue to lose cash to government funds and other vehicles.
We start off with a story about capital structure. As most know, persistently low interest rates over the past few years have helped put corporates in fine fettle, improving their cash positions via well-timed debt issuance. But now they want to keep the party going. “There are certainly worse situations than having a solid capital structure in place and wondering what to do with excess cash,” writes contributor John Hintze. “For many companies the goal now is to hold on to their current good fortune as long as possible. To that end, rate swaps on future issuances have come into vogue, enabling corporates to issue bonds in the future while locking in today’s exceptionally low rates.”
NeuGroup president Joseph Neu discusses how members of the NeuGroup’s Treasurers’ Group of Mega-Caps (tMega) are thinking about counterparty risk. “The unprecedented conditions in financial markets and the changing nature of how credit risk is being measured, especially at heavily regulated, globally significant financial institutions, are cause for treasurers to review and increase the sophistication of their counterparty risk monitoring, mitigation and reporting frameworks.”
In “Are You Ready for Real-Time?” , contributor Geri Westphal discusses the formerly quiet area of corporate payments. While new technology making the movement of money faster has been making inroads into retail banking, in the corporate space, the situation is far slower and, well, antiquated. But things are hotting up and new technologies, most notably blockchain or distributed ledger, will soon make global payments an instantaneous action. “These fundamental changes call for a review of current treasury services, processes and business models,” writes Ms. Westphal. “Now is the time to ensure that your business is ready for this significant structural change as consumers are far more digitally insistent and demand an easier seamless payment experience.”
Our peer group meeting summary this month is from The NeuGroup’s European Treasurers’ Peer Group. At the meeting, members discussed how they can leverage technology in a session on treasury management systems and systems infrastructure. Also discussed were the revisions to the Markets in Financial Instruments Directive (MiFID 2), which aims to make financial markets “more efficient, resilient and transparent, and to strengthen the protection of investors.” Members also examined liquidity management amid low—and in some case negative—interest rates, Basel III and coming global tax changes.
In “New Tools and Partnerships for the Next-Generation Corporate Treasurer”, we discuss how treasury solutions provider 360T is broadening its reach into the US with new products, services and partnerships. One area in which the firm hopes to gain ground is in automated trading, with the introduction of its execution management system.