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Cash & Working Capital

Cash & Working CapitalRisk Management
May 20, 2021

A Look at the Inflation Crystal Ball: Morgan Stanley’s View

Morgan Stanley economist Ellen Zentner says people are becoming “more convinced that inflation is a real thing.”The outlook for inflation and interest rates is a hot topic as the US recovery picks up steam. Here’s the view Morgan Stanley recently outlined for bank treasurers at a recent NeuGroup meeting: Inflationary pressure will almost certainly continue, but even with upwards of $2 trillion in additional capital from the Biden administration’s Build Back Better initiative likely to arrive early next year, the Federal…
Justin Jones
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Capital MarketsCash & Working Capital
May 6, 2021

Moving Target: A Growing Company’s Capital Structure Matures

MUFG helps a high-growth tech company shift from convertibles to a financing mix more in line with an IG credit.The optimal capital structure for a high-growth technology company may change significantly as its business develops and its financing options increase—one reason corporates that issue convertible bonds early in their trajectory often replace them with alternatives more suited to mature businesses with investment-grade (IG) credit metrics or ratings. That takeaway sprang from a session at a recent meeting of NeuGroup for…
Justin Jones
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Cash & Working CapitalTechnology
May 6, 2021

In Search of a Cash Forecasting Model for Use Across the Enterprise

One corporate in search of simplicity opted for developing a solution in-house vs. using third-party vendors.An indispensable lesson from the pandemic is that revenues can drop unexpectedly and precipitously, and so cash forecasts must consider multiple scenarios and learn from the past. An assistant treasurer (AT) from a global industrial company explained at a recent NeuGroup meeting how his company is improving cash forecasting with machine learning and other new technologies. A precise forecast was not the goal, but rather…
Justin Jones
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Cash & Working CapitalRegionalTalking Shop
May 6, 2021

Talking Shop: Processing Fees for a Domestic Cash Pool in China

Editor’s note: NeuGroup’s online communities give members another forum to find answers to their questions. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected]. Member question: “Has anybody set up a China domestic cash pool? I would like to understand market practice on the bank’s processing fee for this. “ is charging us a 0.1% processing fee on the outstanding borrowed balance in the domestic cash pool. Can someone give me a benchmark for this?” Peer answer:…
Justin Jones
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Cash & Working CapitalFX
April 22, 2021

Improvements in Forecasting Open Doors for Hedge Changes

A move from a current-year to a rolling forecast allows one risk manager to fine-tune the cash flow hedging program.A new CFO can mean a little change—or a lot. In the case of one NeuGroup member who manages FX risk, the new CFO drove an initiative to ensure budget forecasts would have a longer horizon and be available earlier. Over the course of two years, this has enabled an evolution from a program that only hedged a year out from…
Justin Jones
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Cash & Working CapitalTechnology
April 22, 2021

Overcoming Resistance: Integrating Data in Cash Flow Forecasting

Treasurers at mid-cap corporates looking to use large-scale data analysis to enhance cash flow forecasting are finding colleagues hesitant.The advantages of using sophisticated data analysis in cash flow forecasting are clear to a growing number of treasurers intent on improving accuracy and eliminating human error. But implementing and executing a data-driven approach often requires collaboration with teams outside treasury, such as AR and credit collections—and some NeuGroup members are meeting resistance. Solid support from leadership and showing the benefits of…
Justin Jones
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BankingCash & Working Capital
April 20, 2021

Treasury’s Eternal Question: What is the Right Level of Liquidity?

Wells Fargo’s risk-adjusted liquidity ratio offers insights on how corporates view liquidity during recessions.Setting a target for a company’s ideal liquidity level is never easy. Corporates use a variety of metrics and liquidity ratios to get it right. But what happens when events like the global financial crisis or the pandemic push the economy into recession and force corporates to go into crisis mode? In theory, given that most companies revenues and expenses drop somewhat during a recession, they should…
Justin Jones
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BankingCash & Working CapitalNeugroup
April 8, 2021

Tapping the Power of In-house Banks to Turn Cash Puddles into Pools

Mega-cap treasurers and PwC discuss multiple benefits of IHBs and some complexities of structuring them. Treasurers not sold on the value of in-house banks (IHBs) often tell Damien McMahon, a partner at PwC, “We have cash pooling already, and therefore we have a kind of in-house bank,” he recently told a group of NeuGroup members from mega-cap companies. In reality, though, many of the treasurers may have what Mr. McMahon called “cash puddles,” not cash pools.PwC and treasurers from two member…
Justin Jones
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Cash & Working CapitalRisk ManagementTalking Shop
March 25, 2021

Talking Shop: How Do You Use Counterparty Exposure Information?

Member question: “Does your organization review counterparty exposure? If so, how do you use this information? “What exposure types do you include? Cash, bank products, derivative contracts, other?“I understand that there are some organizations that set limits to how much exposure can be outstanding per counterparty. Does anyone have this practice in place?” Peer answer 1: “I monitor this frequently and have limits tied to my overall assets. Here are some items we look at for our liquidity providers: JurisdictionRegulatory environment…
Justin Jones
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