Ask FERF about ... corporate treasury issues.

• Author: de Mesa Graziano, Cheryl
• Position: Resources

Treasurers have a lot on their minds, and based on a recent survey, some strongly held opinions about key issues in their area. The findings, summarized below, stem from a survey sent via email in April to 1,968 Financial Executives International (FEI) members with the titles treasurer or vice president of finance. A total of 74 completed responses were received, representing a 3.8 percent response rate.

The survey was developed following a meeting of FEI's Committee on Corporate Finance (CCF) in March, at which CCF discussed several items for potential focus in the coming months. Based on this discussion, CCF worked with Financial Executives Research Foundation (FERF) to develop a survey intended to receive input from FEI treasurer members on whether these identified issues would be worth pursuing with policymakers.

Insurance Industry

According to 70 percent of respondents, more should be done to increase the level of price competition among insurance brokerage companies.

Four companies noted that competition is fostered by working with multiple brokers and insurance companies to obtain several quotes. Another four companies said that complete disclosures on all commissions and fees should be provided upon request. Premiums can then be adjusted accordingly. Two respondents noted that increased transparency or required disclosure would be helpful in decision-making and may result in prices regulating themselves.

Though 70 percent felt more should be done to increase competition, 57 percent thought more regulation was the answer. Additionally, 58 percent did not think the level of state regulation is adequate to protect consumer interests.

A possible solution recommended by some respondents would be federal regulation that could streamline or replace state regulation. More standardization, some said, may be more cost-effective because national insurance firms must be licensed in each individual state. This would increase competition by allowing more companies to quote within a state.

Credit Derivative Swaps (CDS)

By synthetically creating or eliminating credit exposures, these instruments can allow more effective management of credit risks. According to 60 percent of respondents, however, the growth of CDS contracts presents a risk for destabilization of the nation's credit markets, with some foreseeing issues such as cascading defaults, appropriate pricing, credit concentration and a related lack of transparency. A significant majority (78...