Treasury Transformation for the ‘Now’ Normalc.ymcdn.com/sites/ to evolving market conditions Insight Into financial metrics and performance to support business decisions Visibility

Tracey Ferguson KnightSolutions Consultant, Reval

August 21, 2013AFP Atlanta

Treasury Transformationfor the ‘Now’ Normal

Agenda/Notes

o Current Corporate Treasury Environment

o The ‘Now’ Normal– Increased Requirements– Moving from Tactical to Strategic

o Achieving Treasury Excellence– Techniques Matter - Case Study Examples– People Matter – Talent Management– Communication Matters – Promote Treasury– Technology Matters – Treasury & Risk Management (TRM)

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FBARFBAR

Dodd FrankDodd FrankIFRS9IFRS9

TAGTAGSOXSOX

FASB EDFASB ED

FINANCIAL REGULATORY REQUIREMENTS

FINANCIAL REGULATORY REQUIREMENTS

The Perfect Storm: Evolving Market Conditions, Mounting Treasury Expectations

MARKET RISKMARKET RISK

FX RiskFX Risk

Interest Rate RiskInterest Rate Risk

Commodity RiskCommodity Risk

Counterparty RiskCounterparty Risk

Liquidity RiskLiquidity Risk

Reporting Requirements 59% Reporting Requirements 59%

Internal controls 46%Internal controls 46%

Fraud 43%Fraud 43%

Derivatives Regulations 43%Derivatives Regulations 43%

Counterparty Risk 76%Counterparty Risk 76%

Interest Rate Risk 57%Interest Rate Risk 57%

Liquidity Risk 65%Liquidity Risk 65%

FX Risk 57%FX Risk 57%

Commodity Price Risk 30%Commodity Price Risk 30%

Building the Next Generation of Treasury: Survey Participant Report, Treasury Strategies Inc., March 2012

As Requirements Increase, Treasurers Must Respond Dynamically

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Run forecasts, process payments


Understand liquidity statusUnderstand liquidity status

Support Multiple Business Units


Comply with Evolving Regulatory Requirements


Establish Strategic Advisor Position on the Board



Understand liquidity status




Efficiency and ConnectivityTo integrate core treasury systems to streamline efforts, accessibility and achieve straight-through processing functionality

Collaboration Across Business UnitsBy solidifying Treasury as a key driver for change cross-functionally

Flexiblity To respond quickly and effectively to evolving market conditions

InsightInto financial metrics and performance to support business decisions

VisibilityAcross the organization globally to mitigate risk











Increased Expectations = Increased Requirements

State of Corporate Treasury - Observations

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Global Observations: Treasury Continues to Become More Strategic

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*Source - gtnews / AFP 2012

Global Observations: Treasury is Becoming More Strategic

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*Source - gtnews / AFP 2012

Expanded Role of the TreasurerWhat does this mean?

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Traditional Treasury

o Strategico Analyticalo Collaboration

Across Business Units

o Drive Change

o Tacticalo Transactionalo Technicalo Status Quo

New Trend

Great Concept – What Now?

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Achieving Excellence in 2013Delivering on expanded mandates

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Treasury Value Proposition

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Vision

VisionVision & Strategy

Accountability

Measurement

Organization &

Examples of Strategic Initiatives

o Globalization of Treasury– Optimization– Exposure and hedge programs– Commodity hedge involvement– Technology maximization

o Global liquidity structure opportunities– Centralized v. decentralized– Intercompany Lending– Cash pooling– Multilateral Netting– Payment Factories– Bank Rationalization

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Source: AFP Guide to Mobilizing Global Cash

Source: Scandinavian Financial Solutions AB.

Becoming Strategic

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TRADITIONAL TREASURY CLIENT TREASURYORGANIZATION VISION

Company’s Strategic Plan Support

M&A and Business Model Support

Enterprise Risk Management

Leasing and Customer Financing

Trade Finance and Complex Transaction Structuring

Working Capital and Capital Expenditure Management

Company’s Intl Footprint and Global Infrastructure Committee

Treasury Organization Strategic Planning and Talent Mgmt

Bank Relationship Management Treasury Partner Relationship Management

FX Hedging Financial Risk Management

Investments Efficient Frontier Portfolio and Capital Allocation based on ROIC

Debt Management Capital Structure Planning and Management

Treasury Systems Information Management Strategy

Short-term Cash Forecasting

Optimized OperationsControls, Policies and Procedures

Insurance Program Management

Cash Mgmt and Bank a/c Structure

STR

ATEGIC

TAC

TICA

LTAC

TIC

AL

Establish Roadmap

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Strategic Roadmap

Basics under Control Best Practice Excellence

Strategic Planning

Develop models and align to

FP&A processes

Liquidity and debt forecasts –Stress testing

Capital structure planning & EPS

maximization

ERMRisk

identification and ownership

Risk management –

Response, recovery & BCP

Financial modeling and

portfolio analysis

Foreign Exchange

Management

FX exposure reporting and FX

P&L variance analysis

Streamline FX ownership and

processes

Benchmarking and Dynamic

hedging

From Basics to Excellence

Staggered rolling

hedging

Re-defined strategic hedging

objectives-

QuotesCash flows

Balance sheet

-Metrics &

risk tolerance

Re-designed system strategy

-Selected system to support FX vision and strategic

goals

Re-vamped FX strategy

implemented and

operational

Developed new FX

programs to support Company’s business growth

Re-designed FX-related business

processes and

ownership

Concrete Application—FX Management

Year 1 Year 2 Year 3

Stra

tegi

c

Trea

sury

X-fu

nctio

nsS

enio

r M

gt

Basics under control

-Identified exposures

Reconciled P/L impact

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Stra

tegi

c

Trea

sury

X-fu

nctio

nsS

enio

r M

gtConcrete Application—Cash Forecasting

Working capital

forecasting

Working capital

management

Stress-testing

Short-term operational

cash forecasting

Cash forecasts

for annual

plan

3-year strategic

plan cash

forecasts

Scenario planning through

ERM

Contingency action plans

3-year balance

sheet forecast

Capital structure planning

Capital expenditure forecasting

Year 1 Year 2 Year 3

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o Treasury organizations are morphing

o Rotation still desirableo Need to add capacity and

intellectual capital to get to strategic treasury

o Need support of more sophisticated technology to keep people out of execution

Talent Management

o Content AND form (make it pretty)

o Board and Senior Executive communication

o Development

Communication

Requirements for Treasury Transformation

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Innovation

Integration

SpeedIntelligence

Technology Matters - TRM

20Disparate, Disconnected, Siloed Systems and Processes

Multiple Systems and Data Sources Interfaced to Address Tactical Treasury Requirements

Integrated, Connected, Seamless Processes and Capabilities

All-in-one Fully Integrated Solution for TRM Built to Deliver on Strategic Treasury Requirements

GL Ledger

Market DataBank Accounts

Commodities

Risk Management

Light Web User Interface

CustomApps

TWS

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Benefits of a True SaaS for Treasury

o Currento Responsiveo Available

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Future Proof Your Treasury

Effective risk management strategy is key

Align treasury structure, resources and technology with organizational initiatives

Best way to be ready for change is to get out of executionalmode

Flexible, scalable SaaS treasury technology is paramount for future

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Q&A

Tracey Ferguson KnightSolutions [email protected]

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Documents

Treasury Transformation for the ‘Now’ Normalc.ymcdn.com/sites/ to evolving market conditions Insight Into financial metrics and performance to support business decisions Visibility