© 2012 Treasury Strategies, Inc. All rights reserved.

Presented To

Presented By

At a Crossroads: Defining your Future, and Leveraging the Potential of Treasury 3.0SM

September 2012

Dave WexlerPrincipal

Agenda

Assess the Current State of your Treasury

Create a Vision for your Future State Treasury

Define and Execute a Roadmap to Achieve Treasury 3.0

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Why a Treasury Assessment?

Treasury is the Financial Nerve Center

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Treasury 3.0®: Corporate View

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Treasury Operations is an immature, fragmented or informal function, characterized by manual processes.

Treasury centralizes key roles, improving transparency and controls.

There is greater access to data and computing power and consolidation of competency.

1st GenerationHigh

Treasury is a strategic advisor, more closely integrated with business units, supporting globalization, efficiency, trading partner/supply chain integration and greater sophistication in risk/return optimization.

Data Intelligence

2nd Generation 3rd Generation

Information

Low

Data vs. Intelligence

Technology/Data Architecture

• Full Automation & Integration

• Narrow Executional Focus

• Strategic Advisory

• Expanded Risk Responsibility

Sco

pe o

f Inf

luen

ce

2.0

2.0

3.0

3.0

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Why a Current State Assessment Can’t Wait

• The recent financial crisis is a call to action for Treasury 3.0®.

• The first step is to assess your current state.

• In the face of uncertainty, 3.0 helps you stay in control.

Internal External

• Cash flow• Working capital• Counterparty risk• Investment• Debt• Fraud

• Regulation• Economy• Government action• Banking turmoil• Political risk

You CAN control these You CAN assess the impact of these

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Key Assessment Elements

Policies & Procedures• Do policies support the goals of the organization, clearly communicate permissions and

account for unique situations?

Organizational Structure• Does our organizational structure effectively support the

business?

Bank Account Structure• Are banking relationships and bank account structures

leveraged to their potential?

Cash Flow & Liquidity• Do we know where our cash is and can we effectively sustain operations?

Technology• Treasury technology must reflect an organization’s need to be extremely nimble and adjust

quickly to the changes demanded by market conditions.

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Key to Success

Do policies support the goals of the

organization, clearly communicate permissions

and account for unique situations?

Policy Considerations:• Investment

• Debt

• FX

• Financial Risk Management

• Counterparty Risk Management

• Bank Account Administration• Business Continuity

Policy Elements: Instrument Types• Monetary Limits

• Durations

• Credit Ratings

• Concentration Limits

• Defined Review Periods

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Assessment: Policies & Procedures

Key Assessment Indicators

• Timing of last policy review

• What has transpired since the last review?

• Authorization

• Access/Distribution

• Sign-offs

Benefits

• Procedural support increases controls

- Segregation of Duties

• Regulatory Compliance

• Standardization

• Risk Mitigation

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Assessment: Policies & Procedures

Key to Success

Does our organizational structure effectively support the business?

Assessment: Organizational Structure

Organizational Considerations

• Recent/Future Actions

- Mergers/Acquisitions

- Spin-offs

• Staffing

- Resource levels

- Experience

- Knowledge/Training

- Authority

• Geographic Footprint

- Tax Implications

- Regulatory

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Assessment: Organizational Structure

Key Assessment Indicators

• Treasury Mandate

• Staffing

- Roles and Responsibilities

- Performance Metrics

• Business Unit/Subsidiary Roles

• Collaboration with Tax Department

- Timing of Review

- Repatriation Strategies

- Operational Support

• Regulatory Awareness

• Local Relationships

• Communication

Benefits

• Financial

- Tax Savings

- Funding Cost Reduction

• Employee Morale

• Compliance

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Key to Success

Are banking relationships and bank account structures

leveraged to their potential?

Assessment: Bank Account Structure

Bank Account Considerations

• Materiality

• Visibility

• Complexity

- Number of Bank Relationships/Accounts

- Drivers

• Administration

• Oversight

• Fee Analysis

• Relationship Review

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Assessment: Bank Account Structure

Key Assessment Indicators• Optimized Structure Effectively Supporting

Business

- Identify Redundant Services

- Duplicative Bank Accounts

• Review of Bank Relationships

- Periodic: RFP for Services

- Geographic

• Fee Analysis

- Frequency

- Mechanism

- ECR

• Oversight

- Centralized/Decentralized

Benefits

• Costs

• Efficiency

• Control/Risk Mitigation

• Income (Investment, etc.)

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Assessment: Cash Flow & Liquidity

A typical billion-dollar company spends approximately $27 million annually for unnecessary working capital and inefficient processing functions because they lack visibility into the financial supply chain and receivables.*

*Source: Killen Associates

Global VisibilityThe capability of an organization to have timely and comprehensive information on all positions and exposures.

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Key to Success

Do we know where our cash is and can we effectively sustain

operations?

Cash & Liquidity Considerations• Cash Positioning

Process– Mechanisms– Sources

• Cash Flow Forecasting– Methodology

• Accounts Receivable/Payable– Mechanisms: External– Systems: Internal

• Cash Concentration/Pooling

• Intercompany Transactions/Loans– Purpose

• Credit Access

Assessment: Cash Flow & Liquidity

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Key Assessment Indicators

• Cash Positioning- Automation- Consistency- Completeness- Timelines

• Cash Flow Forecasting- Precision- Relevance (Timing)- Consistency

• Accounts Receivable/Payable- Timing- Velocity

• Cash Concentration/Pooling- ZBA Structures- Physical/Notional Pooling

• Intercompany Transactions- Settlement Timing- Currency - On Behalf Of

• Credit Access- Planning/Coordination

with Corporate Finance- Syndicate Participants- Sources

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Assessment: Cash Flow & Liquidity

Benefits

• Optimize idle cash balances

• Lower borrowing costs

• Lower cost of capital

• Netting Opportunities

• Greater investment income

• More favorable FX rates

• Early warning system

Assessment: Cash Flow & Liquidity

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Assessment: Technology

Key to Technology Success

Treasury technology must reflect an organization’s need to be

extremely nimble and adjust quickly to the changes

demanded by market conditions.

Technology

Considerations• System Types

- Older Treasury Workstation Systems

(TWS)- Bank Online Systems- Spreadsheets- Best-of-Breed

• License expiration, migration, “sunset”

• Upgrade timing• Deployment Mode• Costs• Integration/Interfaces• Enterprise accessibility• Information workflow• Controls

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Assessment: Technology

Key Assessment Indicators• Percentage of Manual Processes

• Timing of Last Upgrade

• Interfaces to Promote STP

- Banking

- ERP (GL, AR/AP)

- Trading

• System Access

• Auditability

• Security

• Reporting

• Costs

- Internal

- 3rd Party

Benefits

• Enable Treasury Best Practice

• Automation + Efficiency

• Standardization

• STP

• Controls

• Scalability

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Treasury Management System

Functions used:• Bank Polling• Cash Positioning• Cash Forecasting• Bank Account Administration• Payments (& Payment

Factory)• Short-term Investments and

Debt• FX, Commodities & Risk

Management• LT Debt & LT Investments• In-house Bank &

Intercompany Loans• Multilateral Netting• Accounting & Reconciliation

Analysis & Pricing

Bank Account Administration

In-house Banking, Intercompany Loans &

Netting

Payment Factory

Bank Communication via SWIFT

Financial Transactions

Accounting & Reconciliation

Centralized, Integrated & Real-Time System

Dashboard & Reporting

Technology & Treasury Applications

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Create a Vision for Your Treasury Organization’s Future

5. Roadmap Planning & Development

4. Reporting Protocols

3. Opportunities for Improvement

1. Gap Analysis 2. Benchmark Reporting

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1. Gap Analysis

Controls Deficiencies

Material Weakness

Process Inefficiencies

Inconsistencies

Completeness

Creating the Future Vision: Essential Elements

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Creating the Future Vision: Essential Elements

2. Benchmark Reporting

• General Best Practice

- Operation/Function

• Industry Best Practice

• Substantiated and Credible Best

Practice Standards

- Source

- Metrics

• Local/Regional Practices

• Regulatory Implications

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Treasury Function Metric

Cash Management • Bank fees vs. budget and historical trends • Number of bank accounts, historical trends• Days payables outstanding (DPO)• Accuracy of cash forecast• Transaction error rate• “Trapped” cash balances

Foreign Exchange • Trade performance vs. market rate at time of execution• % exposure to counterparties• Number of FX spot transactions per month• % hedge effectiveness

Investments • Yield and return vs. established benchmarks• Trade performance vs. market rate at time of execution• % exposure to counterparties and issuers

Debt • Total short-term debt outstanding as a percentage of credit availability

• CP rate vs. Federal Reserve Non-Financial CP rate for A2/P2 companies

• WACC • Timing of cash call requirements versus uses of internal time• Interest expense vs. budget and historical trends

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Sample Treasury Metrics

1. Formally define and document global Treasury policies and procedures:

- Dependent upon business: Debt, Short-Term Investments, Bank Account Administration, Cash Forecasting, FX Risk Mgt.

2. Policies should be approved by company’s Board of Directors.

3. Create written global treasury procedures, tailored to individual countries to reflect regional/country nuances and systems

4. Formally document a Treasury Disaster Recovery Plan:

- Periodically test plan to verify its effectiveness.

5. Continue to document and refine country treasury process maps

Guidelines: Policies and Procedures

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3. Opportunities for Improvement

• Identified

• Quantified

• Fundamentals

- Costs

- Efficiencies

- Strategic

- ROI

- FTE

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Creating the Future Vision:Essential Elements

4. Reporting Protocols

• Consistent

• Detailed Support

• Actionable

• Realistic

• Metrics/Statistics

• Executive Presentation

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Creating the Future Vision:Essential Elements

5. Roadmap Planning & Development

Prioritization

Dependencies

Timelines

Resources

Milestones

Risks

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Creating the Future Vision:Essential Elements

The Treasury Roadmap

A treasury roadmap enables organizations to visualize:

Interdependencies of tasks

Critical assets within the organization

Required skills, competencies and

technology

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Roadmap Benefits

Provides focus and direction

Provides management

control

Links tasks to needs and milestones

Visually represents goals

to employees

Improves departmental

communication

Identifies issues and

interdependencies

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The Treasury Roadmap Process

Preliminary Design

• Setting the framework, vision, timing & organizational goals

Roadmap Developm

ent

• Priority Sequencing

• High-level timeline

Follow-up &

Implementation

Roadmap Update

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Distribution of time spent on tasks in a “typical” Treasury department

Analytical (30%)

Operational (40%)

Strategic (30%)

Distribution of time spent on tasks in a “best-practices” Treasury department

Operational (80%)

Analytical (15%)

Strategic(5%)

Operational to Strategic Transition

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Never before has Treasury’s contribution to an organization’s survival been so critical:

• Strategic focus

• Rapid and comprehensive response

• Business Continuity Planning (“BPM”)

• Proactive Plan

• Integrated data

• Impact of uncontrollable forces

• Efficiency

• Communication

• Control

• Enterprise Support

Achieve Treasury 3.0®

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About Treasury Strategies, Inc.

Who We Are

Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.

What We Do

Corporations

We help you maximize worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls.

Treasury Technology

We provide guidance through every step of the technology process – which includes creating a roadmap, selection, implementation and optimization. Our expert approach will uncover opportunities to optimize the value of your treasury through fully integrated technology solutions.

Financial Services

Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business.

www.TreasuryStrategies.com/content/networking-communities

@TreasuryStrat

Accreditations

Connect with Us

Locations

Chicago • London • New York

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