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C O N F I D E N T I A L
R E D H A T , I N C .
P A Y M E N T S A R O U N D T H E W O R L D
May 2016
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C O N F I D E N T I A L
R E D H A T , I N C .
Red Hat Inc. - Company Background
RED HAT INC.
� Revenue size: $14B Market Cap. $2B in sales
� What we do:
Provider of open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, middleware, storage and cloud technologies. The open source development model allows it to use the collective input, resources and knowledge of a global community of contributors who can collaborate to develop, maintain and enhance software because the human-readable source code for that software is publicly available and licenses permit modification. These offerings include Red Hat Enterprise Linux, Red Hat JBoss Middleware, Red Hat Enterprise Virtualization and Red Hat Storage Server
� Where we sell : Three geographic operating segments:
� Americas (U.S., Canada and Latin America)
� EMEA (Europe, Middle East and Africa)
� Asia Pacific
� History: Red Hat was founded by Robert F. Young in March 1993 and is headquartered in Raleigh, NC
� Future: Global growth. Grow, Grow, Grow
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C O N F I D E N T I A L
R E D H A T , I N C .
North America
CanadaUnited States
Latin America
ArgentinaBrazilChileColombiaMexico
Europe
BelgiumCzech RepublicFinlandFranceGermanyIrelandItalyNetherlandsNorwayRussiaPolandSpainSwedenSwitzerlandUnited Kingdom
Middle East / Africa
TurkeyUnited Arab Emirates
Asia Pacific
Australia ChinaHong KongIndiaIndonesiaJapanSouth KoreaMalaysiaNew ZealandSingaporeTaiwanThailandVietnam
Red Hat operates in over 35 countries around the world
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Red Hat Inc. – Global Operations
C O N F I D E N T I A L
R E D H A T , I N C .
Will Consider
47%
Don’t Know
5%
No
7%
Yes
44%
Evolution of Treasury Role
Corporate treasury is shifting from a back-office function towards that of a strategic business partner.
Treasury played an operational and clerical role
Treasury became more analytical and proactive
Treasury will become advisory and strategic
Treasury 1.0 Treasury 2.0 Treasury 3.0 � CEOs are looking to treasury for intelligence to make
key decisions on:
� Cash flow
� Funding
� Risk considerations
� Treasurers are seeking banking relationships that provide higher-value advisory services .
� These relationships will center on the amount and quality of insight the bank can deliver .
Source: Treasury Strategies Inc. 2013
Is your company likely to scrutinize current or prospective financial services providers more thoroughly over the next two years?
“We had a number of executives say they would like to be able to partner with their banks in a more consultative way .”- David Owens, Director of Research, CFO Research
Key reasons for the treasury’s greater strategic ro le
� Increased emphasis placed on cash management and liquidity in the current economic environment70%
� Result of close attention being paid to the company’s liquidity and risk exposure by senior management and the board
� Financial professionals that report that their companies are making a concerted effort to be innovative in leveraging the skills that reside in treasury
� Organization has taken a more cross-functional approach
63%
50%
47%
Source: AFP, Strategic Role of Treasury. 2014
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C O N F I D E N T I A L
R E D H A T , I N C .
Legacy Payables Environment
One ERPMany
LocationsProcessingDifferences
Many Connections
Many FileFormats
• sFTP / PGP
• NACHA
Host-to-Host
• HTTPS / SSL
• ISO20022 XML
File Upload
NORTH AMERICA
• HTTPS / SSL
• ISO20022 XML
Manual Entry
EUROPE / MIDDLE EAST
LATIN AMERICA
ASIA PACIFIC
• HTTPS / SSL
• CSV
• Proprietary
File Upload
OR
AC
LE
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C O N F I D E N T I A L
R E D H A T , I N C .
� Fragmented Payables Process
� Security Concerns with File Exports/Imports
� Inconsistent and Manual Processing
� Different technology, file formats, connectivity and security
� Outgrew Online Processing
Red Hat’s Current State Challenges & Goals of Future State
Current State Challenges
� Automate and Standardize Payments Processing (save time/money)
� Reduce operational risk
� Electronify Wherever Possible
� Clean-up Vendor Master Data
� Consolidate Payables into a single file solution
� Utilize Industry Standard Formats – Reduce the cost of future change
� Maximize Investment in ERP Platform
� Build a Foundation for Future Growth –acquisition integration
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Future State Goals
C O N F I D E N T I A L
R E D H A T , I N C .
Evolution of Payment Processing
Bank Web Portal with export to bank office
Host-to-Host transmission for
payments and reporting
Consolidated reporting and payables, standardized
connection through SWIFT
� Basic cash positioning
� Daily reporting through bank web portal
� Export data in CSV out of bank portal
� Direct transmission of daily reports
� Rely on bank portal for some reporting
� Use of mobile and other multi channels
� Largest may use ERP treasury or TMS
� TMS or dedicated treasury ERP module
� Direct transmission or SWIFT communication channels
� Little if any use of bank web portal
� Pooling and netting schemes
� In-house or web portal check print
� Check usage still high
� Use bank web portal for wire and ACH
� Partial reconciliation
� In-house or direct transmission check print
� Check usage slowing; active campaign to ACH
� International and FX payments
� Use of mixed payments files
� Shared service centers or payment factories
� FX and multicurrency accounts
� Use of mixed payment files
� Payments created and initiated through ERP, likely use ERP as the approval and transmission vehicle
Simple Complex
Simple
Complex
Organizational needs
Information reporting
Payables
Level of Technology
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C O N F I D E N T I A L
R E D H A T , I N C .
� Engage your primary banking partners to better understand:
� Global coverage, considerations, options
� Strategic Advisory
� Payables Trends and Best Practices – what are your other clients doing?
� Considerations in managing Global Payables & Technology
� Consolidated Payables / Supported Transaction Types
� Connectivity Options / SWIFT
� ERP / File Formats / Standard / Bank Agnostic
� Resources and Time Required
� Identify and Recruit Key Stakeholders
� Senior Management – ‘buy in’ key to project success
� Treasury
� Accounts Payable
� Procurement
� Information Technology – engage early!
� Local Teams – ‘buy in’ key to project success
Project Approach
How to begin the project
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C O N F I D E N T I A L
R E D H A T , I N C .
BelgiumFranceGermanyIrelandItalyNetherlandsSouth AfricaSpainSwitzerlandUnited Kingdom
Global Coverage - How Well Do they Match?
Toronto
Mexico City
Sao Paulo
LondonFrankfurt
Mumbai
Singapore
TokyoShanghai
Hong Kong
Sydney
CanadaUnited StatesBrazilMexico
Asia Pacific
J.P. Morgan Branches J.P. Morgan London Solution
The Americas Europe, Middle East & AfricaEurope
Indicates a SEPA country
AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailand
AustriaBulgariaCroatiaCyprusCzech RepublicDenmarkEstoniaFinlandGreeceHungaryIcelandLatvia
LichtensteinLithuaniaLuxembourgMaltaMonacoNorwayPolandPortugalRomaniaSlovakiaSloveniaSweden
Red Hat & J.P. Morgan footprint
Additional J.P. Morgan footprint
Commercial Bank regional banker coverage
Additional Red Hat footprint
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C O N F I D E N T I A L
R E D H A T , I N C .
� Country coverage is rarely 100%
� Even large global banks have country gaps in treasury service coverage
� Many partner with local banks and engage in reciprocal support
� Some require a local bank account
� Regulation – just to do business (Brazil, India, China, Malaysia)
� Tax Payments
� Payroll
� Petty Cash
� Capital Injections
� Existing Relationship
� Local credit needs
Global Coverage, Considerations
Global Coverage
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C O N F I D E N T I A L
R E D H A T , I N C .
� Treasury structuring
� Country specific challenges
� Technology & systems
� Compliance and regulation
� Working capital management
� Cash management, cash pooling structures
� Foreign exchange and risk management
� Counterparty risk management
� Cash flow forecasting
Engage Your Banking Partner
Treasury Trends & Best Practices
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Market
Banking Partner Strategy
C O N F I D E N T I A L
R E D H A T , I N C .
Your provider’s experience with various clients in different stages of the treasury evolutionhelps clients explore the real benefits to their ove rall business strategy
ActiveTreasury
Mgmt.
Regional Treasury Centers
Regional Liquidity Solutions
Global Solutions
RegionalRisk
Mgmt.
RegionalShared Service
Centers
In-CountryLiquidity
Management
Finance Solutions
Payables Cash FlowProjections
Receivables
Country Level
EntityLevel
� Global funding, concentration and investments
� Global payment factory
� Global Supply Chain Program
� Netting, pooling, sweeping structures
� Physical & financial supply chain management
� Regional re-invoicing center
� Active treasury and risk management role
� Shared Service Centers – centralized AP and AR activities
� Regional Treasury Centers – centralized FX and funding
� Rationalization of banking relationships
� In-country accounts
� Basic payments / receivables
� In-country liquidity structures
� Sweeping cash into centrally managed bank accounts or centralized in-country banks
� Local Trade and Supply Chain Financing
Stage 4: Global Model
Stage 3: Regional Model (automated overlay)
Stage 2: Regional Model (manual overlay)
Stage 1: Decentralized Model
Evolution of Treasury Structures
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C O N F I D E N T I A L
R E D H A T , I N C .
Global Payables Best Practices and Technology
� Consolidate to a single ERP or Treasury Management System
� Build a foundation for future growth – acquisition integration
� Enables maximize return on investment in platform
� SWIFT – does it make sense?
� Secure the pipe and the file
� Acknowledgement processing
� Automate and Standardize Payments Processing (save time/money)
� Reduce operational risk
� Utilize Industry Standard Formats – Reduce the cost of future change
ERP / Treasury Management
System
Connectivity
Consolidated Payables
ERP Integration and Automation
� Growth of ISO20022 XML usage
� Reduce the cost of future change
� Bank agnostic
Use Industry Standard Formats
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C O N F I D E N T I A L
R E D H A T , I N C .
Global Payables Best Practices and Technology
� Utilize H2H reporting: ISO20022 XML, BAI2, CSV etc.
� Prior Day – account reconcilement
� Current Day – cash positioning
� Multi-bank Sweeping – Concentrate cash to your primary banking provider
� Multi-bank Payments – streamline number of banking platforms and entitlement management
� Multi-bank Reporting - upgrade your online banking platform to a global portal for cash balances
Reporting Automation
Coverage Gaps / Multi-bank
ERP Integration and Automation
� Ad-hoc payments
� Ad-hoc current day reporting
� View H2H file processing
� Mobile utilization
Use of Online Banking
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C O N F I D E N T I A L
R E D H A T , I N C .
Comprehensive Payables
Key features
Red Hat Host-to-Host Pay J.P. Morgan
I N S T R U C T I O N S
SECURE
TRANSPORTTRANSLATE
VALIDATE AND
PROCESS
CONSOLIDATECONSOLIDATEFORMAT DATAFORMAT DATASECURESECURE
I N F O R M A T I O N
Wires
ACH, GACH
Check Print
Foreign Exchange
Virtual Card
Acknowledgements
Reconciliation and
Reports
ERP Systems or
TMS
Payments
Consumer
Payments
� A mixed payment electronic file solution for urgent and non-urgent, electronic and paper, credit transfer and direct debit – all in a single file
Reconciliation and Reporting
� Intraday and prior-day balances and transactions and payment details by type
Connectivity
� A secure, electronic link between Red Hat and J.P. Morgan and our wide range of automated payment and reporting services
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38% Bank web platform 28% Treasury management system/workstation 19% ERP system 15% In-house developed system
Primary systems for initiating treasury payments and settlements Source: Treasury Strategies’ Quarterly Technology Briefing ,2014
Split Remittance
C O N F I D E N T I A L
R E D H A T , I N C .
� Identification of Project Scope
� Countries, Currencies
� Payment Types (ACH, GACH, Wire, FX, Check)
� ERP Integration
� File Formats / Encryption
� Connectivity / Security
� Transmission locations / Acknowledgements
� Identify and Recruit Key Stakeholders
� Senior Management, Treasury, Accounts Payable, Information Technology, Local Teams
� Implementation Approach
� Strategy: Country, Regional or “Big Bang” approach
� Cross-Regional Coordination
� Project Timing / Expectations / Factors
Project Implementation
Implementing Consolidated Payables
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C O N F I D E N T I A L
R E D H A T , I N C .
� Implementation Approach
� Regional
� North America: U.S., Canada
� Europe
� Asia
� Latin America
� Payments Types: ACH, Wire
� Benefits Realized
� Risk reduction
� Streamlined processes
� Approval & Control Process
Current State
Where are we at today?
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C O N F I D E N T I A L
R E D H A T , I N C .
� Other Regions – Treasury Function Outsourcing, ERP Status
� Europe: SEPA debits & credits
� Asia-Pacific
� Latin America
� Other Value-Add Solutions
� Check Print Outsourcing: U.S. and Canada
� Virtual / One-time Use Card Payments: U.S.
� Mobile Payments / Collections
Future State – Expansion Items
Expanding Global Integration & Automation
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C O N F I D E N T I A L
R E D H A T , I N C .
This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered including such client’s subsidiaries, (the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. It may not be copied, published or used, in whole or in part, for any purpose other than as expressly authorized by J.P. Morgan.
The statements in this presentation are confidential and proprietary to J.P. Morgan and are not intended to be legally binding. Neither J.P. Morgan nor any of its directors, officers, employees or agents shall incur any responsibility or liability to the Company or any other party with respect to the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. a nd its affiliates do not provide tax advice. Accor dingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliate d with JPMorgan Chase & Co. of any of the matters a ddressed herein or for the purpose of avoiding U.S. tax-related penalties.
J.P. Morgan is a marketing name for the Treasury Services businesses of JPMorgan Chase Bank, N.A. and its subsidiaries worldwide. In the United Kingdom, JPMorgan Chase Bank, N.A., London branch and J.P. Morgan Europe Limited are authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
JPMorgan Chase is licensed under US patent numbers 5, 910,988, and 6, 032 and 137.
© 2016 JPMorgan Chase & Co. All rights reserved.
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