Tower46 LLC Tower46 LLC FORAD Multinational Business Finance Simulation Corporate Learning.

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FORAD Multinational Business Finance Simulation

Corporate Learning


Agenda

2

Executive summary

The FORAD simulation:

FORAD company structure and details Decisions process Performance measures Simulation process Reporting

Learning points

Benefits for the corporation

Logistics and sample schedule


Executive Summary

3

EXPERIENCE: The FORAD business finance simulation is a computer-based game designed to help players, usually in teams of 3 to 5, understand what it takes to manage the financial and operational challenges of a multinational corporation. FORAD is typically structured as a competition between 5-10 teams.

LEARNING POINTS: During the course of the competition, the players gain complex corporate finance knowledge and practice crucial managerial and leadership skills. A successful FORAD team demonstrates competencies in Operational Planning, Capital Structure, Hedging, Derivatives, Debt & Cash Management, F/X, Tax Optimization, and Intercompany/Transfer Pricing Strategies.

PLAYERS: While pre-existing knowledge is helpful, it is not a requirement. The Players Manual details how to play FORAD, and the model generates all reporting automatically. Additionally, the players can use the application to test concepts and ideas and examine the effects real time.

BENEFITS: The FORAD competition enhances employees’ professional knowledge, increases engagement and motivation, and reveals employee talent.


FORAD simulation - Company structure

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Banks: LT/ST loans; FX hedging instruments

Shareholders: Equity;Dividends

Clients:Domestic sales; International sales

IC loans and dividends

IC trade

U.S. Holding Company

Japan Operational Subsidiary

Germany Operational Subsidiary



Clients:Domestic sales; International sales

IC loans and dividends

Consolidated FORAD

Company

IC: Inter-companyST: Short-termLT: Long-term


FORAD simulation – Decisions process

Multiple steps, but no formal flow or limit for the desired iterations

Preparation - analyze company’s results, study competitors’ results; forecast the market data; set goals and plan the current period

Operations – decide capacity and production levels, looks for ways to improve revenues and profitability

Financing and investing – review the company needs or excess resources; borrow or repay debt, decide on maturity and currency, issue equity or buyback shares

Review – examine expected results, stress test for unexpected market data, think for ways to increase EPS and/or PE score, adjust the decisions

Tax management – search for opportunities to lower corporate tax rate – via IC loans, transfer pricing, IC dividends

FX management – review the exposures and decide on the hedging approach


FORAD simulation - Performance measures

6

Share Price = Annualized Earnings per Share x current PE score

Credit worthiness,

30%

Currency hedging, 20%Planning skills,

10%

Tax management,

20%

Dividend management,

10%

Quality of earnings, 10%

PE score elements, description and weights:

Credit worthinessDebt/Assets ratio; debt maturity; credit rating; interest expense

Currency hedgingFX gain or loss compared to conservative hedging approach

Planning skillsAbility to predict market data and company's results

Tax managementEffective tax rate for the consolidated company

Dividend managementCorporate dividend compared to earnings; consistency

Quality of earningsSize of non-core earnings; total earnings volatility; dilution effect


FORAD simulation - Simulation process

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Team 1 Decision

The teams submit their decision files to the Administrator

During the simulation, the teams predictions for market data are replaced with the market actuals and teams’ results are recalculated

Team 2 Decision

Team N Decision

The teams receive their final results with complete detailed reporting package and can proceed with the next period decisions

The teams also receive companies’ rankings, selected data for the competitors and economic commentary forecast for the next period

Next period forecast

Industry summary

Team 2 Results

S I M U L A T I O N

Team 1 Results

Team N Results


FORAD simulation - Reporting

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The model generates all reports the users need:

For the competitors and the industry:• Share prices, EPS, PE scores by company• Operations and production highlights• Consolidated financials of the competitors • Market data and forecasts

Individual teams’ detailed results• Financial statements by subsidiary in local

currency and in USD• All current and historical decisions and results by

position – FX exposures and results, borrowings and investments, productions data, tax management

• All reports are Excel compatible

6.00

9.00

12.00

15.00

18.00

P1 P2 P3 P4

T1

T2

T3

T4

T5

T6

$50

$100

$150

$200

P1 P2 P3 P4

T1

T2

T3

T4

T5

T6

PE scores by team by period

Share prices by team by period


Learning points – Finance skills (detailed)

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Risk management Identify, understand and manage risk exposures – those resulting from volatility in the foreign exchange rates, interest rates, commodity pricing

Use economic commentaries to develop market forecasting process Learn how to develop risk management strategy and use the different

hedging instruments and structures available in the simulation

Corporate structure and capital markets

Define target corporate structure and manage credit worthiness Choose between multiple sources of capital available – equity capital, short-

term and long-term fixed and floating rate debt Refine the details – currency, duration, type, risk profile Learn to evaluate the strategy and how to adjust, if needed

The FORAD simulation allows the users to build skills in multiple areas of corporate finance – essential for any well rounded finance professional, and therefore, crucial for

success at the work place


Learning points – Finance skills (detailed) – continued

10

Financial planning and analysis

Use market data to forecast sales and structure company’s operations accordingly

Manage the company’s budget for long-term assets (capacity) and med-term assets (inventory)

Understand the long-term effects and how to plan beyond the current period

International taxation

Learn the differences and specifics of the local tax rules and rates Test the various tools available to a multinational corporation to achieve

better tax efficiency

Financial statements analysis

Learn how to read and explain the numbers after they have been already generated

Review the historical results and examine the trends

Competitors’ analysis

Learn how to use limited publicly available data for the competitors to draw conclusions for their strategy and make adjustments to be more competitive


Learning points – Management skills (detailed)

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Management Skills

See the “big picture” about managing a complex organization and how certain decisions effect multiple areas of corporate finance

Acknowledge and manage trade-offs and learn to prioritize and focus Learn to evaluate performance, identify mistakes and recover Accountability – take ownership of the decisions and defend them to the

public, develop and follow internal rules

Organizational Skills

Time management – deadlines in FORAD are similar to the deadlines in any real business and require tight organization

Team dynamics – success in FORAD is nearly impossible without effective team with quality discussions and team commitments

Communication skills – learn to communicate and negotiate within the team, but also when presenting the company’s decisions and results

The FORAD simulation also allows the users to build skills in areas outside of corporate finance – to complete the overall training experience


Why use this product?

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Professional training

Build stronger team

Share the knowledge

Motivational effect

Flexibility

Effective format

Increases the employees’ expertise and may help identify talent early

The game replicates real world experience - easier transition from academics . The competition element provides extra motivation to learn.

Team members learn from each other too and get exposure to various areas of corporate finance, strategy and reporting

Choice between various game formats to fit corporate’s training needs and goals. No need for investment in technology or users’ preparation

Increases employees’ motivation; could be a long-term activity and carry over the positive effect ; could be structured as “fun” activity too

Team members build relationships with colleagues from different functions and levels


Logistics and other details

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Possible game formats:• Intense short course with a few decisions taken each day • Extended course with decisions due every couple of days Teams and users - no fixed requirement for the number of teams or team members. 3 to 5-member teams offer good balance between work load and efficiency and 5 to 10 teams provide the best competitive environment. Length – the simulation could continue between three and 20 periods, ideal results are achieved between 5 and 8 periods. Location - the learning experience is most effective when teams discuss their decisions and results together, but they do not need to be physically at the same location and could work remotely.

Administration – the simulation could be administered in-house (brief training would be needed) or remotely by Tower46 member. In all cases – interpretation of the results and help with any questions from the users will be provided by the Tower46 team. No specific technology requirements.

Documentation:• Manual for the users with all details to play the game; no additional training required • Manual for the Administrator, if needed • Ready to use market scenarios with economic commentary packages; customization of the

scenarios is an option


Suggested simulation schedule – weekend course

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Prior to the training Day 1 morning Day 1 afternoon Day 2 morning Day 2 afternoon Day 3 morning

Form teams, distribute manual,

install modelTeams work on

period 1 decisionPeriod 1 results and

commentaryTeams work on





period 4 decisionFinal results and

debrief

Tower46 team provides interpretation of the results, answer questions, other finance or techincal support

FORAD simulation course could be executed as short-term intense course:

Users are together at the same location – could be in-house or at remote offsite location Course instructor is needed – Tower46 team will provide brief training

Suggested schedule:


Suggested simulation schedule – long-term course

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Prior to the training Week 1 Week 2 Ongoing…. Last week End of training

Form teams, distribute manual,

install modelTeams work on


commentary-----

Teams work on period 2 decision

-----Priod period results

and commentaryTeams work on last

period decisionFinal results and

debrief

Tower46 team provides interpretation of the results, answer questions, other finance or techincal support

FORAD simulation course could be executed as long-term activity over a few weeks:

Users do not need to be together at the same location – team discussions could be organized remotely at users convenience

Course instructor is not a requirement – Tower46 team could administer the training remotely

Suggested schedule:

Tower46 LLC Tower46 LLC FORAD Multinational Business Finance Simulation Corporate Learning.

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