Treasury Transformation for the ‘Now’ Normalc.ymcdn.com/sites/ to evolving market conditions...
Transcript of Treasury Transformation for the ‘Now’ Normalc.ymcdn.com/sites/ to evolving market conditions...
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
Run forecasts, process payments
Understand liquidity statusUnderstand liquidity status
Support Multiple Business Units
Support Multiple Business Units
Comply with Evolving Regulatory Requirements
Comply with Evolving Regulatory Requirements
Establish Strategic Advisor Position on the Board
Establish Strategic Advisor Position on the Board
Run forecasts, process payments
Understand liquidity status
Support Multiple Business Units
Comply with Evolving Regulatory Requirements
Establish Strategic Advisor Position on the Board
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
Efficiency and ConnectivityTo integrate core treasury systems to streamline efforts, accessibility and achieve straight-through processing functionality
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
Collaboration Across Business UnitsBy solidifying Treasury as a key driver for change cross-functionally
Flexiblity To respond quickly and effectively to evolving market conditions
Flexiblity To respond quickly and effectively to evolving market conditions
InsightInto financial metrics and performance to support business decisions
InsightInto financial metrics and performance to support business decisions
VisibilityAcross the organization globally to mitigate risk
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
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c
Trea
sury
X-fu
nctio
nsS
enio
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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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