Trends in Treasury: What you need to know about technology, best practices & outsourcing. Chris Matthews President Treasury Dynamics, Inc

Transcription

1 Trends in Treasury: What you need to know about technology, best practices & outsourcing Chris Matthews President Treasury Dynamics, Inc

2 Treasury Dynamics About Us 1999 TDi formed specifically to support corporate treasury departments Purchased company 2012 Orbit Treasury Management Systems added to our existing consulting services Client profile $150M to $9B in revenue Industries served High-tech hardware & software Real Estate Biotech Healthcare Retail/Distribution Finance Public and private companies

3 Treasury Best Practices You can t manage what you don t measure Use of treasury metrics and KPI s are not wide spread but the practice is growing, still most companies do not track Treasury for years has had more autonomy Treasury departments are historically understaffed Change hard, even harder with limited resources Invites additional scrutiny Metrics are not easily defined or implemented Reluctant buy in

4 Treasury Best Practices You can t manage what you don t measure Despite obstacles, practice is growing Recent financial turmoil means Treasury is no-longer as autonomous Good thing, raises its value Companies continue to focus on performance in an ever increasing competitive environment Treasury s traditional role more visible, appreciated Treasury s role broadening and becoming more strategic Globalization requires treasury s risk management know-how Increased automation facilitates timely access to data

5 Treasury Best Practices You can t manage what you don t measure Treasury metrics and KPI s still being define and must be; Meaningful, relevant and actionable Relatively easy to track Easily communicated Targeted to audience (internal vs. external) Tied to goals Supported by management Consistent

6 Treasury Technology o Adoption of Treasury Management Systems TMS are replacing Excel as the main technology solution for corporate treasury o An overreliance on Excel posses real risks o Spreadsheets are prone to errors. o Spreadsheets themselves may start small and manageable, but an acquisition or two later, and soon Excelzilla o Reverse engineering required if spreadsheet creator leaves o Significant risk, i.e. FX exposure worksheet o Not designed to manage financial and risk nerve center

7 Treasury Technology Adoption of Treasury Management Systems Reasons not to adopt o For some very small companies, excel may be the best solution o Implementing TMS means change. o Cost TMS require start-up and ongoing costs, which can be very significant. Cloud based systems have lowered this hurdle considerably o Resource drain Treasury departments run very tightly, adding a TMS project into the mix may be daunting. Here again, cloud based make this much more manageable.

8 Treasury Technology Rent or Buy o In-House In-house systems require in-house hardware & expertise Costly and time consuming implementation, integration maintenance & upgrades Harder to scale Manage security Downtime Resource drain + Closer to the hardware + Own the data on-site + Self-reliance + Manage security

9 Treasury Technology Rent or Buy o In-Cloud Data might not be stored on-site Subscription costs ongoing Comfort level with cloud technology + Easy to scale + Little or no impact on internal IT resources + Much lower start-up costs + Ongoing upgrades + Redundancy, nightly backups, failover servers, copy of data may be maintained on-site + Highly secure data centers

10 Treasury Technology - ebam Main Objective Eliminate paper processes for some common bank account management activities 1. Account Management 2. Signer Management 3. Legal Entity Management 4. Reporting Still work-in-progress with unresolved issues, challenges 1. Know Your Customer (KYC) issues 2. Regulations vary in different countries (i.e. digital signatures) 3. Competing channels, security methodologies 4. Successful adoption requires corporates preparation

11 Treasury Outsourcing o Outsourcing has gained in popularity in past years More companies are comfortable with outsourcing all or part of their treasury operations o Industry has matured over past 15 years Now widely accepted Not everyone outsources, but everyone knows someone who does Some clients outsource entire treasury function Other clients are outsourcing functions previously kept inhouse o Full range of providers in marketplace Individuals Regional boutique firms National/International firms

12 Treasury Outsourcing What is driving this growing acceptance? o Controls are stronger - providing added assurances & confidence Sarbanes-Oxley New & better technology Upgrades to bank platforms Adoption of Treasury Management Systems (Orbit, Sungard, Wall Street Systems) Emergence and acceptance of cloud by corporations o Consultants prove themselves worthy of trust and gain confidence of clients Treasury departments, as they should, keep cards close to their chest As consultants prove themselves, clients comfort level and trust increases, appreciate outsourcing as a viable solution o Continued increased demands on treasury departments without corresponding increase in resources.

13 Treasury Outsourcing What is driving this growing acceptance? Other factors o Credit the recent economic turmoil for raising the status and value of treasury within corporations Pros & cons Increased status means increased attention and scrutiny form auditors, board, executives & other stakeholders More pressure to meet higher expectations in very challenging environment Provides some leverage when seeking additional resources

14 Treasury Outsourcing Why Companies Outsource o Operational Support No budget for new headcount Less than FTE No appetite for developing treasury in house Parental leave Sick leave Sabbaticals Backfills o Project Support Bank Migrations Technology implementations Company-wide initiatives o Strategic Support Capital Markets Risk Management Revisiting policies & procedures what are other companies in industry doing, impact of regulatory & accounting changes Desire to establish in-house treasury department Acquisitions Bank admin how to incorporate/absorb bank structure

15 Treasury Outsourcing Benefits of Partnering: o Consultants should have in-depth and specific knowledge of corporate treasury best practices o Flexibility to provide tailored solution o Redundancy Partnering can provide ongoing treasury operations bandwidth on tap

16 Treasury Outsourcing Benefits of Partnering o Consultants are experienced with different technologies Various bank platforms ERP s Treasury management systems o Outsourcing firms have additional resources/intellectual capital Draw on expertise from others within consulting firm Hiring support/conversion o Piece of mind Reduced workloads/demands on staff Still maintain strong controls Back-up support when needed

17 Treasury Outsourcing Potential Drawbacks: o Outsourcing is not a panacea right solution for some, but not all, circumstances o Manage costs o Clear roles and responsibilities avoid unintentional scope creep o Over-reliance More outsourcing = less in-house expertise

18 Treasury Outsourcing Questions, comments, additional information Chris Matthews Treasury Dynamics, Inc. O C

19 Obtaining Full Transparency in the Foreign Exchange Process Trevor Kavanagh Director GPS Capital Markets

20 List of Treasury Priorities 1. Cash Management 2. Credit Relationships 3. Insurance 4. FX

21 FX Market Volatility 5 Year Snapshot

22 FX Market Volatility Last 12 months

23 A New Approach to FX Managing currency risk through an FX Specialist Firm Benefits: Technology Transparency Risk Management Expertise

24 FX Technology Suite Which tools matter to my company? - Payment Platform - Batch uploading - Full visibility/24 hour platform - Customizable permissions - Cash Forecasting - Balance Reporting - I/C Netting - BS Netting

25 FX Technology Suite Ease of Use Compliance Netting Functionality Customized Reporting

26 Transparency Negotiated spreads - Factors: volume, currencies, tenors, credit worthiness - Auditable and consistent - Win - Win - Win proposition Requirements: - Market Participant - Market Know How

27 Core Mandate Manage Risk Manage Risk Manage Risk

28 Expertise Risk Management Initiatives - Identify currency risk - Understand available products Forwards Forward Extras Options - Proper exposure capturing FXpert

29 Overview of FX Exposures - Non-functional currency monetary assets and liabilities -Balance Sheet exposures: for example AR, Cash - Earnings -Revenues earned in foreign countries - Forecasted transactions -Example: a company knows it will buy 10mm worth of raw materials annually from their German subsidiary - Firm commitments -Example: a company locks into a contract to buy a piece of machinery from a company in Japan with a 90 day payment terms. - Net investment in a foreign subsidiary -Example: a company wants to hedge its investment in a British subsidiary. - Economic Risk -Example: a company has considerable receivables in a foreign environment and is anticipating acceleration or slowdown in that country s economy

30 Expertise Active Management - Identify Exposures - Minimize volume - Technical Analysis: Regression, Fibonacci, VAR, ASC 830 & ASC 815 Support (Old FAS 52 & 133)

31 Expertise Guidance and Support - Accounting: ASC 830 & ASC 815 Support (Old FAS 52 & 133) - Regulatory Environment: Dealing with Dodd Frank

32 Case Study Active Currency Management for 90million Acquisition 1. Actively managed position over 2 day period percentage change over trading period 3. Weighted Average rate of

33 An Intelligent Solution Partnering with a Specialty FX Firm

34 Need Additional Information? Trevor Kavanagh GPS Capital Markets Contact Us

35