Treasury Management. MANGO Network Event - 3 November 2015

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1 Treasury Management MANGO Network Event - 3 November 2015

2 Sightsavers Vision Our vision is of a world where no one is blind from avoidable causes and where visually impaired people participate equally in society Sightsavers is an International organisation that aims to eliminate avoidable blindness and promote equality for people with disabilities

3 We work where need is greatest Sightsavers works in more than 30 countries around the world

4 Financial summary (excl GiK) Incoming Resources mm mm Voluntary Fundraising Income Institutional Funding Investment, Financial Income & Other Total Incoming Resources Resources Expended Fundraising & Publicity Expenditure Programme Charitable Expenditure Other Charitable Expenditure Total Expenditure Surplus/(Deficit) 0.1 (1.3) Reserves are higher than policy target in excess of 7.5mm Majority of cash income growth through restricted grant income our income this year nearly doubled since

5 Financial policy framework Risk management framework Sightsavers has an established risk management framework. There is a dynamic process in place to identify business critical risks and develop mitigation strategies Reserves policy The reserves policy quantifies our key risks and assesses an appropriate level of reserves in the context of risks and the business model of the charity Investment policy Having defined target level of reserves the investment policy sets out a strategic asset allocation to balance investment returns with an acceptable level of risk Treasury policy Sets out our approach to credit risk, liquidity risk and currency risk management Delegation of financial authorities policy Defines the formal delegation by Council of financial and contractual authorities Financial framework The framework defines controls and procedures for day to day management of transactions and associated financial recording and reporting Management reporting Includes, but not limited to, monthly management accounts, the CEO report to Council, and the sensitive projects report maintained to track progress of large and key donor funded programmes - 5 -

6 Treasury management - Organisation In 2013 Sightsavers appointed a Treasury Manager reporting into the Financial Controller and split out treasury operational activities into a dedicated team This was in response to a changing external landscape and mitigating against identified enterprise risks, including liquidity Ever increasing compliance requirements from our lead clearing banks HSBC and SCB, particularly as regards international transfers Cash management of restricted grants Management of foreign exchange hedging Development of cash-flow model and forecasting Partner payments centralised majority of transfers being made to in country partners centrally Co-ordination of treasury related management reporting and ensuring proper links with our core finance and procurement systems Set up of borrowing facilities - 6 -

7 Liquidity Sightsavers is not an endowed charity, we target reserves of around 3 months worth of unrestricted expenditure As we have taken on more grant income (now around 50% of overall cash income) management of liquidity more of a concern. Specific mitigation activities have included Commercial response with our biggest grant holders to ensure working capital aspects of contracts are reasonably structured e.g pre financing or invoicing based on estimates Investment in ICT system to manage generation of financial claims across multiple implementation partners Balance sheet clean up ; sale of freehold HO site in Haywards Heath and liquidation of old endowments to general funds Set up of overdraft facilities (both secured and unsecured) to support operational needs and seasonal spikes in liquidity requirements Improved cashflow forecasting Ensuring transfers from restricted grant bank accounts are done on time and minimise implicit pre financing activities through unrestricted cash holdings - 7 -

8 Hedging Sightsavers tracks currency movements daily and has a number of currencies where we have expenditure payments in local currency that correlate with the USD. As most of our income is GBP we will buy some dollars forward as a mechanism to underwrite an element of our budgeted planning rates We also have currencies in West Africa that correlate with EUR but our EUR income and expenditure is roughly balanced There is a balancing act between costs of hedging, types of instrument and maintaining operational integrity Our bias is to keep it relatively simple. We have not bought options for example as disclosure and management aspects are more complex It s important that the Board understand specifics of risk mitigation - 8 -

9 The road ahead 2016 and beyond - 9 -

10 Looking Forward We see increasing challenges with bank compliance and moving cash internationally to some of our country programmes and in-country partners Working closely with our in-country teams to keep on top of local compliance and changes to regulation and legislation Improving quality of relationship management with our lead banks Opportunity to improve pricing of international cash transfers Any move to use of brokers and auctions needs to be done carefully and such that our control environment is maintained Better linkages between treasury and finance systems and further work on project coding and associated development of chart of accounts Key for good cashflow forecasting is building linkages and ownerships with the business particularly fundraisers, grant managers and country teams

11 THANK YOU Any Questions?