Regional Treasury Centers

Building a Case for the Value of Treasury and Getting Seat at the Table

EuroFinance – Miami

May 23, 2011

Greg Zabikow, CTP

Aon Corporation

Director of International Treasury

1

A Path of Change…

2

Aon Corporation Background

Headquartered in Chicago

Risk Solutions

HR Solutions

Operations in over 120 countries

Growth through acquisitions

3

Aon Brands

4

Corporate Revenue Distribution by Region in 2009

US35%

EMEA28%

UK 16%

Americas other than US

12%

APAC9%

5

Several Obstacles Needed to be Addressed to Add Value for the Firm

▪ Decentralized management

▪ External debt

▪ Excess operating cash

▪ Cash balances

▪ Capital in lower tier entities

▪ Operating vs. fiduciary cash

▪ Support

Cash visibility

Self fund

Excess cash use

6

Multi-Currency Notional Pooling Would Meet Our Requirements

Key requirements Approached used

▪ Overlay accounts

▪ Built a market based margin

▪ 26 currencies in place

▪ Web based tool

▪ Netherlands structure

▪ Notional pooling

▪ Aon Corporation guarantee

▪ Existing banking structures

▪ Competitive interest rates

▪ Multi-currency

▪ Global access

▪ No withholding tax

▪ Not viewed as a dividend

▪ Balances protected

7

Daily Mechanics of the Multi-Currency Notional Pool

JPY 2,350 EUR 5 AUD 18EUR (10)GBP (24) EUR 12CAD 15

Translated to Euro at 11:00 AM Rate

+€20 + €9 (€10) + €5 + €9 + €12(€25)

Notional Balance in Pool is ZERO Euro Equivalent

+ €20

Euro Credit

Facility + €20

+ €20

+ €20

Money Market

Fund

8

Aon Corporation‟s Annual Debt Balances

($ in millions)

$2,513

$2,153$2,115 $2,105

$2,243

$1,893 $1,872

$1,998

$1,500

$1,700

$1,900

$2,100

$2,300

$2,500

$2,700

2002 2003 2004 2005 2006 2007 2008 2009 2010

$4,014

Issued

$2.5B for

Hewitt

acquisition

Implemented

MCNP

9

Global Liquidity Management is Facilitated Through Two Structures

US

Multi-Currency Notional Pool

10

Visibility of Cash Allowed for Redeploying Capital

Annual dividend program

Multi-currency notional pool

Balance sheet access

11

Bank Exposure Reduced Due to Multi-Currency Notional Pool

Self

Others

12

Multi-Currency Notional Pooling Results

Debt

Management

Self FundingCash Visibility

Redeploy Capital Counter Party

Exposure

13

A Time of Change Within the Company

New senior management in 2005 to 2008

Removed a layer of management in 2008 and 2009

Large acquisitions in 2008 and 2010

Banking crisis in 2008 and 2009

Expense reduction goals in 2009 and 2010

14

Getting a Seat at the Table

Find value add opportunities

Create a simple story for the vision

Build on your wins

Execute on commitments made

Build rapport

Continue sharing the vision

15

Keep Telling the Story to Cast the Vision for the Future

Help people visualize the future

Must be heard 6-8 times to become their own idea

Short attention spans due to the crisis the day

Leaky bucket – Bill Hybel‟s book “Axiom”

16

17

Creating a Story to Earn a Seat at the Table

Global Treasury

Management

Create regional

treasury hubs

Improve

controls

Reduce costs Increase

investment

income

Benefits

Create a simplified, consistent, and controlled treasury process

Realign resources to meet the operation‟s needs

Consolidate banking to key partners

Bid investment activity

Objectives

18

Simplify the Cash Management Activity

Beginning of Day Balances Intraday Transactions

Closing Position Funding or Investing

19

Cash Management „s Key Pillars to Our International Treasury Strategy

Cash ManagementIn

form

ati

on

Str

uc

ture

Inve

stm

en

t

Part

ners

20

The Vision: Building Three Treasury Hubs to Conduct Regional Activity

AmsterdamChicago

Singapore

21

Building the Regional Hub in Amsterdam Focused on Europe

22

What We Discovered During the Due Diligence Process

Bank

relationships

Kept balances in current accounts

Placed overnight deposits

Invested with high fee money market funds

Investment

opportunities

Conducted business with a large number of banking partners

Utilized local vs. key multi-national banks

Held funds with low rated banks

Signing checks and EFT letter requests

Sent faxes to banks for wires

Collecting checks in the office

Worked in Excel to create cash positions

Enter bank balances manually

Manual

activity

23

The Integration Approach Methodology

Observe Document Transition Parallel Improve

24

Technology Utilized in Implementing the Regional Hub Strategy

Hub

Internet Banking

TWS

FXAll

MMF

Websites

Workflow Tool

Electronic Batch

Payments

25

Daily Operation Work was Allocated Across Three Locations

Country

Amsterdam

Treasury EMEA

Hub

Offshore

Internal

Operation

26

Regional Hubs Resulted in Improve Controls and Compliance

Hub Strategy

Best Practices

Exposure

limits Consistent

Segregation

Internet banking

Expertise

Sox and Audit Testing

Electronic

Closing Accounts

27

Desired Country Banking Model

One or two cash management banks

Access to Internet banking tools

Cash positioning in treasury workstation

Zero balance structure in place to invest from master accounts

One to two money market providers or FXAll time deposits

28

Challenges Experienced During the Integrations

Gaining senior management support

Maintaining local management

support

Overcoming the emotional

connection

Adjusting the interaction point with

local banking contacts

Addressing project delays

Keeping local staff motivated

29

Through the Project There Have Been Missteps

Relied on email and phone

discussions

Did not set specific tasks and due

dates

Assumed contacts would complete

tasks as discussed

Always an excuse

Not always fact based

30

Project Management Focus Used to Complete Integration Tasks

Created a governance and

tracking process

Set tasks and due dates with

local contact

Provided tasks and due dates to

the governance team

Meet with the governance team

Focused on the facts

Kept team members accountable

31

Benefits Created from the Regional Hub Strategy

Reduce costs

Compliance with counterparty exposure policy

Consistent cash management practices

Segregate banking duties

Eliminate manual signature activity

Improve

controls

Centralize treasury process

Reduce FTEs and use of offshore partner

Reallocate staff to other Finance or business unit needs

Benchmark, scale, and bid banking services

Utilize bank provided technology to streamline daily process

Select AAAm MMF providers versus current investments

Bid time deposits with larger group of counter parties

Implement three year interest rate swaps

Reduce credit risk

Access to daily liquidity

Increase

investment

income

Implementing Treasury best practices to support the global Finance strategy

32

Global Finance 2011 – 2013 Objectives

Manage cash to optimize capital utilization

Improve controls

Integrate Hewitt

33

…Will Take Time and Need to Keep Telling the Story

Greg Zabikow, CTP

Director of International Treasury

Aon Corporation

+1 312-381-4632

greg.zabikow@aon.com

Questions