Trends in Treasury: What you need to know about technology, best practices & outsourcing

Chris Matthews President– Treasury Dynamics, Inc

• Treasury Dynamics – About Us – 1999 – TDi formed specifically to support corporate treasury departments – 2008 - 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

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

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

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

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

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.

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

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

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

Treasury Outsourcing o Outsourcing has gained in popularity in past 10–15 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 in-

house o Full range of providers in marketplace

• Individuals • Regional boutique firms • National/International firms

Treasury Outsourcing What is driving this growing acceptance?

o Controls are stronger - providing added assurances & confidence

• Sarbanes-Oxley • New & better technology

üUpgrades to bank platforms üAdoption of Treasury Management Systems (Orbit, Sungard, Wall Street Systems) üEmergence 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.

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

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 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 o Project Support

• Bank Migrations • Technology implementations • Company-wide initiatives

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’

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

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

Treasury Outsourcing

Questions, comments, additional information… Chris Matthews Treasury Dynamics, Inc. chris@treasurydynamics.com O – 650-548-2500 C – 415-613-1879

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Trevor Kavanagh Director– GPS Capital Markets

List of Treasury Priorities

1. Cash Management

4. FX

3. Insurance

2. Credit Relationships

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Need Additional Information?

Trevor Kavanagh GPS Capital Markets

trevor@gpsfx.com 818-597-9167

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