Download pdf - Technology transformation in Treasury Using automation to ......SAP Treasury ( TRM) –Trade and accounting SAP In-house cash – payments on behalf Plan for Treasury Transformation

#NP#_VZBfT8IwFMW/StMnjUy2wmbH22CbDDMswQiS vtTRmcbYLl3xTwjf3Vv 0QZOmufec30lO7hE3DZ4csW2rPZ7gKAzh+Q+fBmB5jQ9z4eRFFJNkF BFCKQnDK49d8iEe4L3yeQHg0 jiBMu2MVgaMZ6/VqrGmN61DzHxIy 4zSzoeqHMyy qJPFilTJ rJzTDZsuQ1Y/LsajigHS dkDcTT ifGd1KK3Uje85JGFH0T1lnDD1YKfqD/eK8FvZ VOqVfz jknteM8N83hDSaAmZU9TMIpo2H9LYvOzQN0q97FYS80+ot dd537hD7dT+enUbydr 9er7c39vN6sdtUy2tKYVDsKjDsj6SyeFkVJA+ iaBmM6zYM09ms6zrK4TCJSwHlP3w==_#NP#

Technology transformation in TreasuryUsing automation to enhance control

July 2017


2

High level Company Overview

The Journey of transformation at Givaudan

Treasury Modernisation: Key areas and benefits

How SAP Treasury helped transform and modernise treasury process

Questions?

Agenda

Confidential and proprietary business information of Givaudan July 2017


Key drivers of consumer repurchase decisionsThe fragrance and flavour industry

Source: AC Nielsen (European) study

3

Scent

4-6% of customers COGS

Smell and taste

0.5% of customers COGS

Overall experience

Brand

Fragrance image

Other

Brand image

Price

Packaging

78%

8%

5%

3%

6%

30%

15%

10%

45%

FRAGRANCES FLAVOURS



End consumer marketsThe Fragrance & Flavour Industry

Our customersMulti-national | Regional | Local | Foodservice | Private label

The cost of fragrances and flavours to our customers is typically between 0.5 – 5% of their product cost

Food BeveragesFine Fragrances Household Personal care

4Confidential and proprietary business information of Givaudan July 2017


Givaudan – The Industry Leader

World leader in creating memorable fragrances and flavoursInspiring our customers’ brands, delighting consumers

Confidential and proprietary business information of Givaudan 5July 2017


6

Key facts and figures from 2016 full year results

Net Profit CHF 644 million

Total Group SalesCHF 4.7 billion

Free Cash FlowCHF 597 million

Leverage ratio19%

24.1 EBITDA%



7





Questions?

Agenda



July 2017Confidential and proprietary business information of Givaudan 8

Givaudan’s Treasury Transformation - Evolution of TMS

2012 2014 2015 2016 2017

Single ERP

SAP Treasury ( TRM) – Trade and accounting

SAP In-house cash –payments on behalf

Plan for Treasury Transformation

Design and Vision

EMIR and Financial instrument valuation

FX Risk Management – Full automation and STP

Supply Chain Financing with In-house cash

Cash Management

Cash flow Forecasting

Counterparty Risk Management

Digital Treasury Platform

SWIFT and Bank Account Management



Improvement in “User Experience”

Future2000s1990s

2010+

Excel sheets Workstation Cockpit



Business drivers

1. FX Risk management

2. Working capital management

3. Cash Management, Cash flow forecasting and counterparty risk

4. Treasury set-up (Centralized / close to local business)

• Treasury is fully integrated with business for monitoring and management of FX exposures

• There is a need from business to actively manage FX exposures

• Payments on behalf (POBO) enables treasury to actively manage working capital

• Supply chain finance initiatives

• Automated data gathering and aggregation from various sources

• Easy and flexible reporting of Cash Positions, Forecasts and Counterparty exposures

Flexible models in treasury set-up –centralized treasury or treasury expert working closely with the local business


11





Questions?

Agenda



12

Giv Fin. (CHF)

Aff. A Aff. BInternal FX

Aff. CAff. D

Internal FX

Internal Fx activities were performed for 17 entities & a total of 31 currency pairs

More than 6,000 internal deals were entered in the system per year vs 1500 with the previous method

In excess of 2hrs per day to manually calculate & process everything

Transitioning from Manual to Automated….?

Remaining Challenges

Take the new process & automate the step of performing the internal Fx deals

Create a consolidated view at the Group level without manual intervention

Can SAP Risk Management capability deliver such a solution?

Leveraging the Power of the Machine



Confidential and proprietary business information of Givaudan 13

Approach

A end-to-end process approach

Exposure Identification

(Identify sources)

Exposure capture (Collect raw exposure)

Exposure Classification

(Classify exposure in time, risk etc.)

Exposure

Position (Create aggregated position

per category)

Exposure

Risk Management (Calculate risk and

hedge risk)

Exposure

Expiry (Expire the exposure on

maturity)

Action

Hedge in the market

External Hedge

Action

Internal deals - Take-over position from

subsidiaries

July 2017


14

Fx Management Process – Arriving at the Destination

FUTURE POSSIBILITIES

RESULTS

CHF 15MReduction in FX

Losses

30MinDaily Effort to Manage Group

Fx

ImprovedControls over end to end

process

AccuracyLess Risk of Manual Error

EfficiencyLess Trading

Volume

ExtendTo Forecasted Transactions

STPDirect Transfer

to Trading Platform

???The Journey of Improvement is

never over..



From 2008 to 2012 we had SAP implementation but at that time no measurement of the Counterparty risk. But the time with bank crisis in Europe in summer 2011 was perfect to start to think a solution.

Through the worldwide implementation of SAP visibility & accuracy of information was improved however what missed was a way on how to measure all the data stored in the system. A manual download of data into an excel spreadsheet was at that moment the solution.

In 2016 we decide to leverage on the “automation” in order to build up a portal that automatically measured the exposure with the bank

15

Counterparty Risk

Progressive Development

2008 2016

Highly Automated Solution

Confidential and proprietary business information of Givaudan

SAP implementation

started

build up a manual solution for Counterparty

risk

Centralisation, Integration &

Process Improvement…..

but

Reaching our Targeted

Destination

2012

No measurement Excel model Build up- manual Measurement

July 2017


16Confidential and proprietary business information of Givaudan

Counterparty risk – manual measurement

Extract the data From Sap Upload the data in Excel Position report

July 2017


17

Counterparty RiskFrom manual to automated report

Challenges

Run all Sap reports was extremely timeconsuming roughly 1.5h to 2h per days

There were access problem in theretrieve of the MTM value of derivativesdue to segregation of duty set up of thesystem.

Settlement risk was impossible to be measured unless of further time spending on daily basis.

Leveraging the automation

Run the report on a daily basis with notime consuming.

Create a consolidate view at group levelwithout any manual intervention.

Question: is SAP capable to give the answer?




Thinking about the flows

Cash flow Forecasting

Challenges

Consolidation tool has only the datain group functional currency

Mix of G/L account set up. Some indocument currency and some othersin functional currency.

Project to be delivered in 6 monthswithout having no clue from wherestart.

Retrieve the actual Free cash flow bycurrency.

Thinking about the flows

Bank movements were the solution

Givaudan bank flows are centralized

All currencies cash-pooled except theone where regulation does not allowit ( INR, IDR, ARS, BRL)

Payment on behalf, olutflow centralizein one company and I/c payments viaIHC structure so without cashmovements

Treasury Flow centralize and bookwith in the system with differentcodes.

July 2017


19





Questions?

Agenda




The Solution

Risks covered and the solution

SAP Operational Modules (SAP

Financials, In-house cash, Treasury)

Excel upload (If needed)

Exposure

Management

(Hedged Item)

Transaction

Manager

(Hedges)

Simplified Hedge

Management

(Hedge Relationship)

Market Risk

Analyzer

(Risk Analysis)

SAP Treasury and Risk Management

Functionality proposed to be implemented for data capture PwC solution Existing modules

360T

Risks covered in the solution:

Balance sheet exposures: Accounts payable and receivables, tax and dividends, cash balances and treasury flows

July 2017


Confidential and proprietary business information of Givaudan

21

The Automated Process

Automated process to identify, capture and transfer exposures

Run extraction program Position report Internal deals

21July 2017


The dashboard displays the “net” exposure to be hedged externally. As a future scope, there is a possibility to transfer the exposures directly to the FX dealing platform.


Exposure Dashboard

External hedge

July 2017



Cash Management- Solution

Bank balancesDay’s cash movements

Analysis and Reporting

Treasury deals and bank account balance data from the system

Group Treasury can view their Opening and simulated Closing balance for the next 5 days and make adjustments

Treasury deals

Bank account balances

Payments

Extract bank balances for all Cash relevant bank accounts,

Payments, Treasury deals

Daily Liquidity Monitoring using daily bank balances and movements

July 2017



Credit Risk - Solution

Data for credit riskCredit Risk calculations


Treasury deals and bank account balance data from the system

Group Treasury consolidates the forecasts and performs analysis -> Actual to forecast / Historical

Treasury deals

Bank account balances

Market data

Credit Exposure =

{MtM (Deals) + Bank

Balances} * Ratings and

CDS multipliers

Compare exposure to

limits

Credit exposure based on Dynamic counterparty ratings

July 2017


Reporting time reduced to 10 mins!!


Cash flow Forecasting Solution

Fast entry and user experience are key to success!!

Cash forecasts from subsidiaries

Aggregation of cash forecasts


Pre-populated data based on predictive analytics in a web based tool

Subsidiary reviews and confirms the system generated forecast

Group Treasury consolidates the forecasts and performs analysis -> Actual to forecast / Historical

Group Treasury analyses the forecast

July 2017



Approach - Summary

Predictive analytics for CFF proposals and dynamic CP risk management using Integrated treasury tool on ERP

Cash Management Cash flow forecast Counterparty risk

Application Daily visibility of cash

Short term view ( 5 days)

View of excess / deficit per currency

12 months rolling forecast

Forecast per currency, legal entity

View of cashflow forecastFX exposures

Dynamic tracking of CP risk

Alerts on the thresholds

Approach Build up of bank account balance based on cashflow categories

Track opening and closing balance per account

Direct approach

Pre-populated data for subsidiaries ( time saving) (using predictive analytics)

MtM approach with counterparty ratings

CDS spreads for dynamic monitoring

Tools / Technology

Integrated tool on SAP treasury

Integrated with underlying ERP

Integrated web based tool on SAP treasury

Integrated with underlying ERP

Integrated with treasury transactions and bank account positions

July 2017


27

Q/A



Confidential business and proprietary information of Givaudan, may not be copied or distributed to anyone without the express written permission of GivaudanConfidential business and proprietary information of Givaudan, may not be copied or distributed to anyone without the express written permission of Givaudan

Thank you

ContactAntonio Nota Madhu PadmanabhanHead of Market Risk Senior ManagerGivaudan International SA PricewaterhouseCoopers AG