UNICEF Treasury
Agenda
1. Treasury Overview
• SAP Treasury • Functional Overview
2. UNICEF Treasury Activities • ‘AS IS’ • ‘TO BE’
3. Treasury – Manage Financial Instruments • ‘AS IS’ • ‘TO BE’
4. Treasury – Manage Cash & Liquidity
• ‘AS IS’ • ‘TO BE’
5. Treasury – Manage Financial Risk
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6. Reporting 7. Bank Account Management
8. Summary of Significant Process
Changes • ‘AS IS’ • ‘TO BE’
9. Compliance with Audit
Observations
10. Future Opportunities
1 – Treasury Overview
Standard Treasury Functions & SAP Architecture
MM = Money Market DER = Derivatives SEC = Securities FX = Foreign Exchange FM = Funds Management GM = Grants Management
SAP Treasury and Risk Management
Risk Analyzer
Credit Risk Market Risk Portfolio Analyzer
Transaction Manager
MM FX DER SEC
SAP Cash and Liquidity Management
Cash Management Liquidity Management
SAP Bank Communication Management
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
SAP ERP
Finance Excellence Financial Core
Treasury FSCM
FM AP/AR Controls General Ledger GM
Treasury Functions Applications from SAP
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1 – Treasury Overview (cont’d.)
Treasury modules in SAP
SAP NetWeaverTM Portal, Security, Business Warehouse, and eXchange infrastructure
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Ho
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Ban
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mySAPTM ERP
SAP Financial Accounting
SAP In-House cash
SAP Cash and Liquidity
Management
Credit Risk Analyzer
Market Risk Analyzer
Portfolio Analyzer
Money Management
Foreign Exchange
Derivates Securities
Transaction Manager
SAP Treasury and Risk Management
Trad
es Mar
ket
Dat
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EBS
SWIF
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SAP System External Systems
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1 – Treasury Overview (cont’d.)
Functional Overview
Back Office Accounting Reporting Front Office
• Exposure analysis
• Decision support
• Optimized deal entry
• Online limit check
• Position reporting
• Flexible process definition
• Confirmation
• Settlement
• Correspondence
• Interest Rate Adjustments
• Standing instructions
• Payments
• Alert monitor
• Proper recording of all aspects of Treasury in Financial Accounting
• Valuation according to Generally Accepted Accounting Principles (GAAP) – IPSAS
• Standard Reporting
• Ad hoc Reporting
• Internal Controls
• Limit reporting
• Management Reporting
• KPI Reports
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2. UNICEF Treasury Activities – ‘AS IS’
Morning
Task Purpose
Review the Manual MT940 (faxed by the Bank / extracted from Chase Insight) • Identify transactions not front ended through SAP
(Contributions, ZBA sweep, Bank Charges etc) Identify, create and post manual journal
entries • Compare MT940 transactions against the
Treasury Daily Dairy Report
•To ensure the accuracy of all bank transactions •To ensure that all trades are settled through the bank accounts •To record transactions in SAP
Update the Cash Position Report in Excel for USD / EUR
•To ascertain the cash balance (Opening Balance for the day)
Generate / Print MT942 from the bank • Manually enter them in Excel Cash Position Report
•To ascertain the current day cash transactions during the day (Transactions for the day)
Mo
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g
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2. UNICEF Treasury Activities – ‘AS IS’
All Day
Task Purpose
Buy / Sell Currencies and Investments •Risk, Liquidity & Investment Management
Match Buy / Sell positions with counterparties
•To confirm trades with counterparties
Provide Liquidity for Cashiers to Transfer
Cash to Country Offices globally (though
cumbersome manual processes)
•To provide Liquidity for business functions
Analyze Risks based on positions and market movements
•Risk Management
Enter Profit & Loss on Trades in Excel
•MIS for Value add by Treasury
Prepare manual deal tickets and create trades in SAP
•Create trades in SAP - original data input
Update the Cash Position Report in Excel for all trades
To determine the cash balance
All
Day
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2. UNICEF Treasury Activities – ‘TO BE’
Morning
Tasks Purpose
Execute Bank Statement Monitor (BSM) (BSM is a part of Bank Communication Management (BCM) • This provides the upload status of the Bank
Statements into SAP and identifies potential problems.
•Ensure that the Bank Statements have been received, are in sequence, have bank balances matching with GL and are processed in SAP.
Review MT940 excel output from the system (An excel output of the Bank Statement would be available with posted document numbers)
•To ensure that the bank transactions are accurate.
Run the Cash Position Report (An excel output stating the Cash Position)
•To determine opening cash position for the day
Mo
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2. UNICEF Treasury Activities – ‘TO BE’
All Day
Tasks Purpose
Upload bank transactions for contributions, ZBA sweep, bank charges etc.) (These transactions are not front ended by SAP – and an excel upload would be available to the users)
•Manual entries are avoided, reducing errors, time and enhancing efficiency
Upload the MT942 file received from the bank (MT942 is the intra day bank statement)
•To know the correct current day bank balances
Perform Treasury Functions: • Buy / Sell Currencies • Buy / Sell Investments • Match Buy / Sell positions with counterparties • Provide Liquidity to Country Offices globally • Analyze Risks on account of currency and market movements
•Everyday Treasury Functions
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3. Treasury – Manage Financial Instruments
Bank Statement Monitor (BSM)
• Bank Statement Monitor (BSM) displays the status of bank statements from individual house bank accounts
• A bank statement that is delayed or that does not reach the monitor can be immediately as well as any differences occurring between the bank statement balance and the internal G/L account balance
Key Benefits:
• Treasury starts the day with determining the cash balance. BSM ensures that the balance in SAP matches the bank balance
• Any missing bank statements are identified Note: BSM is part of the BCM (Bank Communication Management)
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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3. Treasury – Manage Financial Instruments
(cont’d.)
MT940 upload • Once MT940 is uploaded, VISION will email specified Treasury users a Daily
Report in an excel format. • Show MT940 uploaded transactions (previous day transactions) • Identify transactions to be uploaded (non SAP front ended) including a pre-
filled up upload sheet • Have a Cash Position Report (previous day - Actual) • Forecast current day Cash Position Report based on Treasury, AR & AP
Treasury starts the day by having the previous day Cash Balances reconciled
Key Benefits:
• Eliminates time spent on reconciliation • Automatic upload of transactions – streamline data input for non-treasury flows • Cash Balance updated in SAP • Reduce operational risks
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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3. Treasury – Manage Financial Instruments
(cont’d.)
MT942 upload • Treasury receives the MT942 file from the bank and uploads it in SAP
• All same day transactions are recorded in SAP treasury (not in FI) • Cash Management positions are updated • Cash Management report forecasts cash position for the future • Current data Cash Position Report (based on actual data ) is generated
Treasury executes transactions with accurate cash balances in the system
Key Benefits:
• Accurate cash position visible at all times in Cash Management • Eliminates reconciliation • Optimizes investment of available funds • Mitigate overdraft risk
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
3. Treasury – Manage Financial Instruments
(cont’d.) (‘As Is’)
Paper document
Front Office
Back Office
1
Counterparty
SAP (VISION)
Paper document
Confirmation Process
• Generate Letters • Signature • Fax
2
3
4
5
6
7
These transactions are manual and entered twice (once in the
trading system and then again in SAP)
Deal created
Paper documents
Telephone call
SAP Transactions
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3. Treasury – Manage Financial Instruments
(cont’d.) (‘To be’)
SAP (VISION)
Back Office
Create Deal
Settle Deal SWIFT Services
Front Office
All the above transactions are automated and need to be entered only once
Trade confirmations are
executed via a deal matching service provided by SWIFT,
called ACCORD
Counterparty
1
3
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
Payment 4
4
2
Matching Services
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4. Treasury – Manage Cash & Liquidity
Liquidity Management is one of the core terms of Reference for the Treasury Unit. UNICEF Treasury works to ensure that there is sufficient Liquidity at the Country Offices. Treasury ensure liquidity by: a. Provide liquidity for the Cashier to transfer Currency directly
to the Country Office House Bank Accounts or third parties
b. Sale of Currency to a counterparty (who then remits the value in the Country Office currency)
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘As Is’)
1070140
Treasury
USD
CHASE
1040350
Cashiers – Main
USD
CHASE 1040370
Cashiers-TRF
USD
CHASE
1051030
India
USD
CHASE 1060270
India - Main
INR
SCB 1063710
India
INR
SCB
1060240
India
INR
SBI
Vendor F02401
DONORS
Headquarters
Field Office
Cash flow to Country Office from Treasury (1/2)
Transfer of funds through the FV60 route is a workaround and carries substantial risk
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
1 1
2
3
3
2
4 4
Receipt of Contributions 1
Zero Balance Sweep 2
Transfer through FV60 3
Settle AP or Expense Payment 4
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4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘As Is’)
Payment through F110
Headquarters
Country Office
Flow through the Accounts Payable Route
Park Invoice 1
3
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
1070140
Treasury
USD
CHASE
Post Invoice 2
1040370
Cashiers
USD
CHASE
Post Invoice
Park Invoice
Internal Vendor
1
2
1060270
India - Main
INR
SCB
CO Bank Account
3
2
4
ZBA Sweep 4
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4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘As Is’)
1060270
India - Main
INR
SCB
Sale of Currency
Headquarters
Country Office
Cash flow to Field Office from Treasury (2/2)
Counterparty
Sale of major currencies held by Treasury for Country Office currencies through banks. This process is handled through the “Manage Financial Instruments” process
TX13 Request for
Currency
Request for Currency
1
3
3
1
3
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
TX14 Get Rate from CP
2
1070340
Treasury
EUR
CHASE
107XXXX
Treasury
Other Currencies
Any Bank
1070140
Treasury
USD
CHASE
Treasury Bank Accounts
Get Rate from CP 2
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4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘To be’)
One of the major improvements of the transfer of funds from Headquarters to Country Offices would be to adopt “Bank to Bank Transfer” in SAP. This would eliminate the need to go through the “Accounts Payable” process. This would :
• Eliminate the Risk inherent tin the “Accounts Payable” process.
• Reduce lead time to complete a transfer
• Provide full control of Treasury / Cashier over the process
• Enable Treasury to front-end the lost trades
This process would streamline the entire “Cash Replenishment Process”
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘To be’) SAP – Integration of External Systems
Credit risk analyzer Market risk analyzer Portfolio analyzer
Money management
Foreign exchange Derivatives Securities
Transaction Manager
SAP Treasury and Risk Management
GL AP FM AR
BANKS
Dealing platforms (360t / Bloomberg)
Data Feeds (Bloomberg / Moodys)
Treasury Counterparty
Other Vendors
HOUSE BANKS
SWIFT SERVICES BANK
COMMUNUICATION MANAGER
BANK ACCOUNT MANAGEMENT (BOLT ON)
SAP
FINANCIAL CORE
Payments
Matching Services
Trading Data flows
SWIFT Files FI
Bank MGMT
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Data from External Sources
SAP (VISION)
4. Treasury – Manage Cash & Liquidity
(cont’d.)
Liquidity Planner The Liquidity Planner provides tools for entering, adjusting, aggregating, evaluating planned cash flows, and determining actual values.
Cash Management
Cash Balances Treasury Flows
Memo records
from emails
Accounts Receivable
PFP Data from
Cognos
Pipeline data from PARMO
Accounts Payable
Open Purchase Orders
Other Sources
LIQUIDITY PLANNER (SAP & BI) / CASH ACCOUNTING
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
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5. Treasury – Manage Cash & Liquidity (cont’d.)
This would be through the implementation of the Analyzers
Manage Cash and Liquidity
Manage Financial Risks
Manage Financial Instruments
Analyzer Purpose
Credit Risk Analyzer Enables the active control of default risks by computation of attributable amounts and specification of risks. Requires Market data feeds. Example: Counterparty risks, Sovereign risks
Market Risk Analyzer Analysis of Market risks in financial positions. Example: Risks on account of changes in interest and foreign exchange rates. Requires market data feeds and would allow for straight through market valuations on treasury positions as well as other risk metrics and modeling simulations
Portfolio Analyzer Tools for the calculation of yield and performance figures, as well as the comparison of these key figures to benchmarks. Requires Market data feeds. Example: Comparison of existing investments to LIBOR
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• The effectiveness and oversight of the Treasury functions lies in timely reporting to the Senior Management.
• There is currently a large scope for improvement, notably:
Improvements under study: 1. A self-reconciling report for Treasury is under development which replaces 5
reports in the current system. 2. Reports for cash positions generated from SAP eliminating the need for bank
parser software saving $ 4000 per month on bank charges.
3. Timely Limit Management Reports
4. Report for Profit & Loss on daily FOREX trades
Country Office market rate vs Actual treasury rate
UNORE rate vs Actual rate
5. Various automated reports for FAC & Controllers Office(currently manual)
6. Reports on concentration of currency in Country Offices (for oversight purposes and to ensure adequate liquidity)
6. Treasury – Reporting
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7. Treasury – Bank Account Management
ISSUE - We have various data related to banks in various places in SAP and they are not synchronized EXAMPLES: Count No. Data Point
• 501 - House Banks created in SAP (VISION) • 1046 - Number of Banks created in BCMS • 122 - Number of Closed banks in BCMS • 543 - Bank GL Accounts
ACTIONS REQUIRED
• Cleanup and streamline Bank Account & Bank Master Management along with its dependencies like GL accounts, signatories
• Bank Account Management should capture additional data like Credit Ratings of Banks, Bank Hierarchy, last date of bank review, bank throughput, exceptions
• Signatories on accounts should be based on roles assignment to the post (through DHR)
Options : • Invest in BCMS (current) -Home grown solution with little integration • Bolt on Solution -Buy Bolt on Solutions like eBAM / Overture5
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8. Summary of Significant Process Changes
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AS IS TO BE
Cash Position is maintained outside the system
SAP will have reconciled cash balances thereby reducing operational risk and automating daily bank account reconciliation. Note: This is dependent on MT940 from the bank.
Manual data for Cash Position, Bank entries, trade entries, and excel for MIS
Manual data entry eliminated to a large extent, thereby eliminating errors and corrections
Reports created from data outside the system
Accuracy of data will ensure quality reporting from the system
Analysis is cumbersome due to spread of data in various places
Analysis possible as all data present within the system
Limited use of SWIFT. Transactions through multiple gateways like Chase, ebanking portals and the UN
More robust rollout of SWIFT at HQ with SWIFT Alliance
10. Treasury - Future Opportunities
Rollout of Automatic upload of bank transactions to HQ locations and / or
Service Centers (non front ended through SAP)
Use of SWIFT Services at Country Offices
Cash Management at Country office
Leverage BI for reporting
Positive Pay File for Checks & Wire transfers
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