Treasury Technology

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Treasury Technology FEI Treasurers
Conference Fred Cohen February 27, 2001
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Agenda

• Key market trends in treasury management
  services
• Treasury Technology
• Future market segmentation
• A Global Solution
• What will be the key to your treasury technology?

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Key market trends in treasury management
services
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Current debate questions whether risk management
contributes to the creation of shareholder value
Today
Forward Looking
Focus on Revenue and Cost React to
Opportunities Control -- not Manage -- Risk
Portfolio Management
Capital Allocation
Capital Attribution
Influence
Profitability Analysis
Control Earnings Surprises Anticipate
Future Scenarios Focus on Risk Drivers
Risk Based Pricing
Risk Measurement
Control
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To create value the challenge for executive
management and their risk managers is to.

• Deliver predictable earnings growth and reduce
  volatility
• Awareness of complex risks
• Sensitivity of earnings to external and internal
  factors
• Advise management of potential earning surprises
• Allocate capital efficiently to all parts of the
  business
• Optimal usage of capital at enterprise-wide level
• Identify value creating / eroding lines of
  business
• Align the capital coverage with the risk appetite
  of the firm
• Develop a robust technology infrastructure
• Support decentralized decision making
• Embedding risk in the decision making process
• Change from historic to forward-looking to
  supplement the strategic planning process

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The Integrated Performance Management delivers
integrated profitability and risk information for
decision making
Best Practice Methodologies for Managing business
functions
Achieving operational excellence
Enabling consistent business management
Tactical, operational and strategic decision
support
Integrated Planning Cycle
Achieving Strategic Excellence
Shareholder Value Creation
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and supports forward looking analysis for
performance based planning
Complexity Modeling
Earnings Sensitivity
Scenario analysis
Impact on future earnings and Shareholder Value
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By product type..
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By Location .
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By industry sector ...
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By Geography .
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Treasury Technology
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Integrated Performance Management
IPMDelivering the methodologies and platform to
enable integrated and forward-looking decision
making that leads to superior performance
Meeting investment community expectations
Implementation Approach
Risk Performance Measurement
Technology Architecture
Forward Looking Decision Making
Actionable Information ...How we will deliver?
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To integrate and deliver all the information in
an efficient manner, the technology architecture
has to be flexible and scalable
Information Presentation
Information Processing and Storage
Translation Processor (Middleware)
Source Data

• Flexibility
• Leverage existing (ERP) investments
• Support plug-in best of breed applications
• accelerated organizational changes due to
  shorter, less costly implementations
• Facilitates integration of new systems (MA)
• Scalability
• Accommodate growth in the organization
• support high volumes of transactions and level of
  detail
• enhance timeliness of delivery due to capacity

Traditional ERP Financial Management Accounting
External Feeds
Summarized financial postings
Transaction Capture

• Market data
• Credit ratings

Drill down to detail
Discrete Reporting

Operational Systems
Integrated Data Store
Translation Mapping

• Power trading
• Gas trading

Integrated Reporting

Transaction detail
Web based report viewer
Business Support Systems
Analytical results
Calculation Engines
Blended Reporting

• Payroll
• Benefits

Summarization Posting

• Detailed financial postings
• Business events
• Reference data

Non-Automatic Inputs
Ad hoc Reporting

• Manual entries

Algorithmics Profit Analyzer
R.E.A.L.
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Technology
A convergence of enterprise information systems

• Integration between CRM, SCM, and ERP
  applications
• Coordination of financial flows and value chain
  flows
• Blurring of traditional boundaries between
  applications for treasury, payments processing,
  banking and working capital management
• Growing importance of technology outsourcing
  (e.g. ASP market)
• Increased leverage of web-based services
• Development of standard formats (e.g. XML) and
  tools that permit interoperability between systems

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Banking and Payment Services
Strategic Issues for the Banks and Corporates

• In-country and cross-border bank pooling and
  enhanced payment services offer
• Progress towards integrated payment systems and
  standards
• Virtual shared service centers for
  payables/receivables and payments/receipts
  processing to facilitate central processing and
  in-country settlements
• Shift from paper to electronic payments

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Leading Practices

• Increased quality of information in a flexible
  and cost constrained environment
• Improved, streamlined and automated treasury
  business processes
• Central treasury team becomes a business partner
  focusing on monitoring operations and management
  of strategic activities
• Controls become embedded in the systems and
  processes
• Reduced cost of risk management through
  enterprise-wide-risk management and stream lining
  review (outsourcing, Application Service Provider)

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Future market segmentation
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High-End Market (Approximately 100 to 500
corporations)

• Advanced risk management analysis/reporting
• Sophisticated IT requirements integrated with
  e-business solutions
• Outsourcing treasury technology services (ASP)
• Leveraging benefits from ERP roll-outs
• Multibank and/or monobank cross-border structures
  
• Single bank local banking services
• Shared Service Centres and Virtual Shared Service
  Centres
• Automated analysis and decision making
• Enhanced security of payments and other
  electronic communications
• Real-time liquidity reporting and forecasting
• Integrate treasury with working capital management

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The Rest (Approximately 20,000 corporations)

• Basic risk management and reporting capability
• Rapid implementation requirements
• Simple banking structures (may prefer monobank
  solution)
• Outsourcing treasury technology services (ASP)
• Limited IT support capability - simple
  requirements
• Outsourcing treasury processes
• Security of payments and other electronic
  communications
• Liquidity forecasting
• Working capital management tools (excluding
  inventory)

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Key Opportunities

• Deliver full suite of risk management and
  treasury management information requirements
• Integrate treasury management applications with
  core business applications (CRM, ERP)
• Applications available through ASP
• Support multi-bank and monobank structures
• Comply with FAS 133/IAS 39 standards
• Integrate treasury management applications with
  liquidity forecasting and working capital
  applications
• Web enable applications
• Rapid implementation times (e.g. standardised
  approach for low-end market)

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A Global Solution
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Short/Medium Term Vision
Bank and other service providers accessed through
many-to-many connections leveraging existing
connectivity and security standards
Treasury Workstation
Reporting
Electronic Banking
CashForecasting
Payments
Collections
Applications integrated to meet individual
customer needs
Finance
CRM
SCM
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Long Term Vision
Financial service providers accessed through
many-to-one-to-many structure (metamediary)
ASP
Portals
Web Native Applications
Treasury workstation Electronic
banking Reporting Collections Cash
forecasting Payments
Outsourcing
Marketplace
Finance
CRM
SCM
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What will be the key to your treasury
technology?
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Integrated Performance Measurement

• Improves Decision Making
• Access to measures that truly reflect
  organizational performance and drive SHV
• Decision Making based on risk-adjusted
  profitability - EP as driver for
  investment/divestment decisions
• High-quality information base that enables
  data-driven decision making
• Drives Enabling Technology
• Incentives aligned to shareholder value creation
  and balanced scorecard
• Scalable and open system architecture that
  addresses information needs today and in the
  future
• Systems integration
• Enhances Execution
• Significant improvements in coordination between
  functions
• Breakdown of functional silos that prevented
  the organization from implementing strategies
  efficiently

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IPM Delivering the methodologies and platform to
enable integrated and forward-looking decision
making that leads to superior performance and
increased shareholder value
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