eurofinance miami presentation greg zabikow 052311
TRANSCRIPT
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
Questions