fx risk strategies. from the cutting edge to the bottom line. · evolution of treasury management -...

© Rim Tec Inc. All Rights Reserved. Proprietary & Confidential.

FX Risk Strategies.

From the Cutting Edge to the

Bottom Line.Presented by

Chris Wikoff, CTP, CertICM

Director, Corporate Treasury, CommScope, Inc.

Elizabeth St-Onge, CertICM

Managing Director, Treasury Strategies, Inc.

Andy Gage

V.P. of Strategic Market Development, FiREapps

© Rim Tec Inc. All Rights Reserved. Proprietary & Confidential.© Rim Tec Inc. All rights reserved. Proprietary & Confidential. Slide 2

• Introductions

• Market Overview

• A Foundation of Best Practices

• CommScope Case Study

• The FiREapps Value Framework

• Q&A

Agenda


Introductions & Overview

Andy Gage

V.P. of Strategic Market Development

FiREapps

Elizabeth St-Onge, CertICM

Managing Director

Treasury Strategies, Inc.

Chris Wikoff, CTP, CertICM

Director, Corporate Treasury

CommScope, Inc.

© Rim Tec Inc. All Rights Reserved. Proprietary & Confidential. Slide 4

Market Overview

Source: Treasury Strategies, Inc.


• Recent market disruptions have increased the visibility of

and demands on corporate Treasury departments

• Key challenges include:

– Changing role of Treasury

– Globalization

– Risk management (currency volatility)

– Liquidity management

– Technology

– Industry competition

Industry Issues



Evolution of Treasury Management - 1.0

Treasury 1.0

Va

lue

an

d V

isib

ilit

y o

f T

rea

su

ry

Treasury Management Evolution

Operational &

clerical

Management of

bank accounts and

funds movement

Analytical and

proactive

Management and

protection of liquidity in a

world of fluctuating

currencies and interest

rates

Advisory & Strategic: Nerve

Center

Insightful, integrated &

comprehensive

Payment, liquidity & risk advisor

Providing business intelligence &

decision-support

Treasury 2.0 Treasury 3.0


Copyright 2010 Treasury Strategies, Inc.



Treasury 1.0

Va

lue

an

d V

isib

ilit

y o

f T

rea

su

ry


Operational &

clerical

Management of bank

accounts and funds

movement

Analytical and

proactive

Management and

protection of liquidity in a

world of fluctuating

currencies and interest

rates


Center


comprehensive

Payment, liquidity & risk advisor

Providing business intelligence &

decision-support






Treasury 1.0

Va

lue

an

d V

isib

ilit

y o

f T

rea

su

ry


Operational &

clerical

Management of

bank accounts and

funds movement

Analytical and

proactive

Management and

protection of liquidity

in a world of

fluctuating currencies

and interest rates


Center


comprehensive

Payment, liquidity & risk

advisor

Providing business

intelligence & decision-

support







Criticality of Treasury Today


A more strategic and effective treasury is founded on 3 key pillars

Pillars of Effective Treasury

Robust risk

management

Global visibility Technology &

Automation



Technology Architecture for Treasury 3.0

Creating the Ecosystem

Source: Treasury

Strategies, Inc.Copyright 2010 Treasury Strategies, Inc.

Analysis &

Pricing

Bank Account

Administration

Payment

Factory

Bank Connectivity

via SWIFT

Financial Transaction

Execution

Accounting &

Reconciliation

Web Access for

Subsidiaries

Dashboards

In-house

Banking

Intercompany

Loans

Netting

Currency Exposures

Accounts

Receivable

Cash

Forecasting

Links to the IPA

Accounts

Payable

Market Research & Data

Scenarios &

Simulations

Rating Information


Risk Management Process

1. 2. 5.4.3.

Measurement

MethodologyDefine Measure Mitigate

• Policy

• Types of risk

• Risk appetite

• Gather data

• Calculate exposure

• Report

• Analyze

• Covering strategy

• Hedge execution

• Performance analysis



Future of Treasury

Treasury Is:

Treasury Technology Provides:

1.0 Reactive

2.0 Proactive

3.0 Responsive

1.0 Data

2.0 Information

3.0 Intelligence



FX Exposure Management

Case Study

© 2010 CommScope, Inc


• Global leader in communicationinfrastructure solutions

• >$3 billion annual sales

• Fortune 1000 (Ranked 641)

• >11,500 employees

• >3,100 patents & pending applications

• Serving customers locally in over 100 countries

• 20 strategically positioned manufacturing and distribution centers throughout the world

Company Overview



FX-related Business Challenges…

Acquisition-driven growth &

complexity

• Lack of understanding of

consolidated gross exposure or FX

g(l) forecast

• >100 legal entities

• >100 FX exposure pairs

• Multiple ERP systems and

platforms (SAP & Oracle)

• Complex intercompany flows

• Various exotic or “more-

restrictive” currency exposures

Desired greater confidence in…

• Exposure data for hedge decisions

• ERP remeasurement processes

• Rationalization for FX g(l) results

Needed ability for…

• Timely, accurate, controlled and

efficient consolidation of exposures

• Visibility, analysis and understanding

of 100% of exposures

• Rules-based hedge decision process

• FX g(l) forecasting


© Rim Tec Inc. All Rights Reserved. Proprietary & Confidential.© Rim Tec Inc. All rights reserved. Proprietary & Confidential.

• “Hard” validation and retooling of

FAS 52 remeasurement in multiple

SAP environments

• Reconciled P&L FX gain(loss)

• Implemented process to regularly

captured 100% of Balance Sheet

exposures for various analysis

• Analyzed underlying drivers for

exposure, i.e. I/C

• Categorized exposures by type

** Consultancy & systems provided by FiREapps

• Re-engineered…

• Monthly exposure analysis & hedge-

decision processes

• Metrics for Exposure Management &

Hedge Performance

• Developed…

• Hedge strategy & ideal hedge % for

each exposure type

• Immediate and on-going opportunities

for exposure mitigation

• Vision for reporting for senior

management on FX exposure mgmt.

• Personnel dedicated to global FX

exposure management

Response & Results to FX Challenges…



Aggregate Analyze Decide

FX Trades to be Executed

Summary Level Hedge Data

Bank(s)

Better Data Better Decisions

SAP

General

Ledger

Balances

SAP

FiREapps Solution Footprint

© Rim Tec Inc. All Rights Reserved. Proprietary & Confidential.© Rim Tec Inc. All rights reserved. Proprietary & Confidential.

16 months later…

• Accurate FAS 52 remeasurement

• Monthly controls for “soft”

exposure validation, review of

trends, alerted to new exposures,

etc.

• Intelligence and understanding of

100% of B/S FX exposures, sources

and underlying drivers, i.e. I/C

• Rules-based hedge decision process

• 30-40% of hedge decisions are natural

• Exceeding hedge targets & zero

“missed hedge opportunities”

• 38% reduction in gross FX B/S exposure

thru exposure awareness, intentional

focus and actions to eradicate exposure

• Reduced volatility

• Management reporting

• Capable of FX g(l) forecasting

Action plans and “task force”

established to target unique

exposure types, drivers,

sources, etc.



• Streamlined I/C Netting

• Hedging of exotic or “more restrictive” currency pairs

• Cashflow exposures

More exposure mitigation opportunities…



• Treasury 3.0 requirements– Insightful, integrated and comprehensive treasury

– Payment, liquidity and risk advisor

– Business Intelligence and Decision Support

• Pillars of Effective Treasury– Global visibility

– Robust risk management

– Technology and automation

• FX exposure management is a key ingredient to protecting

earnings

Key Takeaways


Value Framework


Quantifying the Value of Confidence

Risk Reduction

• Reduce FX Risk

• Protect Earnings

• Protect EPS/EBITDARisk

Reduction Cost

Savings

Operational

Efficiency

Cost Savings

• Reduce transaction costs

• Generate Interest

Income

• Eliminate over-hedging

Improved Operational Efficiency

• Reduce FX manual process time and resource

requirements

• Improve utilization and effectiveness of

Treasury and Accounting staff

Risk Reduction

Cost Savings

Operational Efficiency

• Reduce FX Risk


• Protect EPS


• Optimize cost/benefit of risk management program


• Reduce manual process time and resource requirements

• Improve utilization and effectiveness of Treasury and Accounting staff

• Reduce FX Risk


• Protect EPS


• Optimize cost/benefit of risk management program


• Reduce manual process time and resource requirements

• Improve utilization and effectiveness of Treasury and Accounting staff

Risk Reduction

Cost Savings

Operational Efficiency


Q&A

Your turn.


A copy of the presentation

Multicurrency accounting white paper

LEAN Manufacturing white paper

FiREapps product information

FiREapps case studies

For More Information

www.fireapps.com

e-mail: [email protected]

1 866-928-3473 x140

www.TreasuryStrategies.com

Elizabeth St-Onge

Managing Director

Treasury Strategies, [email protected]

mailto:[email protected]

fx risk strategies. from the cutting edge to the bottom line. · evolution of treasury management -...

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