© 2016 Treasury Strategies, Inc. All rights reserved.

Presented By

“Risk-y” Business: FX Risk Management and the TMS

June 1, 2016

Elaine Filus Principal Treasury Strategies, Inc.

Tim McNamara Senior Manager, Treasury/Capital Markets EMC

Introductions

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Elaine Filus, CTP Treasury Strategies, Inc. Principal Elaine_Filus@TreasuryStrategies.com

Tim McNamara EMC Inc. Senior Manager, Treasury/ Capital Markets Timothy.McNamara@emc.com

Risk Management

Source: TSI/Reval Treasury Benchmarking Survey, 2015

Nearly 80% indicated they were looking to treasury technology to help address •  Enhance existing

•  Implement new

Agenda

!  Technology Environment

!  EMC Overview and Challenges

!  Beginning The Journey

!  The New World at EMC

!  EMC’s Benefits and Lessons Learned

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Treasury Technology Environment

A TMS for Risk Management

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Risk management is often NOT included in a TMS deployment

Risk/ Compliance

Liquidity Management

Evolution of Treasury Management Systems

!  Expanding scope of Treasury

!  Increasing complexity

!  Increasing risk sensitivity

!  Growing regulation

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Cash Management

Evolution of Treasury Management Systems

Integration for Risk Management

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TMS

General Ledger

Banks

Market Rate

Service

FX Trading Portal

Investment Portal

Trade Confirm-

ations

Hedge Accounting

Risk Management

The Current Market Space

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TMS SunGard (Integrity, Quantum)

Wall Street/Ion (WS Suite, IT2, City Financials)

Kyriba

Reval

Bellin

GTreasury

Orbit

Treasury Curve

Salmon

Financial Sciences

Chatham Financial

OpenLink

Outsource Chatham Financial

Atlas Capital

Reval

Hedge Trackers

TreasuryOne

Trading/Settlement FXAll (Trade and settle)

360T

Currenex

Misys CMS

FinCad

OANDA

Exposure Mgmt FireApps

Chatham Financial

Rate Sources Bloomberg

ThomsonReuters

OANDA

Requirements for Risk Management

•  Enhance staff efficiency through STP and reduction of manual processes

•  Facilitate consolidation of exposures across the company

•  Improve controls and segregation of duties

•  Meet complex accounting requirements

•  Analyze and manage risks inherent in exposures

•  Improve management reporting

•  Improve decision-making through better, real-time data and sophisticated analytics

•  Ease the burden of regulatory compliance

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Overview and Challenges

EMC Overview

!  EMC- A global leader in data storage •  Accelerating customers journey to cloud computing

•  Provide products for IT professionals to store, manage, protect and analyze data

•  Full-year 2015 GAAP revenue of $24.7 billion with cash and investments totaling 14.7B.

!  Geographic scope

•  400 sales offices and scores of partners in 86 countries

•  EMC employs approximately 70,000 people worldwide

•  Treasury operations based in Hopkinton, MA with a large presence in Cork Ireland

!  Currently implementing Reval as a TMS solution for FX and Cash

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EMC Challenges

!  Global expansion – new countries/currencies, rapid sales growth

!  Increased complexity due to regulatory changes in the US and EU

!  Limited staff – manual processes and spreadsheets growing in complexity

!  Post 2008 Recession- Counterparty and FX market risk rising

!  Manual, labor intensive management reporting

!  Reliance on Excel

!  Manual general ledger entries=slower close

!  Sunsetting of former FX trading tool by vendor

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EMC Risk Management Objectives

!  Deploy ONE SYSTEM for both cash and risk management

!  Minimize customization to allow for seamless upgrades

!  Integrate all aspects of trade life cycle and minimize non-value added work

•  Exposure capture and analytics

•  FX trading

•  Confirmation process

•  Trade Settlement

•  Valuation

•  Hedge accounting – long haul and CTM

•  Management reporting

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Beginning The Journey

Planning

!  Evaluate existing workflows and processes: -  Cash management and forecasting

-  Trade processing

-  Settlements

-  Approvals and control points

-  Trade lifecycle management

-  Regulatory compliance and reporting

-  Management reporting

!  Analyze your workflows thoroughly – fixes needed?

!  Define scope and priorities for the project

!  Secure buy-in/approval of all stakeholders

What does your ideal risk management operation look like?

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Integration Plan

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Treasury Management

System Banks

Settle-ments

FX Trading

Trade Confirms

GL Acctng

FX Rates

Benefits of Integration

!  Straight-through processing •  FX trading, confirmation

•  Settlement

•  Accounting entries

!  Comprehensive exposure measurement " Better management •  FX risk

•  Counterparty risk

•  Cash, investments, credit

!  Better cash flow forecasting " Better risk management

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The New World at EMC

It’s a Journey….

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… we aren’t there yet! Priorities

1.  Core functionality, core data

2.  Advanced Analytics

3.  Enhanced reporting

For EMC Workstream 1 – FX Operations, risk management

Workstream 2 – Cash Operations We are here..

EMC Trade Life Cycle

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Reval 1.  Analyze exposures 2.  Execute trade 3.  Process confirmation 4.  Generate settlement 5.  [Designation] 6.  Create accounting

SAP

360T

Counter-party

Exposures

Misys

Settlement Instruction

1

2

3

4

Accounting

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Bids to Reval Trade details to 360T

Trade details from Reval Status update to Reval

Trade details from Counterparty

Bank

Wire

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Exposure Analysis

!  Create an improved view of portfolio risk •  CFAR

•  What-if analysis

•  Shocking

!  Support balance sheet and cash flow exposures, mixture of forwards and options

!  Consolidate exposures from multiple sources

•  Imported from SAP

•  Tools for other external sources

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Deal Execution

!  Streamlined, efficient workflows •  Integration with 360T, Misys, banks

•  “Instantaneous” processing

!  Ability to segregate front office, middle office, back office

!  Automatically generate settlements, future dated cash flows

!  Link exposure to hedging deal

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Confirmation and Settlement

Confirmation !  Replace business process controls with automated control

!  No need to log in separately to Misys •  Only for exceptional issues

Settlement !  Settlement instructions stored for each type of trade/counterparty

!  Ability to initiate settlement of FX trades out of the system

!  Enhanced controls and defined user roles for SOX purposes

!  System generates FX journal entries monthly

!  Visibility to future settlements in the cash forecast

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Valuation and Hedge Accounting

!  Improved approach to tracking forward points, volatility, spot rates •  Replaced Excel cutting and pasting

!  Automatically updated valuations available for any business day

!  Straight-thru-processing on accounting entries

•  Deal by deal valuations

•  Point in time ledger balances

!  Ability to Utilize either CTM or Long Haul Accounting

•  Hedge documentation and testing attached to deal electronically

•  Seamless testing with a few mouse clicks

•  Robust effectiveness test reporting/documentation for auditors

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EMC’s Benefits / Lessons Learned

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Benefits of EMC’s TMS Implementation

!  Enhanced controls and regulatory compliance

!  Streamlined treasury operations •  Increase efficiency from trade initiation to settlement •  Less potential for error with spread sheet models out of the picture •  Focus on less “paper” but equal or better record retention

!  Improved liquidity management decisions

!  Simplified management reporting process

!  Eliminate manual tasks and repetitive keystrokes

!  Provide a platform for future Company growth

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EMC Lessons Learned

!  Engage a senior executive sponsor, in a formalized fashion •  Steering Committee meetings

•  Status reports and updates

•  Engaging an advisor such as Treasury Strategies pays for itself in mistake avoidance

!  Begin internal department communications early, secure buy-in

•  Understand staffing limitations and invest in fully dedicated resource if possible

!  Choosing a TMS -- trust the data/ calculations, reporting is secondary

!  Allow ample time for

•  Decisions – process changes, user access rights, approval workflows

•  Testing

•  Reporting that must be built and tested

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EMC Lessons Learned (cont’d)

!  Be flexible – be prepared to live with work-arounds •  Adapt procedures to reality of available technology

!  Early start to review security and proposed process changes •  Audit, SOX

•  IT security/compliance

•  Build in time to include these in your contract allowing the fix to happen by go-live.

!  Despite due diligence of RFPs and demos, be prepared for surprises

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Final Questions?

Tim McNamara Senior Manager, Treasury/Capital Markets EMC, Inc. Timothy.McNamara@emc.com (508) 293-6656

Elaine Filus Principal Treasury Strategies, Inc. Elaine_Filus@TreasuryStrategies.com (312) 628-6916

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About Treasury Strategies, Inc.

Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.

What We Do Corporations We help you maximize worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls.

Treasury Technology We provide guidance through every step of the technology process – which includes creating a roadmap, selection, implementation and optimization. Our expert approach will uncover opportunities to optimize the value of your treasury through fully integrated technology solutions.

Financial Services Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business.

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@TreasuryStrat

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