what every finance leader needs to know about unlocking the strategic value of treasury
DESCRIPTION
Video/Presentation: http://www.proformative.com/events/what-every-finance-leader-needs-know-about-unlocking-strategic-value-treasury-panel CFOs are increasingly being tasked with defining and leading the growth strategy at their companies. A CFO needs to become the Chief Trusted Advisor at his or her company to build and leverage the relationships necessary to lead successful growth initiatives. Treasury leaders can be invaluable to CFOs in this endeavor. Today's treasury department influences many of the key levers that impact company results. Experience an interactive discussion among experienced practitioners focused on defining the strategic impact that treasury is currently having at companies, and discover how to leverage the expertise of the treasury organization at your company to drive results across the enterprise. Speakers: Ernie Humphrey, CEO & Founder, 360 Thought Leadership Consulting - MODERATOR Nick Guglielmo, Treasurer, The Associated Press Linda Wright, Treasurer Consultant, Former SVP of Finance & Treasurer, Fireman's Fund Insurance Company Bruce Lynn, Managing Partner, Financial Executives Consulting Group Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com Track: Operational Effectiveness | Session: 3TRANSCRIPT
1© 2013 Ask, Share, Learn
www.proformative.com
Unlocking the Strategic Value of
TreasuryNick Guglielmo Linda Wright Bruce LynnTreasurer Financial Consultant Managing PartnerThe Associated Press Former SVP & Treasurer The FECG, LLC Fireman’s Fund Insurance, Co.
Moderator: Ernie Humphrey, CEO, 360 Thought Leadership Consulting
2© 2013 Ask, Share, Learn
www.proformative.com
Our Panel
Nick Guglielmo Treasurer The
Associated Press
Linda WrightFinancial ConsultantFormer SVP, TreasurerFireman’s Fund Insurance, Co.
Bruce LynnManaging PartnerThe FECG, LLC
3© 2013 Ask, Share, Learn
www.proformative.com
Panel Discussion
The evolution of Treasury from transactional to strategic over the past five yearsThe strategic value of working capitalOwning risk managementThe new realm of bank relationship managementEmbracing a strategic role in driving growthLeading across the enterprise
4© 2013 Ask, Share, Learn
www.proformative.com
Thank You!!
5© 2013 Ask, Share, Learn
www.proformative.com
ContentAppendix
6© 2013 Ask, Share, Learn
www.proformative.com
The Evolving Role of Treasury
7© 2013 Ask, Share, Learn
www.proformative.com
The Evolving Role of Treasury
Source: 2011 AFP Strategic Role of Treasury Survey
N= 673
8© 2013 Ask, Share, Learn
www.proformative.com
The New Strategic Role of Treasury
Source: Treasury Strategies
9© 2013 Ask, Share, Learn
www.proformative.com
Today’s Treasury: Top Priorities
10© 2013 Ask, Share, Learn
www.proformative.com
The Strategic Value of Working Capital
How the function of managing working capital has evolved from transactional to strategic, and how is working capital being managed, and mismanaged in today’s world? How do firms define their optimal level of liquidity? How do companies find the right home for excess cash in today’s global investment markets?
11© 2013 Ask, Share, Learn
www.proformative.com
RiskMgt
(Mkt, Credit, Ops)
Cash Accounting (focus on posting, reconciling transactions)
DebtInvestment
Cash Management(focus on balances)
The Traditional Treasury• Focused on Processing
• Resources devoted to repetitive tasks
Basic
AdvancedGoals
Cash
Processing
Planning
2013 THE FECG LLC
12© 2013 Ask, Share, Learn
www.proformative.com
The Modern Treasury
Cash Management
Risk Management
Debt Management
Investment Management
FinancialMarkets
&Institutions
Company&
OperatingUnits
• Policies Highly Visible• Interactive Communications• Plan, Actual & Forecast in Sync
• Functions & Systems Integrated• Performance Metrics in Place• Effective Bank Network
Technology
2013 THE FECG LLC
13© 2013 Ask, Share, Learn
www.proformative.com
Liquidity MetricsFrequency = weekly
Time Horizon > 90 days
Definition / Comments
Liquidity1. Free Cash Flow
2. Cash Conversion
3. Debt Utilization
4. Available Liquidity
5. Op cash flow as % EBITDA
6. Target Balances
1. Trend: Op cash Flow – CAPEX – Dvds
2. Trend: DSO – DIO + DTP (days)
3. O/S vs Total (% / $): 3rd party & interco.
4. Cash + un-utilized credit lines ($)
5. Profit is “leading indicator”, but relation to cash flow should be parallel
6. Set limits per account or per bank. Amounts above target are “excess”, subject to “best use” (invest, pay debt, dividends, etc) by Treasury
2013 THE FECG LLC
14© 2013 Ask, Share, Learn
www.proformative.com
How Much Liquidity is “Enough”?
S & P 500 (423 non financial co.) as of June 2013Selected Financial Trends - Year end
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 (est)Fiscal Year
$ i
n B
ns
-20
0
20
40
60
80
100
120
140
Ca
sh
flo
w (
$ i
n M
illi
on
s)
Cash + S/T Investments Total Debt Total Cash Flow
2013 THE FECG LLC
15© 2013 Ask, Share, Learn
www.proformative.com
Owning Risk ManagementRisk management not all that long ago was thought of as only encompassing risk management insurance, what is your definition of risk management? How has treasury’s role evolved in managing key elements of financial and operational risk management? What role has technology played the arena of risk management and how are firms leveraging technology on this area?Why does it make sense for Treasury to “lead the charge” in technology adoption in this area, and in general ?
16© 2013 Ask, Share, Learn
www.proformative.com
Risk Management: Treasury’s Contributions
Financial Risk Management Counter Party Risk
Investments- short term and pension
Customers, suppliers, and contingents including letters of credit
Balance Sheet ProtectionsSOX- key controls
Segregation of duties
Data integrity
Claims & Near Miss AnalysisPrelude to purchasing insurance policies
17© 2013 Ask, Share, Learn
www.proformative.com
Risk Management: Treasury’s Contributions
Operational Risk Management Near Miss Analysis, via Inter-department Coordination and Data MiningEstablishment of Real Estate Standards
Safety
Cube and Office Space
Travel, Entertainment and Fleet StandardsLitigation Settlement Practices
18© 2013 Ask, Share, Learn
www.proformative.com
Risk Management: Treasury’s Contributions
Credit Risk Management Credit Terms, including DiscountsCollection Efficiency Measurement
M&A Assistance, including but not limited to:Market Scans—Credit Worthy Buyers/SellersDue Diligence including System Compatibility and Lawsuits, Planned or PendingStandard Contract Terms and ConditionsPost Transaction Assessments
19© 2013 Ask, Share, Learn
www.proformative.com
Risk & Related MetricsFrequency = weekly
Time Horizon > 90 days
Definition / Comments
Risk1. Exposure – Currency
2. Exposure – Var. rate debt
3. Financial Leverage
4. Compliance
5. Op error / error rate
1. Compare to policy by currency
2. % or $ variable debt to total
3. Ratio total debt to equity
4. # of covenants (financial + non financial)
5. # / % errors (need to define “error”)
Counterparties & Operational1. # global banks &
accounts
2. Cost of funds3. Fees Pd
1. Count by total and by legal entity
2. After tax COF (% gross, net int.), $ Expense
3. $ by business unit2013 THE FECG LLC
20© 2013 Ask, Share, Learn
www.proformative.com
Bank Relationship ManagementHow have you seen the strategy of bank relationship management change over the past 5 years, and how you define the expectations of your banking partners? Do you believe that Banks can play a key role as a strategic partner in offering advice and technology in driving growth and managing risk or do you believe that this is just “hype” from the banks, maybe good in theory, but not in practice?
21© 2013 Ask, Share, Learn
www.proformative.com
Bank Relationship Management
2008 Paradigm ShiftIt’s all about Communication!More Consultative/Advisory PartnershipChange in Expectations about Relationship Profitability
22© 2013 Ask, Share, Learn
www.proformative.com
Treasury’s Role in Driving Growth
CFOs are taking more a leadership role in leading growth strategy and obviously M&A is a key part of this strategy, can you comment on the role that treasury has played in M&A throughout your career, and the strategic role that treasury plays in your current role?
23© 2013 Ask, Share, Learn
www.proformative.com
Treasury’s Role in M&AMember of the Due Diligence Team
Bond Indenture and DebtCash and Cash Equivalents portfolioRisk Management including Insurance PoliciesCredit Facility Covenants
Hedging the FX Risk of the TransactionCapital Structure Analysis
24© 2013 Ask, Share, Learn
www.proformative.com
Leading across the Enterprise
How have you seen the strategic role of treasury evolve over the past 5 years, and where is it going? In what areas has Treasury taken open and embraced a key role in driving strategy and execution? How have you as a Treasury Leader been successful in building relationships that allowed you to drive results across departmental borders? How have you seen the relationship of Treasury with the CEO, and CFO during your career?
25© 2013 Ask, Share, Learn
www.proformative.com
Treasury’s Strategic Role From Transaction Processor to Strategic AdviserOptimize Cash Flow and Cash VisibilityBuild Closer Relationships with Business Units/PeersMonitor and Remediate Organizational Risks
26© 2013 Ask, Share, Learn
www.proformative.com
The Modern Treasury
Cash Management
Risk Management
Debt Management
Investment Management
FinancialMarkets
&Institutions
Company&
OperatingUnits
• Policies Highly Visible• Interactive Communications• Plan, Actual & Forecast in Sync
• Functions & Systems Integrated• Performance Metrics in Place• Effective Bank Network
Technology
2013 THE FECG LLC
27© 2013 Ask, Share, Learn
www.proformative.com
Thank You Sponsors!
PLATINUM
GOLD
SILVER
DIAMOND