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Selection and implementation of a TMS

Noordwijk, 9 November 2012

Joan SchutteAssistant Treasurer

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Introduction

Who??

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• Multiple telecoms operators providing voice and data services• Headquartered in Amsterdam since summer 2010 following

combination of businesses by 2 main shareholders under new holding company; a Bermuda Ltd

• Listed on the New York Stock Exchange under the ticker “VIP” • Operations in 18 countries; Russia, CIS, SE Asia, South Asia, Africa,

Italy, Canada

2011 revenue: $23.5 billion from 205 mln subscribers2011 EBITDA: $9.3 billion2011 debt: $27.0 billion

• 5 business units covering regions• Operationally independent• HQ acts as ‘Strategic Controller’

VimpelCom – some key facts

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Treasury challenges

Spring 2011 - the key issues:

1. 100+ people in the ‘New VIP’ doing Treasury in 19 countries2. Many different cultures (country and corporate) and back grounds3. Widely varying practices, processes and policies (or lack of them)4. No treasury management systems – access to information5. No (Treasury) staff in Amsterdam – need to cooperate/delegate

The immediate first step:

Bring key Treasury people together and get aligned on1. VMV and organization2. Burning issues – fix the important and urgent first3. Align on the end-state for all key elements of the function4. Agree on a road map from ‘as-is’ to end-state

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Treasury at VimpelCom - Organization

Treasury

Treasury

Treasury Treasury

Treasury

Moscow

Moscow

CairoRome

Kiev

Treasury

Amsterdam

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TMS – Selection process

1. Key urgency issue: get detailed visibility on cash, debt, derivatives, bank accounts, etc. (June 2011)

2. Start monthly reporting in excel on cash and debt (July 2011)3. Investigate what TMS’s are used and how (July – Oct 2011)4. Formulate TMS requirements and weights in light of the defined ‘end

state’, local needs and decentralized organization (Dec 2011)5. Ask 2 Treasury consultancy firms to rank available systems in the

market based on the defined requirements and weights (Jan 2012)6. Based on feedback consultants (same recommendation), invite vendor

to demonstrate – webex meetings with RTCs (Jan 2012)7. Develop detailed & tailored test script with one of the consultants and

do extensive test demo based on these scripts (Feb 2012)8. Additional demos for RTC teams and testing based on demo version9. Agree on final conclusion and recommendation to select – sign-off10. Start implementation – kick off March 2012

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TMS requirements & weights

TMS criterion group TMS scoring criterion Weight

Score Weighed score

Score Weighed score

Score Weighed score

Score Weighed score

Score Weighed score

Score Weighed score

Functionality Cash/debt visibility 10% 0 0 0 0 0 0

  •import/reconciliation bank statements

  •position monitoring

Functionality Instrument coverage 8% 0 0 0 0 0 0

  •straight forward debt instruments

  •plain vanilla derivatives

  •trade finance

  •I/C loans

Functionality Cash forecasting 10% 0 0 0 0 0 0

Functionality Exposure/risk management 6% 0 0 0 0 0 0

  •FX and IR exposure, incl. scenario analysis

  •Credit risk

  •MtM calculation

Functionality Settlement 5% 0 0 0 0 0 0

  •Treasury Payments

Functionality Accounting 0% 0 0 0 0 0 0

Functionality Hedge accounting 0% 0 0 0 0 0 0

Functionality Reporting 5% 0 0 0 0 0 0

Integration Interfacing 8% 0 0 0 0 0 0

  •Banks

  •Dealing platform(s)

  •Market data vendor(s)

  •ERP / General Ledger (Oracle,C1)

Integration Global system access 10% 0 0 0 0 0 0

Functionality Multi-language 5% 0 0 0 0 0 0

Feasibility Segregation of duties 5% 0 0 0 0 0 0

Feasibility Audit Trail 5% 0 0 0 0 0 0

Feasibility System security 5% 0 0 0 0 0 0

Feasibility Implementation time 10% 0 0 0 0 0 0

Cost Pricing (TCO) 8% 0 0 0 0 0 0

Overall Weight / Scoring 100% - - - - - -

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TMS – Implementation process (1/2)

1. Global kick-off meeting March 2012 – jointly with BELLIN – paint the bigger picture / policy in which the TMS fits – not a stand alone project

2. Create clear (local) ownership and responsibility – GT / RTCs / OpCos / IT

3. RTC relationship managers at GT level, key users in RTCs, single point of contact with BELLIN (top-down approach)

4. Step-wise implementation – cash and debt first, the rest later5. Staff-up for initial phase of (centralized) static data entry - interns6. Add all bank accounts in tm5 – 1,300 accounts globally – replace excel

based reporting with tm5 based reporting7. Ongoing training of key users in RTCs and some key OpCos through

webex8. Progress reporting to all teams on the project in general, ‘motivate the

laggards’

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TMS – Implementation process (2/2)

9. Make processes and instruments fit the system – not v.v.10. Keep pushing on simplification of underlying structures – cut back on

complexity (# bank accounts, banks, manual processes)

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TMS – Implementation processTMS implementation time-line April May June July December

Static dataUsersBank accountsCounterparties + limits…….Dealing platform interfaceBloomberg interfaceUser manual

Cash balances, deposits and other investmentsDaily cash balances (via auto-upload)Deposits, investments

Cash flow forecastingCash flow forecast per currency

DebtExternal debt instruments (ST & LT)i/c loans

FXSpot & Derivative contractsMtM

IRDerivative contractsMtM

GuaranteesAll guarantees received/issued

NFA - Counterparty Credit RiskCustomized report

= Completion milestone

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Treasury Management System - Lessons

1. Keep it simple - ease of use & access is key for TMS to work for VIP2. Align (with IT early), involve and communicate3. Consultants do add value in speeding up the selection process;

implementation can (and should) be done yourself4. Know what you want, focus on what you need; nice-to-haves add

complexity; will come later when people are familiar with the basics5. Celebrate successes and recognize role model behavior – create ‘we’6. Demonstrate solutions for those that present ‘issues’7. Creating customized user manual is time consuming but essential

Key statistics after 6 months: 1,300 bank accounts and all Treasury deals in tm5 180 users in 18 countries 500 entities / counterparties Global consolidated Treasury reporting from tm5