insights from our clients….what’s next?

Fall 2013

Treasury and Trade Solutions

Insights From Our Clients….What’s Next?

Panelists:

Moderators:

Sharon Petrey Assistant Treasurer

The Coca-Cola Company

Michael Fossaceca North America Sales Head, Corporate

Treasury and Trade Solutions, Citi

Joe Promo Assistant Treasurer

Global Treasury Services, Merck

Raeleen Medrano Assistant Treasurer

IBM

Asok Patnaik Segment Strategy & Cross Product Initiatives

Liquidity Management Services

Treasury and Trade Solutions, Citi

Panel Discussion

Perspectives from the Client Advisory Board Survey

Key Challenges & Next Steps : Panel Discussion

Panel & Audience perspectives : What should Citi invest in?

Appendix - Validations from Citi Treasury Diagnostics

1

13%

63%

25%

0% 50% 100%

The pool is NOT providing sufficient/anticipated benefits and we

expect to review it

The pool is providing sufficient/anticipated benefits and we

expect to expand usage (e.g. add more legal entities/currencies/balances)

The pool is providing sufficient/anticipated benefits and we

expect to maintain as-is

77%

45%41%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Cash concentration / Physical pooling

Single Currency Notional Pooling

Multi-currency Notional Pooling

1. Visibility, Funding, Liquidity & Risk Management 1a

How would you rate your visibility of global Cash

on a daily basis?

What are your key impediments to achieving 100%

visibility of global cash on daily basis?

What types of pooling structures do you use to manage

liquidity in your company? Please check all that apply.

If you have a Multi Currency Notional Pool, how

would you best describe its effectiveness?

2

50-75%9%

76-90%50%

Over 90%41%

5%

41%

45%

32%

27%

0% 20% 40% 60%

Others

The cost of getting to the last 10% visibility is not worth it

Some banks in emerging markets unable to provide daily statements

Lack of a global Treasury Management System

No impediments - we have very close to 100% visibility

23%

36%

0%

27%We have been able to

increase limits

We have reduced limits

We have reallocated limits across banks

We have remained more or less at the same level

91%

50%

36%

45%

36%

Stay up to date with the latest local regulatory changes and tools available in all key markets

Use an efficient global cash forecasting program to maintain tight control on local

subsidiary funding and repatriation

Deploy best available local liquidity structures to optimize onshore cash usage before moving in

liquidity from offshore

Whenever local funding is needed, actively evaluate all available options to use "least

costs" tools

Mitigate trapped cash through reorganization of third-party and intercompany flows

2. Visibility, Funding, Liquidity & Risk Management 1b

Approximately what % of your cash would you

say is trapped?

What are you doing to leverage trapped cash? Please check all that apply. In the past couple of years, when it

comes to managing counterparty

limits for relationship banks:

At this stage what effects from Basel III are you

seeing from your relationship banks? Please

check all that apply.

3

50%

23%

14%

5%

0%

10%

20%

30%

40%

50%

60%

0-10% 10-20% 20-30% >30% 50%

18%

18%

27%

No ef fect seen as of now

Derivative pricing has started to change

Loan pricing has started to change

Deposit pricing has started to change

36%

41%

32%

18%

45%

45%

Reducing working capital requirements

Greater focus on visibility & control of cash

Greater focus on improving operational controls or

alleviating rising operational

risks associated with processing activities

Concerns stemming f rom greater commercial/sovereign

credit risk in new

markets/jurisdictions

Better balance sheet structure and ef f iciency

More demand f rom the operating business for support/consulting

f rom treasury

3. Working Capital 2

Would you agree that in recent years Treasury’s

role in operational activities such as

AP/AR/Supply Chain has increased?

If yes, what are the key reasons why you think Treasury’s

role in operational activities has increased in recent years?

4

Yes95%

No5%

8%

75%

42%

50%

75%

Others

Reducing bank cash and external debt held at subsidiaries

More ef fective FX risk management

More ef fective management of intercompany demand/revolving …

More ef fective management of intercompany term loans

4. Treasury Structure & Governance

Do you have one or more In House Banks or are

you considering setting up one in 2014/2015? If yes, what are the key factors that were/are

important in creating the In House Bank(s)?

How quantifiable are the benefits of

your IHB to your management?

3

Will your Treasury have any major transformation projects during 2014

and, if so, what are the main drivers? Please choose all that apply.

5

Yes55%

No41%

Not Sure4%

27%

50%

36%

9%

5%

Treasury-led banking restructuring or streamlining project

Treasury-led transformational project (e.g. material treasury organizational, …

Enterprise-led technology transformation project with impact on Treasury (e.g. ERP …

Enterprise led business transformation project with impact on Treasury (e.g. …

We do not have any notable projects ongoing or planned for 2014

58%

50%

17%

You are able to demonstrate clear,

financially quantifiable benefits

You focus partly on financially

quantifiable benefits and partly on

qualitative benefits

You focus more on qualitative benefits,

as quantifiable benefits are hard to

measure

0%

10%

20%

30%

40%

50%

60%

70%

> Treasury Trends > Working Capital Trends

Key Metrics from Citi Treasury Diagnostics

What is Citi Treasury Diagnostics?

Built on Six Aspects of Treasury Operations

Liquidity

Management

Working Capital

Management

Risk

Management

Subsidiary Funding

and Repatriation

Policy and

Governance

Systems and

Technology

Identify Where You Stand Relative to Peers—Learn What Counts as Best in Class

Benchmarks Benchmarks Relative Performance Detail

Winner, Celent

Model Bank Award

Silver Winner, Solution of the

Year, Treasury and Risk Alexander Hamilton Awards Winner, Innovative Product

Performance Risk Management +/- Policy &

Governance

Liquidity

Working Capital

Sub Funding &

Repatriation

Risk Management

Systems &

Technology

4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9 4.33.6

3.6

2.4

2.4 4.9

2.6

1.0

1.7

My Score

Peer Group

Universe 3.0

2.9

My Relative Performance

Process Area Against Peer Group Against Universe

Liquidity/funding risk Worse Worse

Interest rate risk Worse Worse

Foreign Exchange

(Transactional) Better Better

Citi Treasury Diagnostics SM is a global benchmarking platform providing treasury insights based on

data from over 350 multinationals.

6 Key Metrics from Citi Treasury Diagnostics

http://www.alexanderhamiltonawards.com/

Citi Treasury DiagnosticsSM Participant Profile

CTD participants come from all geographies and industries.

Geography* Industry Market*

* HQ Locations

ASIA 25%

EMEA 33%

LATAM 6%

NA 36%

Emerging Mkt24%

Developed Mkt76%

7%

7%

18%

19%

23%

25%

Others

Healthcare

Energy, Chemicals, Metals (ECM)

TMT

Consumer

Industrials

Treasury Trends

Netting

Center

Treasury

Center

In-House

Bank

Cash &

Funding Risk Governance Systems

Working Capital Trends

Shared Service Center

Accounts Payable Accounts Receivable

Source: Citi Treasury Diagnostics (Last Updated July 2013)


1. CTD Trends: Visibility, Funding and Risk Management

Cash & Funding

Visibility1

Forecast2

Risk

Treasury Risk Coverage3

“Post financial crisis, there is

greater emphasis on global

visibility, control & risk

management” 59%

42%

Daily Cash Balance Full Visibility

+17% Full visibility of daily cash

balance increased by 17%


+4%

32%

27%

Fully or Partially Automated Forecast

(facilitated by TWS/ERPs)

Fully or Partially

Automated Forecast

facilitated by TWS/ERPs

gained ground by 4%

2011-2013 Responses 2009 Responses

FX 83% 17%

Liquidity 78% 22%

Counterparty 84% 16%

71% 29% Interest Rate

36% 64% Commodity

Yes No

1. How much of your total cash balance do you have daily visibility to?

2. Do you forecast your cash flows?

3. Does your treasury policy cover all FX, Liquidity, Counterparty, Interest Rate, and Commodity risks?

1


2. CTD Trends: Working Capital

Structure

A/R A/P

Treasury involvement in WC Mgmt.2 AR Mgmt.3 AP Mgmt.4

“Emphasis on internal

funding is driving up

treasury’s involvement

in working capital.”

30% Shared Service Center1

Yes No

70%

No

Yes

27% Treasury

Directly

Involved

in WCM

+8%

74%

(Current) 66%

(2009)

Supplier Payments

+9%

38%

29%

Customer Receivables

+14%

34%

20%

2011-2013 Responses

2009 Responses


1. Have you established shared service centers (SSC) to support business processes?

2. Which one of the following best describes Treasury’s current role in working capital management?

3. What is the scope of Treasury’s responsibility – Customer Receivables?

4. What is the scope of Treasury’s responsibility – Supplier Payments

2


3. CTD Trends: Structure and Governance

Structure

Governance

Centralized Treasury1

Netting2

In-House Bank3

Yes No

27% 74%

57% 43%

41% 59%

Netting usage is higher for industrials, tech and healthcare companies and is lower for consumer and energy companies

Favored Locations for In-House Bank: Ireland, Netherlands, Switzerland, Belgium. Singapore tops locations in Asia

No

Yes

26%

74%

No

Yes

32% Treasury

Business

Continuity

Plan5

68%

Treasury

KPIs4


“Centralization continues, with

emphasis on tax, financial &

operational efficiency. Treasuries

are increasingly being measured

on quantifiable KPIs”

1. Which best describes your treasury organization?

2. Do you operate an Intercompany Netting Process?

3. Do you have an in-house bank?

4. Is Treasury Department’s performance measured through quantifiable KPIs?

5. Do you have a treasury business continuity plan?

3a


4. CTD Trends: Technology

Systems

Use of ERP / TMS3

89%

86%

Corporates are

increasingly using ERP

TMS modules

ERP TMS

Module

+3%

No

Yes

49% Use of

Fewer Bank

e-platforms 2

51%

No

Yes

33%

67%

TMS1

Of companies with centralized treasury, 72% use TMS

2011-2013 Responses 2009 Responses Source: Citi Treasury Diagnostics (Last Updated July 2013)

“Companies are moving towards

an end state of Single Instance

ERP & single global TMS, but

these are multi year projects.”

29% 35%

34% 28%

27% 32%

29% 35%

34% 28%

27% 32%

Location of systems accessed for treasury processes4

+4%

+5%

Access by central

corporate

treasury only

Access by central

corporate treasury

and RTC(s)

Accessed by All

locations

Systems Access

1. Do you use a Treasury Workstation System (TWS) or ERP Treasury Module?

2. How many electronic banking platforms do you have?

3. Does your treasury system interface with your corporate and legal entity ERP and general ledger systems?

4. Where are the system(s) accessed and used for treasury processes?

3b


1. Industry Breakdown: Treasury Trends

“Trends appear to indicate that

best in class is generally

agnostic to industry verticals.”


42%

54%

50%

50%

49%

48%

58%

46%

50%

50%

51%

52%

TMT

ECM

Industrials

Healthcare

Consumer

Universe

In-House Bank (IHB)4

63%

68%

68%

60%

63%

63%

75%

80%

85%

75%

70%

77%

Universe

Consumer

Healthcare

Industrials

ECM

TMT

Centralized Treasury Centralized Risk Management

Centralization12

70% 69%

58%65% 66% 67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Universe Consumer Healthcare Industrials ECM TMT

Treasury KPIs3

1. Which best describes your treasury organization?

2. Is risk management centralized or regional?

3. Is Treasury Department’s performance measured through quantifiable KPIs?

4. Do you have an in-house bank?

4


2. Industry Breakdown: Working Capital Trends


Shared Service Centers (SSCs)2

86%

63%

68%

71%

68%

71%

14%

37%

32%

29%

32%

30%

TMT

ECM

Industrials

Healthcare

Consumer

Universe

Treasury in Working Capital Management1

“Treasuries are playing a larger

role in Working Capital

Management but many have

not reached optimal state.”

2.3

2.3

2.1

2.5

2.3

2.7

Universe

Consumer

Healthcare

Industrials

ECM

TMT

Treasury Involvement in WC - Score (0-5)3

66% 73%86%

67%53%

75%


1. Which one of the following best describes Treasury’s current role in working capital management?

2. Have you established shared service centers (SSC) to support business processes?

3. Overall calculated Treasury and Working Capital score

5


0%

10%

20%

30%

40%

50%

60%


Multiple systems with E-Banking One system per region with host to host links

Single processor with host to host interface Other

3. Industry Breakdown: Technology Trends


“In our wider client universe, there

is still much room for improvement

in treasury technology.”

67%

61%

64%

68%

62%

78%

Universe

Consumer

Healthcare

Industrials

ECM

TMT

TWS / ERP1

Payment Processing Systems2

22% 25%

28%

22%21%

16%

82%

81%

89%

83%

74%

84%75%

83%

67%

77%

65%

71%

Universe

Consumer

Healthcare

Industrials

ECM

TMT

Bank Relationship Management Cash Operations/Liquidity Management

Treasury Controls and Accounting

Treasury Processes supported by TWS / ERP3

1. Do you use a Treasury Workstation System (TWS) or ERP Treasury Module?

2. Have you rationalized your payment processing systems in any of the ways noted below?

3. What treasury processes does your TMS support? (Bank Relationship management; Cash Operations / Liquidity Management;

Treasury Controls and Accounting)

6


insights from our clients….what’s next?

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