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Leadership in Treasury: Emerging
Markets Pave the Way for
Globalization
Andres Ken Shuyama, CTP
Director of International
Treasury,
Stanley Black & Decker, Inc.
Jiro Okochi
CEO & Co-Founder,
Reval
Sharon Petrey, CTP
Treasury and Risk
Management,
Reval
Session Agenda
• Introduction to the Session
• Objectives and Best Practices
• Case Study: Stanley Black &
Decker
Emerging Markets Growth
• In 1988, there were just 10 countries in the MSCI Emerging Markets Index, representing less than 1% of world market cap
• Today the MSCI Emerging Markets Index covers over 800 securities across 23 markets and represents approximately 11%1 of world market cap
• Goldman forecasting that emerging markets market cap will eventually exceed developed markets
• Yet to the developed world emerging markets continue to pose a challenge
• Why is that?
The Emerging Markets Challenge
• Despite time,
importance and growth
emerging markets is
daunting to many
• “Treasury in Brazil is a
nightmare and would
avoid it at all cost”
European Treasurer,
September 17, 2014
• “Emerging markets
don’t change and will
always be emerging”
Emerging Markets FX
Trader 1998
The Times They Aren’t A Changing
Why Does Treasury Care More Now?
Trapped Cash
• The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent1
• China, India and Russia worst offenders in trapping company cash2
• U.S. corporations are holding $1.95 trillion in deferred earnings outside our borders. – 12% higher than one year earlier.
– Repatriated would generate about $682.5 billion in tax revenue.
1 Bloomberg News, March 12, 2014 2 Euromoney, March 13, 2014 3 Forbes.com, Sept 25, 2014
Follow The Money: Cash Visibility
• Central Treasury can struggle to integrate post M&A or with new business units
• Regional offices can “hide” behind local: language, culture, requirements, & relationships
• Change management from the top
• Reeling in control from the bottom with the cash
• Sweeping cash to HQ sends a powerful message!
SaaS Technology For Control &
Change Management • Single global platform for
real-time cash visibility
• Eliminate riskier manual processes
• Better workflow controls
• Easier regional deployment and connectivity
• No need for regional IT support
• Emerging markets telco infrastructure can be better than some developing countries
Leadership in Treasury: Emerging
Markets Pave the Way for
Globalization
Sharon Petrey, CTP
Treasury and Risk
Management,
Reval
Overarching Objectives: Entering
Emerging Markets
Strategically
• Ensure access to sufficient financing
• Maintain sufficient in-country liquidity
• Manage risk
• Optimize local cash
Operationally
• Overall ease of operation • Streamlined and
optimized banking structures
• Technology Optimization
• Efficiency and oversight
Best Practices for Entering
Emerging Markets
• Setting treasury structures and policies
• Key questions when setting a funding
strategy
• Opening and managing bank accounts
• Maintaining liquidity, visibility and
control
Treasury Structures and Policies
• Ensure entity can operate legally
• Ensure policies are in place
• Review structures after a period of time
Funding New Activity
• Who is responsible for arranging
funding?
• Is the funding arranged up front or as
needed?
• Is there an initial capital requirement?
• How will working capital be financed?
Opening and Managing Bank
Accounts
• Are in-country bank accounts needed?
• How many, which types, which
currencies?
• What bank?
Maintaining Liquidity, Visibility
and Control
• Do you have visibility into bank
accounts and accessibility to cash?
• Do you have the right liquidity in
various countries?
• Can you even maintain control in
certain locations?
The Tax and Treasury
Conversation
• Concepts
– Permanent Reinvestment
– SubPart F income
– Transfer Pricing
– Withholding Tax
– Thin Capitalization Rule
– New Developments
Leadership in Treasury: Emerging
Markets Pave the Way for
Globalization
Andres Ken Shuyama, CTP
Director of International
Treasury,
Stanley Black & Decker, Inc.
Agenda
• Overview of Stanley Black &
Decker
• Impact of Globalization on
Treasury
• Lessons Learned and Tips that
Helped Us
A Diversified Global Leader
CDIY
Industrial
Security
Building World Class Branded Franchises With Sustainable Strategic Characteristics
That Create Exceptional Shareholder Value
Market Cap & Dividend Yield Are As Of Market Close 7/25/2014 $90.77
Industrial $3.3B • Industrial & Automotive Repair
• STANLEY Engineered Fastening
• Infrastructure
Security $2.4B • Convergent Security
• Mechanical Access
• Healthcare
CDIY $5.3B • Professional Power Tools
• Hand Tools & Storage
• Consumer Products Group
• Fastening & Accessories
Stanley Black & Decker (NYSE: SWK)
2013 Revenue: ~$11.0B Market Cap: $14.2B Cash Dividend Yield: 2.2%
Dividend Paid Consecutively For 138 Years; Increased For Past 47 Consecutive Years
Global Brand Power
A Powerful Portfolio Of Well Managed Brands
Global Presence
Australia 1Q’14 2Q’14
Organic Flat + 2%
% SWK 2% 2%
Europe 1Q’14 2Q’14
Organic + 4% + 1%
% SWK 29% 26%
Canada 1Q’14 2Q’14
Organic + 9% - 1%
% SWK 5% 5%
Japan 1Q’14 2Q’14
Organic + 11% + 1%
% SWK 2% 2%
US 1Q’14 2Q’14
Organic + 2% Flat
% SWK 46% 48%
Emg Mkt 1Q’14 2Q’14
Organic + 5% + 1%
% SWK 16% 17%
Expanding Geographic Reach Nearly Half Of Our Revenues Still Generated In The U.S.
54% 19%
16%
11%
U.S. Europe Emerging Markets ROW
47%
41%
6%
Industrial
37%
24%
28%
11%
Security CDIY
47%
26%
17%
10%
Canada 5%
Australia 2%
Japan 3%
Emerging Markets ~17% Of 2013 Revenue | Goal Of 20%+
6%
Global Emerging Markets Represent A Significant Opportunity For Organic Growth
Stanley Black & Decker Segments
Compelling Acquisitive Growth
Opportunities Growth
Characteristics
Acquisition Capital Focused On Driving Growth In Both Core And New Platforms
Five Acquisitive Growth Areas
Security
Engineered Fastening
Infrastructure
Tool Consolidation $35B 3-5%
$35B 4-6%
$15B 6-8%
$85B 6-8%
Addressable
Market Size
Emerging Markets $15B 10-20%
Overview of Stanley Black &
Decker
Diversified & Global Company
Powerful Brands
Focus on growth in Emerging Markets
What does this mean to Stanley Black & Decker’s Treasury team?
Impact of Globalization on
Treasury • Increased complexity
• Increased unpredictability / risk
• Need to learn new things / new responsibility
• Working as a team with other functions / business
units is a must
• Interaction with different cultures and styles of
communication
Greater visibility and opportunity
Lessons Learned and Tips
1. Take care of existing
operations
Simplify and reduce
complexity
Enhance processes and
leverage technology
Automate transactions,
‘connect the pipes’ and create
liquidity structures
2. Prepare for growth in
new markets
Assess banking & credit
needs and availability in
target country
Understand funding and
repatriation requirements
Monitor risks (currency,
geopolitical, counterparty)
Free up capacity to focus on new markets
Stay involved!
Best Practices for Entering
Emerging Markets • Collaborate internally (tax, legal, finance ops, etc.)
• Learn from your peers, local treasury associations, technology
and banking partners
Streamline
&
Standardize
Maximize
Liquidity
Manage Risks
Ask & Learn
• Setting Treasury structures and policies
• Optimize banking structures
• Examine processes and technologies
• Maintain liquidity, visibility and control
–Leverage controls and reporting to improve visibility & forecast
–Utilize liquidity structures to maximize liquidity and funding
• Monitor and manage risk according to appetite (Operational,
Financial, Liquidity, Country, Counterparty, Cost)
Questions?
Jiro Okochi
CEO & Co-Founder
Reval
Sharon Petrey, CTP
Treasury & Risk Management
Reval
Andres Ken Shuyama, CTP
Director of International Treasury
Stanley Black & Decker, Inc.
