Corporate treasury services
April 2016
123
Con
tent
s Corporate treasury services
About EY
Appendices
Credentials
Contacts
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Corporate treasury services
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Corporate treasury services
A challenging context leads to … … a wide range of needs for treasurers:
► Considerable change, driven by economicand regulatory conditions
► Increasing complexity of the businessenvironment
► Strengthening of the control environment► Application of standards on accounting for
financial instruments (IFRS 7, 9, 13)► Emergence of new risks to be managed
(e.g., commodities, energy)► Greater financial sophistication (e.g.,
financial derivatives)► Changes within the company and its
communication protocols
► Design and implement the company’streasury strategy (e.g., payment factory)
► Streamline processes and controls (e.g.,centralization)
► Create new businesses and riskmanagement indicators
► Manage increased financialcommunication, more complex valuationand accounting issues (IFRS 7, 9, 13)
► Manage cash requirements and securitizerefinancing (e.g., cross-currency cashpooling)
► Implement effective communication withsenior management
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Helping treasurers to respond to a wealth ofnew opportunities
Demands on corporate treasury areconstant and evolving.
Our treasury network is focused on theeight key challenges faced by companies.Our team of professionals works closelywith you to help you address these inyour business.
Organizationand
governance
Assuranceand control
Cash andliquidity
management
Corporatefunding
Valuationand
accounting
Performanceassessments
Treasurytechnology
Treasurymanagement
Financial riskmanagement
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Organization and governance Treasurymanagement
We work with you on the following treasury activities from defining objectives to developing a new or revisedorganization, including the governance structure and underlying processes.
1. Current state analysis► Analyzing the current state of your treasury as compared to leading practices and established control requirements► Assessing your systems and methodologies, focusing on identifying potential for improvements
2. Future state development► Defining the target organization► Defining, updating or standardizing policies, processes and procedures for:
► Banking network (banking selection and rationalization)► Cash management (pooling and netting)► Short- and medium-term financing (for example, factoring and securitization)► Financial risk management► Treasury accounting► Definition and adjustment of key management indicators► Selecting and implementing treasury management systems► Defining roles and responsibilities, job descriptions and assisting with recruitment and secondment placement
3. Implementation► Project planning and management (objectives, resources, milestones)► Identifying and developing “quick wins” (containment of cost structure, reduction of bank fees)► Roll-out of your new global or regional structure► Additional organizational knowledge through workshops, including operations, accounting, finance, legal, tax services
and information systems
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Performance assessments Treasurymanagement
We have developed a framework to assess the performance of a treasury function on the basis of our global experiencewith treasury organizations. We also take into account external comparisons and guidelines, such as those from industrybodies, accounting standards and corporate governance codes, which need to be considered in the broader context of thecompany’s risks and its level of complexity.
Taking external market trends into account, as well as our experience, we have developed a compact corporate treasurychecklist that allows for a comprehensive comparison against leading practices and provides a quick insight into potentialimprovements.
In addition, the maturity of the treasury function is assessed and compared with established, leading treasuryorganizations, while taking into account your organization’s characteristics.
In our treasury assessment, we cover:► Treasury organization, strategy and systems► Integration into the company's strategy, rules and
responsibilities► Management of financial risks (for example, interest
rate, currency and commodities)► Liquidity and cash management► Internal control► Performance measurement► Financial reporting
Our assessment deliverables include:► Treasury performance assessment► Treasury assessment dashboard
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Financial risk management
We can help and strengthen your understanding of financial risk management strategies, supporting you to achieve yourorganization’s goals — both in terms of better business performance and enhanced financial reporting.
This includes a comprehensive overview of your organizational structure and infrastructure (such as policies, controls,processes and models), and helping you develop methods and processes for quantifying, assessing, managing andmonitoring financial risks across the financial value chain. In addition, working with our Tax team, we can assess theimpact of BEPS on your organization.
We provide advice and support as you:► Identify the main sources of financial risk exposure and measure the company’s hedging effectiveness► Review your strategy for financial risk management within the group’s financial supply chain► Review and assess models to quantify and monitor financial risks, including VaR, EaR, gap and scenario analysis► Integrate more complex financial products into your information systems► Develop appropriate (hedge) accounting to reflect the (economic) exposures, including hedge-effectiveness testing► Develop appropriate reporting to enable effective monitoring and steering of financial risks by management► Understand profit and loss deviation through a thorough analysis of commodities, forex and interest rate impact
Treasurymanagement
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Financial risk management framework Treasurymanagement
The EY risk management framework consists of five stages:
Identify Diagnose
► Analyze and commenton current client's riskmanagement framework
► Understand businessstructure, economicmodel and transactionalflows
► Conduct financial riskexposure analysis
► Analyze current financialrisk management policyand hedging framework
► Analyze businessplanning schedule andcycle versus financial riskforecast schedule andcycle, and comment onpotential improvement
► Understand and validatethe current state offinancial risk managementframework
► Analyze impact offinancial risk managementframework on client'sresults
► Define recommendationsto implement enhancedrisk managementframework
► Post implementationanalysis and sustainableimprovement plan
► Assess and validate thecurrent state of your FXrisk managementframework
► Define criteria for itsevaluation andunderstand desiredfuture state
► Assess accountingschemes and impact ofFX risk managementframework on your resultsfor both statutory andmanagement reporting
► Identify comparativecompetitors in terms of FXrisk management
► Set financial managementobjectives consideringlinkage with shareholders’value
► Define your financial risktolerance, taking intoaccount businessdynamics
► Design and enhance yourfinancial risk managementpolicy and hedgingframework
► Define recommendationsof potential benefits ofusing or not using hedgeaccounting
► Analyze impact on:
► ERP systems
► Control framework
► Develop the approachand requirements for theselected improvements,as stated in the newfinancial risk managementpolicy
► Design and enhance thefinancial risk managementmanual
► Validate the newlydesigned financial riskmanagement framework
► Analyze impact andredesign of financial riskmanagement frameworkon statutory accounting,management reportingand control framework
► Implement a financial riskmanagement framework
► Confirm the newlydesigned financial riskmanagement frameworkis operating as intended,and capture lessonslearned (KPIs,performancemanagement reporting)
► Perform test of design toidentify performance gapsof the newly designedfinancial risk managementframework
► Implement an ongoingmonitoring program
► Identify furtheropportunities to extendthe benefits across theclient’s group
Key tasks
Activities
Design Deliver Sustain
We help you as you:
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Cash and liquidity management Treasurymanagement
We help you work towards improving your company’s financial resources (cash management and funding) andhelp you determine a reasonable path to follow so you can manage your cash effectively — from both a financeand tax perspective.
Cash flow forecasting modelIn addition, we have the right knowledge to assist you in securing your payments means more effectively, using changes in the paymentslandscape (for example, SWIFT Xml).
We can help as you :► Develop your liquidity risk funding strategy, policy and procedures► Review your company’s local, regional and global cash collection, disbursement and bank account structure► Develop your cash-pooling, including the architecture and processes, RFP and bank shortlist► Develop methodologies for cash flow forecasting and variance analysis procedures► Select systems and technology used in the cash forecasting process► Streamline the cash and liquidity management processes and structures in alignment with global tax strategies► Assess and reorganize your cash management activities (for example, methodology to implement shared service centers)► Examine your framework for structured monitoring of key indicators for liquidity risk► Support implementation and enhance cooperation from management participants► Strengthen your financial resources (cash management and funding) and help effective cash management — from both a financial and
tax perspective► Assess the reliability of cash forecasting and the adequacy of your process in this area, designing or implementing a better cash-
forecasting model as required► Assist you to secure your payment means more effectively, leveraging changes in the payments landscape
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Corporate funding Treasurymanagement
We work with colleagues from across EY to create a multidisciplinary team to cover the full range of financing activities,from helping you to define your strategy to support you as you negotiate and implement a financing arrangement.In the area of corporate funding, we can help you as you select and implement:► Appropriate structures, procedures and systems to help you determine and manage the financing strategy of your company► A financing strategy tailored to overcome organizational, legal, regulatory, fiscal, contractual and accounting constraints► Ways of reaching improved financing costs and an appropriate diversification of funding sources
Define the financing strategy► Identification of the medium- and long-term financing needs► Develop a methodology for forecasting and monitoring financing needs and financial covenants► Identification of the financing structure diversity possibilities, for example, bond and MTN issues, money market, open market or
syndicated banking credit or loan, securitization, project financing, sale and lease back and factoring
Negotiate financing► Implement a “call for tenders” procedure, including assistance in preparing term sheets to support negotiations with banks► Examination and support negotiation, with the assistance of legal advisors, of the financing arrangements► Analysis of the implied credit risk of the company, based on the credit spread included in the financing arrangement► Analysis and assisting on tax and accounting operations treatment
Implementation► Implement the necessary structures and teams to manage the financing needs► Setup of an in-house bank, including a transfer-pricing policy for financial instruments and guarantees► Tax-constraint management, while preserving an acceptable administrative management level (for example, withholding tax,
deduction of interest, stamp duty and sales tax)
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Valuation and accounting
Accounting and valuation are core competencies, given the complexity of derivatives and accountingrequirements. Our goal is to translate our knowledge to you in usable value. We can support you in theapplication of relevant accounting standards (IFRS and local GAAP) and assist you with:Valuation► Credit value adjustment (CVA) and debt valuation adjustment (DVA) methodologies and quantification► Hedging strategy scenarios► Valuation review (such as basis risk, index of services (IOS) validation, commodity specifics)► IFRS convergence projects► Valuation of complex financial instruments, including embedded derivatives and personnel options► Modeling and valuation of complex derivatives► Quantification of credit risks and spreads, and impacts on valuation► Valuation and hedging in illiquid markets► Application of IFRS 13 (CVA and DVA)
Treasurymanagement
Accounting for financial instrumentsWe assist you in applying the (hedge) accounting provisions of IFRS to your local GAAP, in particular:► Preparation or review of your accounting policy, as compared with leading practices► Support in the design of hedge accounting procedures► Advise on the measurement of hedge effectiveness► Support in application of the derecognition requirements to achieve appropriate accounting of asset backed securities
transactions and factoring► Advise on the accounting for the issuance of mezzanine capital, such as convertible bonds and hybrid bonds► Knowledge transfer and training to the treasurers and relevant operating units as well as the board and head of risk or
internal audit
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Valuation and accounting Treasurymanagement
Effective control► An effective treasury activity control environment is critical to a company and its shareholders.► IFRS and the obligation of executives to report on the internal control framework to external parties create an additional
level of compliance (e.g., the Financial Security Agreement Law and the Sarbanes-Oxley Act, or the more recent over-the-counter derivatives reform legislation).
► Assistance is often necessary to alert the cash manager, the finance department or the executive management aboutthe main challenges, and to provide assurance on the quality of the organization and the internal control frameworkrelated to cash, financing and risk management activities. Companies often need external guidance to manage theirtreasury management control.
We offer to share control and management methodologies, taking into account the requirements for:
Legislative andregulatory compliance
Efficiency Efficacy Accountability
We review the current state and provide recommendations for meeting your statutory and regulatory requirements.
Our services include support to your existing internal audit units in planning, preparation, performance and reporting,taking into account current and future trends. We provide recommendations for the development of an effective(continuous) monitoring control environment, support for the implementation of programs (such as fraud prevention andSOX), and evaluation of the efficiency of implemented controls.
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Treasury technology
We can work with you to identify the current and future needs of your treasury function. This analysis shouldfocus on both functional requirements and technical- and vendor-related issues. We can assist you with your:► Alignment of treasury technology to your requirements► Fast and efficient integration of systems into your processes► Extensive treasury management system (TMS) knowledge and proven methodologies for system selections, and the
business aspects of application► Choosing the system provider with the right level of independence required► Securing your treasury data against any cyber threats by working with our Forensic Technology & Discovery Services
team► Sustainable knowledge transfer
Treasurymanagement
Using this analysis and our knowledge of the TMS market, we provide:► A structured approach to identifying vendors► Support in development of a request for proposal, based on proven templates► Support on the management of the complete request-for-proposal process, including vendor communication► Advice on assessing vendor responses► Facilitation of vendor demos, “proof-of-concept” and reference visits► Assistance with the preparation of the cost and benefit analysis, and business plan
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Treasury technology Treasurymanagement
Support and guidance as you implementTo help confirm that IT systems quickly and seamlessly fit into the business of your treasury, we assist you with thefollowing:► Support with program and project management► Design workshops and preparation of design documents (blueprints)► Define and configure statistical data► Define reporting requirements► Reconcile static data► Develop and perform testing programs and scripts► End-user training
In addition, wehelp you achievequality in all partsof theimplementationproject.
Treasury Management System
Market D ata Systems
Tradin g Platforms
Accou ntingSystem
Forecastin gSystem
Confirmationsystems
Ban kSystems
Risk Man agemen tSystem
CashManagement
Liqu idityManagement
CorporateFinance
Interest Rate Risk
FX Risk
Credit Risk
C ommodity
Treasury Accounting
Treasury Control& Reporting
Back-office
ReportingSystem
Treasurymanagement systemfunctionalcapabilities andvendor selection
2013 TreasuryManagementSystems Overview
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Assurance and control Treasurymanagement
Where there is complexity and a high volume of financial transactions, a reliable system of internal controls is moreimportant than ever. For example:► Validation► Back-testing► Auditing estimated values, including current values► Auditing the risk early-recognition-system.
In addition to strengthening the independent audit processing units, it is very important to integrate an effective controlenvironment into the landscape of treasury processes to facilitate a continuous risk management strategy.We can help you to reduce operational risks and identify operational improvements by jointly building appropriatemonitoring and control systems to help you balance the demands of the following challenging areas:► Legislative and regulatory compliance► Efficiency► Effectiveness► Accountability
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Benefits of working with EY Treasurymanagement
With the ever increasing pace of change for businesses in terms of regulation, compliance and technology, treasury hasbecome a strategic business associate across all areas of the business, adding value to the operating divisions of anorganization. Our aim is to support treasury teams as their role continues to evolve.
We can work with you across your treasury team to support your review of every element to be ready to adapt to thechanging business environment. We often bring in other professionals from across EY to create the relevantmultidisciplinary teams to respond to your challenges.
Why EYOur Corporate Treasury team includes more than 150 professionals. Our team has worked with organizations across awide range of industries and in many countries. We have the specific skills and experience, including in supply chains andcorporate transactions, needed to provide you with treasury services that are both sophisticated and practical.Our highly integrated global network means that our professionals can support you wherever you need us to be.
Certain of our services for an audit client and its affiliates may be more limited in order to comply with applicableindependence standards. Please reach out to your EY contact for further information.
About EY
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Asia-Pacific sub-areas
ASEANBrunei, Cambodia,Guam, Indonesia, Laos,Malaysia, Maldives,Myanmar, NorthMariana Islands(including Saipan),Philippines, Singapore,Sri Lanka, Thailand,Vietnam
Greater ChinaMainland China, HongKong SAR, MacauSAR, Taiwan, Mongolia
KoreaOceaniaAustralia, Fiji, NewZealand, Papua NewGuinea
Financial ServicesOfficeAustralia, China, Korea,Singapore, Vietnam
Offices worldwide in more than700+ 150 countries
EY Global
Employees worldwide as of 30 June 2015212,000Global revenue as of 30 June 2015US$28.7 billion
Appendix
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Treasury credentials
Advisory:Treasury
operating model reviewleading to
internal audit win
Internal audit:TMS migration project
support andassurance
Secondments:Multiple secondments
to treasury team,covenant reviews
Advisory:Creation of a paymenthub in Asia and newhedging strategies
Advisory:Advice on early adoption
of IFRS 9
Advisory:FV hedge and TOFAcompliance review
Hedge accounting,trading advice, processand accounting review
Partnering with head ofIA to co-develop atreasury IA plan for
the next three to fiveyears
FIDS:Fraud management and
payments review forFIDS
Advisory:Support for complex
derivative andrefinancing program
— working withinvestment bank on
strategic options
Page 22 Corporate treasury services
Financial Accounting Advisory ServicesContacts — EMEIA
Kieren CummingsTreasury Services
[email protected]+61 2 9248 4215
Damien JonesTreasury Services
[email protected]+61 2 9248 5236
EY | Assurance | Tax | Transactions | Advisory
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