Carolina's Cash Adventure - Payments Around the World... · Indonesia Japan South Korea Malaysia New Zealand Singapore Taiwan ... Corporate treasury is shifting from a back-office

C O N F I D E N T I A L

R E D H A T , I N C .

P A Y M E N T S A R O U N D T H E W O R L D

May 2016

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Red Hat Inc. - Company Background

RED HAT INC.

� Revenue size: $14B Market Cap. $2B in sales

� What we do:

Provider of open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, middleware, storage and cloud technologies. The open source development model allows it to use the collective input, resources and knowledge of a global community of contributors who can collaborate to develop, maintain and enhance software because the human-readable source code for that software is publicly available and licenses permit modification. These offerings include Red Hat Enterprise Linux, Red Hat JBoss Middleware, Red Hat Enterprise Virtualization and Red Hat Storage Server

� Where we sell : Three geographic operating segments:

� Americas (U.S., Canada and Latin America)

� EMEA (Europe, Middle East and Africa)

� Asia Pacific

� History: Red Hat was founded by Robert F. Young in March 1993 and is headquartered in Raleigh, NC

� Future: Global growth. Grow, Grow, Grow

1



North America

CanadaUnited States

Latin America

ArgentinaBrazilChileColombiaMexico

Europe

BelgiumCzech RepublicFinlandFranceGermanyIrelandItalyNetherlandsNorwayRussiaPolandSpainSwedenSwitzerlandUnited Kingdom

Middle East / Africa

TurkeyUnited Arab Emirates

Asia Pacific

Australia ChinaHong KongIndiaIndonesiaJapanSouth KoreaMalaysiaNew ZealandSingaporeTaiwanThailandVietnam

Red Hat operates in over 35 countries around the world

2

Red Hat Inc. – Global Operations



Will Consider

47%

Don’t Know

5%

No

7%

Yes

44%

Evolution of Treasury Role

Corporate treasury is shifting from a back-office function towards that of a strategic business partner.

Treasury played an operational and clerical role

Treasury became more analytical and proactive

Treasury will become advisory and strategic

Treasury 1.0 Treasury 2.0 Treasury 3.0 � CEOs are looking to treasury for intelligence to make

key decisions on:

� Cash flow

� Funding

� Risk considerations

� Treasurers are seeking banking relationships that provide higher-value advisory services .

� These relationships will center on the amount and quality of insight the bank can deliver .

Source: Treasury Strategies Inc. 2013

Is your company likely to scrutinize current or prospective financial services providers more thoroughly over the next two years?

“We had a number of executives say they would like to be able to partner with their banks in a more consultative way .”- David Owens, Director of Research, CFO Research

Key reasons for the treasury’s greater strategic ro le

� Increased emphasis placed on cash management and liquidity in the current economic environment70%

� Result of close attention being paid to the company’s liquidity and risk exposure by senior management and the board

� Financial professionals that report that their companies are making a concerted effort to be innovative in leveraging the skills that reside in treasury

� Organization has taken a more cross-functional approach

63%

50%

47%

Source: AFP, Strategic Role of Treasury. 2014

3



Legacy Payables Environment

One ERPMany

LocationsProcessingDifferences

Many Connections

Many FileFormats

• sFTP / PGP

• NACHA

Host-to-Host

• HTTPS / SSL

• ISO20022 XML

File Upload

NORTH AMERICA

• HTTPS / SSL

• ISO20022 XML

Manual Entry

EUROPE / MIDDLE EAST

LATIN AMERICA

ASIA PACIFIC

• HTTPS / SSL

• CSV

• Proprietary

File Upload

OR

AC

LE

4



� Fragmented Payables Process

� Security Concerns with File Exports/Imports

� Inconsistent and Manual Processing

� Different technology, file formats, connectivity and security

� Outgrew Online Processing

Red Hat’s Current State Challenges & Goals of Future State

Current State Challenges

� Automate and Standardize Payments Processing (save time/money)

� Reduce operational risk

� Electronify Wherever Possible

� Clean-up Vendor Master Data

� Consolidate Payables into a single file solution

� Utilize Industry Standard Formats – Reduce the cost of future change

� Maximize Investment in ERP Platform

� Build a Foundation for Future Growth –acquisition integration

5

Future State Goals



Evolution of Payment Processing

Bank Web Portal with export to bank office

Host-to-Host transmission for

payments and reporting

Consolidated reporting and payables, standardized

connection through SWIFT

� Basic cash positioning

� Daily reporting through bank web portal

� Export data in CSV out of bank portal

� Direct transmission of daily reports

� Rely on bank portal for some reporting

� Use of mobile and other multi channels

� Largest may use ERP treasury or TMS

� TMS or dedicated treasury ERP module

� Direct transmission or SWIFT communication channels

� Little if any use of bank web portal

� Pooling and netting schemes

� In-house or web portal check print

� Check usage still high

� Use bank web portal for wire and ACH

� Partial reconciliation

� In-house or direct transmission check print

� Check usage slowing; active campaign to ACH

� International and FX payments

� Use of mixed payments files

� Shared service centers or payment factories

� FX and multicurrency accounts

� Use of mixed payment files

� Payments created and initiated through ERP, likely use ERP as the approval and transmission vehicle

Simple Complex

Simple

Complex

Organizational needs

Information reporting

Payables

Level of Technology

6



� Engage your primary banking partners to better understand:

� Global coverage, considerations, options

� Strategic Advisory

� Payables Trends and Best Practices – what are your other clients doing?

� Considerations in managing Global Payables & Technology

� Consolidated Payables / Supported Transaction Types

� Connectivity Options / SWIFT

� ERP / File Formats / Standard / Bank Agnostic

� Resources and Time Required

� Identify and Recruit Key Stakeholders

� Senior Management – ‘buy in’ key to project success

� Treasury

� Accounts Payable

� Procurement

� Information Technology – engage early!

� Local Teams – ‘buy in’ key to project success

Project Approach

How to begin the project

7



BelgiumFranceGermanyIrelandItalyNetherlandsSouth AfricaSpainSwitzerlandUnited Kingdom

Global Coverage - How Well Do they Match?

Toronto

Mexico City

Sao Paulo

LondonFrankfurt

Mumbai

Singapore

TokyoShanghai

Hong Kong

Sydney

CanadaUnited StatesBrazilMexico

Asia Pacific

J.P. Morgan Branches J.P. Morgan London Solution

The Americas Europe, Middle East & AfricaEurope

Indicates a SEPA country

AustraliaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailand

AustriaBulgariaCroatiaCyprusCzech RepublicDenmarkEstoniaFinlandGreeceHungaryIcelandLatvia

LichtensteinLithuaniaLuxembourgMaltaMonacoNorwayPolandPortugalRomaniaSlovakiaSloveniaSweden

Red Hat & J.P. Morgan footprint

Additional J.P. Morgan footprint

Commercial Bank regional banker coverage

Additional Red Hat footprint

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� Country coverage is rarely 100%

� Even large global banks have country gaps in treasury service coverage

� Many partner with local banks and engage in reciprocal support

� Some require a local bank account

� Regulation – just to do business (Brazil, India, China, Malaysia)

� Tax Payments

� Payroll

� Petty Cash

� Capital Injections

� Existing Relationship

� Local credit needs

Global Coverage, Considerations

Global Coverage

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� Treasury structuring

� Country specific challenges

� Technology & systems

� Compliance and regulation

� Working capital management

� Cash management, cash pooling structures

� Foreign exchange and risk management

� Counterparty risk management

� Cash flow forecasting

Engage Your Banking Partner

Treasury Trends & Best Practices

10

Market

Banking Partner Strategy



Your provider’s experience with various clients in different stages of the treasury evolutionhelps clients explore the real benefits to their ove rall business strategy

ActiveTreasury

Mgmt.

Regional Treasury Centers

Regional Liquidity Solutions

Global Solutions

RegionalRisk

Mgmt.

RegionalShared Service

Centers

In-CountryLiquidity

Management

Finance Solutions

Payables Cash FlowProjections

Receivables

Country Level

EntityLevel

� Global funding, concentration and investments

� Global payment factory

� Global Supply Chain Program

� Netting, pooling, sweeping structures

� Physical & financial supply chain management

� Regional re-invoicing center

� Active treasury and risk management role

� Shared Service Centers – centralized AP and AR activities

� Regional Treasury Centers – centralized FX and funding

� Rationalization of banking relationships

� In-country accounts

� Basic payments / receivables

� In-country liquidity structures

� Sweeping cash into centrally managed bank accounts or centralized in-country banks

� Local Trade and Supply Chain Financing

Stage 4: Global Model

Stage 3: Regional Model (automated overlay)

Stage 2: Regional Model (manual overlay)

Stage 1: Decentralized Model

Evolution of Treasury Structures

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Global Payables Best Practices and Technology

� Consolidate to a single ERP or Treasury Management System

� Build a foundation for future growth – acquisition integration

� Enables maximize return on investment in platform

� SWIFT – does it make sense?

� Secure the pipe and the file

� Acknowledgement processing

� Automate and Standardize Payments Processing (save time/money)

� Reduce operational risk

� Utilize Industry Standard Formats – Reduce the cost of future change

ERP / Treasury Management

System

Connectivity

Consolidated Payables

ERP Integration and Automation

� Growth of ISO20022 XML usage

� Reduce the cost of future change

� Bank agnostic

Use Industry Standard Formats

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Global Payables Best Practices and Technology

� Utilize H2H reporting: ISO20022 XML, BAI2, CSV etc.

� Prior Day – account reconcilement

� Current Day – cash positioning

� Multi-bank Sweeping – Concentrate cash to your primary banking provider

� Multi-bank Payments – streamline number of banking platforms and entitlement management

� Multi-bank Reporting - upgrade your online banking platform to a global portal for cash balances

Reporting Automation

Coverage Gaps / Multi-bank

ERP Integration and Automation

� Ad-hoc payments

� Ad-hoc current day reporting

� View H2H file processing

� Mobile utilization

Use of Online Banking

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Comprehensive Payables

Key features

Red Hat Host-to-Host Pay J.P. Morgan

I N S T R U C T I O N S

SECURE

TRANSPORTTRANSLATE

VALIDATE AND

PROCESS

CONSOLIDATECONSOLIDATEFORMAT DATAFORMAT DATASECURESECURE

I N F O R M A T I O N

Wires

ACH, GACH

Check Print

Foreign Exchange

Virtual Card

Acknowledgements

Reconciliation and

Reports

ERP Systems or

TMS

Payments

Consumer

Payments

� A mixed payment electronic file solution for urgent and non-urgent, electronic and paper, credit transfer and direct debit – all in a single file

Reconciliation and Reporting

� Intraday and prior-day balances and transactions and payment details by type

Connectivity

� A secure, electronic link between Red Hat and J.P. Morgan and our wide range of automated payment and reporting services

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38% Bank web platform 28% Treasury management system/workstation 19% ERP system 15% In-house developed system

Primary systems for initiating treasury payments and settlements Source: Treasury Strategies’ Quarterly Technology Briefing ,2014

Split Remittance



� Identification of Project Scope

� Countries, Currencies

� Payment Types (ACH, GACH, Wire, FX, Check)

� ERP Integration

� File Formats / Encryption

� Connectivity / Security

� Transmission locations / Acknowledgements

� Identify and Recruit Key Stakeholders

� Senior Management, Treasury, Accounts Payable, Information Technology, Local Teams

� Implementation Approach

� Strategy: Country, Regional or “Big Bang” approach

� Cross-Regional Coordination

� Project Timing / Expectations / Factors

Project Implementation

Implementing Consolidated Payables

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� Implementation Approach

� Regional

� North America: U.S., Canada

� Europe

� Asia

� Latin America

� Payments Types: ACH, Wire

� Benefits Realized

� Risk reduction

� Streamlined processes

� Approval & Control Process

Current State

Where are we at today?

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� Other Regions – Treasury Function Outsourcing, ERP Status

� Europe: SEPA debits & credits

� Asia-Pacific

� Latin America

� Other Value-Add Solutions

� Check Print Outsourcing: U.S. and Canada

� Virtual / One-time Use Card Payments: U.S.

� Mobile Payments / Collections

Future State – Expansion Items

Expanding Global Integration & Automation

17



This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered including such client’s subsidiaries, (the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. It may not be copied, published or used, in whole or in part, for any purpose other than as expressly authorized by J.P. Morgan.

The statements in this presentation are confidential and proprietary to J.P. Morgan and are not intended to be legally binding. Neither J.P. Morgan nor any of its directors, officers, employees or agents shall incur any responsibility or liability to the Company or any other party with respect to the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation.

IRS Circular 230 Disclosure: JPMorgan Chase & Co. a nd its affiliates do not provide tax advice. Accor dingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliate d with JPMorgan Chase & Co. of any of the matters a ddressed herein or for the purpose of avoiding U.S. tax-related penalties.

J.P. Morgan is a marketing name for the Treasury Services businesses of JPMorgan Chase Bank, N.A. and its subsidiaries worldwide. In the United Kingdom, JPMorgan Chase Bank, N.A., London branch and J.P. Morgan Europe Limited are authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

JPMorgan Chase is licensed under US patent numbers 5, 910,988, and 6, 032 and 137.

© 2016 JPMorgan Chase & Co. All rights reserved.

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Documents

Carolina's Cash Adventure - Payments Around the World... · Indonesia Japan South Korea Malaysia New Zealand Singapore Taiwan ... Corporate treasury is shifting from a back-office