© 2011 Treasury Strategies, Inc. All rights reserved.

April 19, 2011

Currency Wars: Managing FX Risk in Volatile Times

Presented by: Andrew Gage, VP of Strategic Market Development, FiREapps

Laurie McCulley, Managing Director, Treasury Strategies

Agenda

•  Introductions and Backgrounds

•  A Call to Action -  Feeding the Appetite for Growth -  Currency Volatility Trends -  A World Class Headache

•  Treasury 3.0: Treasury, The Strategic Nerve Center

-  Applying Treasury 3.0 in Managing FX Risk -  The Exposure/Risk Management Process -  Challenges and Requirements

•  A Success Story: Agilent Technologies

•  Questions and Answers

Introductions

Laurie McCulley is a Managing Director within the Treasury Strategies, Inc. Technology Consulting Practice. Leveraging over 25 years of experience in transaction banking and corporate treasury, Laurie works with bank and non-bank service providers to help them expand globally, integrate technology and mitigate risk. Laurie drives value for clients by combining her expertise in treasury technology with an in-depth knowledge of treasury operations. The result is a strategic analysis of market developments, product mix options, and back office integration that delivers stake holder value. Ms. McCulley is a Certified Treasury Professional. She earned a B.A. with honors in International Relations from Pomona College and an MBA from Seattle University.

Andy Gage is Vice President of Strategic Market Development for FiREapps. In this capacity, Andy is responsible for working closely with FiREapps clients that have complex exposure management requirements and developing and managing partnerships with FiREapps strategic partners. Andy joined FiREapps as Vice President of Marketing in the summer of 2006 and subsequently took on the role of Vice President of Sales. Andy has accumulated over 20 years of experience in marketing, product management and consulting. Prior to joining FiREapps, Andy has held several marketing and product management executive positions. He also spent several years providing strategic consulting services for Deloitte Consulting. Andy holds an MBA from the University of Texas, Austin and a bachelor’s degree from the University of Arizona.

A Call to Action

Growing Risk

financial flows Increasing

International Growth, 62%

Staying the Course, 38%

Based on Analysis of Most Recent Earnings Statements from Fortune 100

Fortune 100 Companies Growth Strategies Driven by

Increased Globalization

New Markets, New Risks

New Markets, New Risks

Emerging World

BRIC appeal Two-thirds of the pharma and life sciences CEOs we surveyed anticipate that a substantial amount of their company’s future growth will come from emerging markets

Technology CEOs have their eyes firmly fixed on emerging markets— where demand is soaring, thanks to double-digit economic growth and huge consumer populations with increasing disposable incomes. 88% expect their key operations in Asia to grow, and that 36% are looking for acquisition targets in the region.

BRIC Countries: Brazil

Source: Yahoo Finance

USD/BRL FX rates 1/1/2009 to 1/31/2011

30 day volatility for USD/BRL - 3.09%

BRIC Countries: Russia

USD/RUB FX rates 1/1/2009 to 1/31/2011

30 day volatility for USD/RUB - 2.89%

USD/INR FX rates 1/1/2009 to 1/31/2011

30 day volatility for USD/INR - 11.21%

BRIC Countries: India

USD/KRW FX rates from 1/1/2009 to 1/31/ 2011

30 day volatility for USD/KRW - 7.0 %

Other Growth Countries: Korea

Increased Growth + Increased Volatility = World Class Headache

International Growth

Currency Volatility

FX Risk Manager

Growth & Volatility Implications

•  More “eyes” are focused on FX impacts: -  C-Suite

-  Business Units

-  Auditors (Internal and External)

•  FX exposure management environment is increasingly complex: -  Mergers and acquisitions

-  Functional currency designations revisited

-  More systems and sources of exposure

-  Harmonizing disparate FX risk management processes

Growth & Volatility Consequences

•  Brutal Reality: Legacy approaches for managing currency risk will not effectively support corporate strategic growth plans: -  Lack automation

-  Insufficient analytical capabilities

-  Executive management is requiring more timely reporting

-  FX gain / loss attribution analysis increasingly difficult

-  Increased push for more frequent monitoring and adjustment

-  Potential trend: Increased adoption of “daily rates”

Treasury 3.0

Treasury 3.0: Treasury is the Financial Nerve Center

Characteristics of Strategic Treasury

Treasury

Funding

Liquidity

Risk Management

Controls Payment

Treasury 3.0 - Corporate Perspective

Treasury Management Timeline

Treasury Operations is an

immature, fragmented or

informal function, characterized by manual processes

Treasury centralizes key roles, improving

transparency and controls

Greater access to data and computing power and consolidation of

competency

Treasury 1.0

LOW

HIGH

Treasury is a strategic advisor, more closely

integrated with business units, supporting

globalization, efficiency, trading partner/supply chain integration and

greater sophistication in risk/return optimization

Treasury 2.0 Treasury 3.0

Pre 1970 1970 - 2010 Now - Future

Trea

sury

Influ

ence

& V

alue

Add

Data Information Intelligence

Technology for Treasury 1.0

Technology for Treasury 2.0

Analysis & Pricing

Bank Account Administration

Payment Factory

Bank Connectivity via

SWIFT

Financial Transaction Execution

Accounting & Reconciliation

Web Access for Subsidiaries

Dashboards & Reporting

In-house Banking

Technology Architecture for Treasury 3.0

Intercompany Loans

Netting

Foreign Exchange

Accounts Receivable

Cash Forecasting

Links to the IPA

Accounts Payable

Market Research & Data

Scenarios & Simulations

Rating Information

Investments

Funding

Applying Treasury 3.0 to Improve Efficiency and Effectiveness of

Managing FX Risk

- 24 -

Same principles apply in the New World… you just have to do faster and more effectively

Tried & True Risk Management Process

- 25 -

Income Statement

Revenue

COGS

Operating Expense

Operating Income

Other Income/Expenses

FX Gain/Loss

Net Income

EPS

Understand Economic and Accounting Exposures

What Makes Effective FX Exposure Management So Elusive?

“All too often, organizations are managing their FX risk with partial, inaccurate or late information. That is the piece of the puzzle FiREapps has enabled its clients to really manage.”

Laurie McCulley, Treasury Strategies, Inc., Managing Director

Disconnect between Data & Decisions: Balance Sheet Exposures

•  Common Challenges: -  Disconnect between what is re-

measured and what is “managed”

-  SAP Variants: Complex and Static

-  Oracle Setup: Tricky at Best

-  FAS 52: Harder than you think

-  Manual Data Entry

-  Poor Exposure Data Integrity

•  Keys to Success: -  Increased collaboration between Controller, Treasury, IT and in some cases Tax

-  Periodic reviews of account classification, the longer you wait, the more painful it is to fix

-  Automated data extracts and analysis; eliminate manual processes & data entry wherever possible

Disconnect Between Data & Decisions: Forecasted Exposures

•  Common Challenges: -  Multitude of Source Systems

-  Different slices of the FX Lifecycle from different sources

-  Forecasts & budgets are often presented in the reporting currency

-  Exposures have different likelihoods and timeframes o  Revenues o  Expenses o  Commissions o  R&D etc…

•  Keys to Success: -  Cross functional collaboration across groups that are the sources of exposure data

-  Automate collaboration, data capture and analysis

-  Empowered single point of contact for managing the end to end process: FX PROCESS OWNER

Business Requirements for Surviving in the New World

•  Automate end-to-end FX exposure management process •  Improve operational efficiency & reduce risk of manual errors

-  Treasury Operations (Straight Through Process)

-  Business Unit Finance and Accounting

•  Increase transparency & timeliness •  Automated trade execution •  Seamless integration with post-trade accounting •  Improve ease of compliance and controls •  Improve ability to handle dynamic growth environment •  Measure and report results •  Minimize the impact of FX on earnings & EPS

The Reference Architecture for Managing Corporate Currency Risk

Exposure Sources

Trade

Trading Platform

Post-Trade

Treasury Management

System

Pre-Trade Exposure Analytics and Decision

Support

Slide 30

FX Data Aggregation Analytics

Decision Support

Agilent Technologies:

A Success Story

Agilent Technologies

•  “The Power of Measurement” •  Designer, manufacturer, and provider of electronic and optical test,

measurement, and monitoring instruments, systems, and solutions •  Spun off from Hewlett Packard in 1999 •  Net Revenue FY 2009: $4.5 Billion (67% Outside U.S.)

•  Services customers in 110 countries

Agilent Technologies

Increase Efficiency and Focus on Strategic Value •  Achieve an automated, straight-through process •  Better understand top-to-bottom impact of currencies on the income

statement •  Focus on analysis and decision-making

The Agilent Vision: Achieving Agility; Positioning for Growth

Exposure Sources

Trade Post-Trade Pre-Trade Exposure Analytics and Decision

Support

Agilent Technologies: Solution Landscape

Aggregate Analyze Decide

AvantGard Integrity

FX Trades to be Executed

Summary Level Hedge Data

Executed Trades

Trading Platform Oracle

Cash Flow Actuals

Balance Sheet Actuals

“It is an integrated, full-circle, straight-through-process THAT UTILIZES MULTIPLE DATA SOURCES AND INTERFACES.”

DAWNETTE BLAKE FX & PENSIONS MANAGER FOR AGILENT TECHNOLOGIES

Flexibility •  Corporate structure changes easily incorporated

Operational efficiency •  Reduction in data aggregation/validation •  Greater focus on analysis and decision-making

Greater transparency via expanded reports/analysis •  Each stakeholder understands how they impact the balance sheet (and

ultimately, cash) •  Decision Analysis report – high level snapshot of all exposures

Compliance and Control

Solution Benefits for Agilent Technologies

“It is absolutely vital. Our goal is to support the overall business and so getting that visibility, that transparency, HAVING THE AVAILABILTIY OF THE DETAILS IS REALLY CRITICAL TO MEETING THE OVERALL BUSINESS NEEDS.”

DAWNETTE BLAKE FX & PENSIONS MANAGER FOR AGILENT TECHNOLOGIES

Current Risk Mitigation Unmitigated Value at Risk

Understand Risk and the Cost/Benefit Of Managing Risk

Where can I learn more?

•  Jan/Feb 2011 AFP Exchange Article: Trust But Verify

•  Treasury Strategies Linked In Communities

•  FiREapps Website Best Practices Section

Questions?

•  Andy Gage, VP, FiREapps

agage@fireapps.com

Phone: 480-443-7333 (ext 155)

•  Laurie McCulley, Managing Director, Treasury Strategies

Laurie_McCulley@TreasuryStrategies.com

Phone: 407-644-6202

Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.

@TreasuryStrat

www.TreasuryStrategies.com/ content/networking-communities

What We Do Corporations We help you maximize worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls. Treasury Technology We provide guidance through every step of the technology process. Our expert approach will uncover opportunities to optimize the value of your treasury through fully integrated technology solutions. Financial Services Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business.

About Treasury Strategies, Inc.

•  Founded in 2000

•  Provider of Cloud-based FX Business Intelligence

•  World-class solutions based on real world experience

•  Software & Advisory Services provide: -  Complete & Accurate FX Exposure Definition -  Timely Exposure Monitoring -  Exposure Visibility & Transparency

•  Rapid time to value with minimal IT support

•  Proven track record of helping companies reduce the risk and costs of FX

About FiREapps