Risk Management in Treasurynyce.tmany.org/.../05/Sess-2RegentRisk-Managment-in-Treasury-Final.pdfRisk Management In Treasury Objectives •Enterprise Risk Management •General Risk

Strategic Treasurer, LLC © 2014

Risk Management in Treasury

May 2014


gRisk Management In Treasury

Objectives• Enterprise Risk Management• General Risk Management

Process• Visualizing Risk• Measuring Impact• Stress Testing

- Risk Management Framework in Treasury examines the benefits of integrating treasury operations with the larger financial and logistical functions of the company. The discussion reviews contemporary systems, along with new technologies and concepts, to obtain an overall picture of liquidity and risk.


g

Global Issues Impacting Volatility

2007

2008-2010

2011-2012

Syria Civil War

Russia annexes Crimea

and threatens Ukraine

Iran Nuclear threat

North Korea

threatens with artillery and nuclear

weapons

Board members and Executive Management are now far more in tune with financial risks then at the start of the financial crisis

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

USD/EUR

JPY/USD

USD/GBP

CHF/USD

CAD/USD


Why and Why Now?

Continued VolatilityCounterparty Changes

2008 Moody’s Top 20 U.S. Banks

2014 Moody’s Top 20 U.S. Banks


gEnterprise Risk Management (ERM)& Financial Risk Management

Financial Risk ManagementERMFRM

Enterprise Risk Management

FX

IR

Commodity

Country

Counterparty

Liquidity

Fraud - Internal

Compliance Requirements

Compliance

Financial Reporting & Disclosure

ReportingFraud – External

Operations & Supply Chain

Operations

Financial Risk Management – The Treasurer’s Domain


Control Framework Examples

COSO ERM & Internal Control Integrated Framework (ICIF)


gPerspectives on Risk

Top Down Risk Framework


gRisk ManagementChoices

Ignore

Avoid

Accept

Manage

Risk Management

Choices

Alter

Hedge

What is your goal? Is it to bring risks into line with your organization’s risk tolerance?


gPerspectives on RiskReducing Volatility


gRisk IdentificationVisibility and Calibration

Risk Identification

• Visibility

Transactions

Sales

Marketing

Balance Sheet

• Calibration

Type of exposure

Certainty of exposure

What does it mean?


gChallenges: To Successful Risk Management

SUPPLY CHAINCREDIT RISK MANAGEMENT

TREASURY

FUNCTIONS

SYSTEMS

LIQUIDITY

MGMT

WORKING

CAPITAL

FINANCIAL RISK

MGMT

BALANCE SHEET

MGMT

BANK ACCOUNT

MGMT

COUNTERPARTY

MGMT

· I/R / FX

TWS / TMS RISKBANK ACCOUNT

MGMTFORECASTING CUSTODIANS

BANK

PORTALS

CONTROL

SYSTEMS

CUSTOM

SPREADSHEETS

CONNECTIVITY

SYSTEMSDATA/RATES

TRADING

PLATFORMS

ERP1

ERP2

BUDGETING

SYSTEM





BANK OF AMERICA

B OF A

MERRILL LYNCH

1

2

3

BANK OF AMERICA = B OF A

B OF A = B OF A

MERRILL LYNCH = B OF A

· BANK OF AMERICA

· BANK OF AMERICA

· BANK OF AMERICA

1

2

3

| Normalize |




gVisualizing RiskExposures & Level of Risk


gTreasury Technology Landscape

Treasury Workstation (TWS/TMS)(Visibility, Cash, Risk, Enterprise)

Data Consolidation(CaaS - Connectivity as a Service, SWIFT, Banks & Third Party)

Workflow Image Tech(File Management, Workflow Management, Data Integrators)

Spreadsheet/Database(Controls for Worksheets)

Risk, Debt & Investment(FAS133, IS39, Documentation, Testing & Modeling Systems)

Netting Systems(Banks, Vendors, with and w/o Workflow Management)

Currency Systems(Currency Trading)

Bank Administration(Bank Administration, Account Analysis)

Control Systems(Reconciliation & Escheat)

Order To Pay(EIPP, Outsourcers, Reverse Lockbox, Imaging, Credit/

Financing)

Order To Collect(Supply Chain Management,

Credit & Collections, Disputes, Credit/Financing)

LANDSCAPE OF TREASURY TECHNOLOGY SYSTEMS

TWS, LIQUIDITY PORTALS AND IN HOUSE BANKINGWORKING CAPITAL & CASH

CONVERSION CYCLECOMPLIANCE RELATED

RISK MANAGEMENT

IHB & Pooling Systems(Banks, TWS, ERP)

Exposure Identification(Retrieving and Analyzing Exposures)

Investment Compliance(Counterparty, Instrument, Policy)

Letters of Credit Systems(Banks)

Custody Systems

Investment/Liquidity Portals

TREASURY VISIBILITY

Dimensional Risk Analytics Dashboard / Treasury Optics(Dimensional Risk Dashboards, Cross Application Tools)


gVisibility Expansion


gTreasury Technology ExampleVisibility & Analytics


gTreasury Technology Example


gTreasury Technology ExamplePolicy & Exception Management


gTreasury Technology ExampleCashflow at Risk - Histogram


gTreasury Technology Example


gTreasury Technology ExampleStress Test – Graphical Display


gTreasury Technology ExampleStress Test – Matrix Example


Suggested Reading:

gReview

Concept of Volatility

ERM/FRM and Control Frameworks

Perspectives and Choices

Risk Identification

Challenges to Risk Management

Visualizing Risk

New Technology


Craig Jeffery formed Strategic Treasurer, LLC in 2004 to provide corporate, educational, and government entities direct access to comprehensive and current assistance with their treasury and financial process needs. His twenty-five years of financial andtreasury experience as a practitioner and as a consultant with various financial institutions have uniquely qualified him to help organizations craft realistic goals and achieve significant benefits quickly. He is primarily responsible for relationship management and ensuring total client satisfaction on all projects. Additionally, he oversees the development of all practice areas and staff.

Mr. Jeffery was previously a Senior Vice President and Practice Leader for Wachovia Treasury & Financial Consulting from 2000through 2004. Prior to joining Wachovia, Mr. Jeffery worked with a major regional bank as Vice President and worked in the Information Management, Investment, and Treasury Divisions at The Hartford. Mr. Jeffery’s experience in finance, treasury, consulting, information technology, and process re-design encompasses numerous industry segments. He has extensive cross-functional project management experience and has aided many organizations on a variety of projects, including strategy formulation, financial transparency and system implementation efforts. His project experience ranges from multi-year, multi-million dollar efforts to rapid assessments.

He is often quoted in, and has written articles for, finance and treasury management publications, such as Treasury & Risk, Financial Executive, Business Finance, and CFO magazines. He is also regularly requested to present both in the U.S. and internationally. He is the author of a book for Treasury, The Strategic Treasurer: A Partnership for Corporate Growth,published July 2009 by John Wiley & Sons.

Mr. Jeffery graduated from the University of Connecticut with a BS in Accounting. He is a permanent Certified Cash Manager, an Accredited ACH Professional and a Fellow of the Life Management Institute with distinction.

Email: [email protected]

Phone: 678.466.2222

Craig A. JefferyAAP, CCM, FLMI

Managing Partner

gCraig A. JefferyManaging Partner

Strategic Treasurer500 Westpark Drive, Suite 110Peachtree City, GA 30269+1 678.466-2220

http://www.treasurybook.com/

mailto:[email protected]


Documents

Risk Management in Treasurynyce.tmany.org/.../05/Sess-2RegentRisk-Managment-in-Treasury-Final.pdfRisk Management In Treasury Objectives •Enterprise Risk Management •General Risk