treasury focused on growth etienne kleuters michel hanssen 14 november 2014
TRANSCRIPT
Treasury focused on growthEtienne KleutersMichel Hanssen
14 N
ovem
ber
2014
Table of Contents
1. Introduction2. Business case for Treasury Management System3. Treasury system landscape
Cash and Liquidity ManagementHedge Management Business forecastingExposure Management
4. Next steps5. Lessons Learned
1. Introduction - Qrcus
Michel HanssenSAP Finance Consultant
1. Introduction - OCI NVFacts and figures
Leading global nitrogen fertilizer producer and engineering & construction contractor
Employing more than 55,000 people in 35 countries
Listed on NYSE Euronext as AEX-fund in Amsterdam
Founded in 1950 as a construction company
First fertilizers activities acquired in 2008, nowadays top 3 nitrogen-based fertilizer producer
1. Introduction - OCI FertilizersLocations
Challenges:Combining two separate companies into one OCI NitrogenDisconnected from corporate environment and operate as a stand alone company
1. Introduction - OCI Nitrogen
One of the European marketleaders in fertilizers andammonia products and thelargest producer of melamineworldwide. Over 80 years ofhistory and as from 2010 partof OCI
LocationHQ in Geleen (The Netherlands)(approx. 800 employees worldwide)
ProductionAmmonia, Mineral Fertilizers and Melamine
Annual TurnoverEUR 1.2 billion
Key strategic player within OCI Fertilizers
2. Business case for TMS2010 2014
Meeting first requirements stand alone
treasury organization
Upscaling to increased requirements (risk
management, regulatory,
accounting, financing, public listing parent)
Integration in corporate treasury
?< 2010
Fully integrated in
corporate treasury DSM
Organization
Policies
Information
Challenges:Develop a sustainable systemAchieve process efficiencySecure accuracy / Data integrationMeet the increased need for information
Treasury applications from SAP
SAP Treasury and Risk ManagementRisk Analyzer
Transaction Manager
SAP Bank Communication Management
SAP In-House Cash
Cash Management Liquidity Planning
Credit Risk Market Risk Portfolio Analyzer
Hedge Management Exposure ManagementMoney Market
Foreignexchange Securities Commodities
SAP Cash & Liquidity Management
Derivates Debt Mgmt
BPCForecasting
3. Treasury system landscape
Treasury applications from SAP
Cash Management Liquidity PlanningSAP Cash & Liquidity Management
3. Treasury system landscapeCash & Liquidity Management
A0 FI Banks
F2 Debtors
Today Today +1 Today +2 Today +3 Today +4
Cash position
B1 Outgoing Payment subledger
B3 Incoming Payment subledger
T1 Treasury in
Liquidity position
T1 Treasury out
Treasury deals
Payment in Transit
AP/AR
F1 Creditors
Sales and Purchases
P1 Purchase orders
P2 Sales orders 300
300
800
-800
-800
-800A0 FI Banks
Level / Short text
500 500 500
D C D C D C D C D C
500
-800
Treasury applications from SAP
SAP Treasury and Risk ManagementRisk Analyzer
Transaction Manager
Cash Management Liquidity Planning
Market Risk
Hedge ManagementMoney Market
Foreignexchange
SAP Cash & Liquidity Management
Derivates
3. Treasury system landscapeHedge Management
12
Types of risk which are hedged by OCIN:Foreign currency risk Interest rate risk
Hedging aims to mitigate the impact of economic risks on an entity’s performance.
Hedge accounting:Adjust the accounting treatment of a hedging instrument and/or a hedged item to enable recognition of gains and losses on the hedging instrument in the income statement in the same period as offsetting losses and gains on the hedged item.(Matching concept).
Hedge Management
3. Treasury system landscape
13
Strict criteria:Existence of formal documentationAchievement of effectiveness tests (80%- 125%)
Effectiveness tests:
Key date valuation
Retrospective
Inception date Interim or annual financial statements
Prospective
Interim or annual financial statements
Hedge Management
3. Treasury system landscape
Treasury applications from SAP
SAP Treasury and Risk ManagementRisk Analyzer
Transaction Manager
Cash Management Liquidity Planning
Market Risk
Hedge ManagementMoney Market
Foreignexchange
SAP Cash & Liquidity Management
Derivates
BPCForecasting
3. Treasury system landscapeSAP Business Planning & Consolidation (BPC)
SAP BPC is used for:Budget & ForecastAd hoc simulations
Advantages:
SAP BPC
Integration with SAP ECC ERP system
Shared responsibility Business Controllers
One-time input of (forecast) data
Possibility to delegate responsibilities of data input to other departments
3. Treasury system landscape
SAP BPC
Input currencies
&
Basic Assump.
Prices Raw Materials
Calculate Cost prices
Sales Volume &
Prices
Logistical Tariffs
P&L Reporting
Cash flow
BS
ReportingBPC Exposure
Mgmt
Automated CF Statement Identify exposures Scenario analysis
3. Treasury system landscape
Treasury applications from SAP
SAP Treasury and Risk ManagementRisk Analyzer
Transaction Manager
Cash Management Liquidity Planning
Market Risk
Hedge Management Exposure ManagementMoney Market
Foreignexchange
SAP Cash & Liquidity Management
Derivates
BPCForecasting
3. Treasury system landscapeExposure Management
Main requirements:– Identify FX exposures – Analyse Sensitivity – Accurate reporting FX results
Qualitative analysis to identify types of FX risk– Transactional (economic) versus Translational (accounting)– Direct and indirect – Different price commitment periods– Mainly EURUSD (long and short)
Quantative analysis to determine sensitivity
“OCI Nitrogen looked for a structural solution to get the required insight and
understanding of their FX exposure”
Exposure Management
3. Treasury system landscape
Exposure Management
3. Treasury system landscape
Treasury applications from SAP
SAP Treasury and Risk ManagementRisk Analyzer
Transaction Manager
SAP Bank Communication Management
SAP In-House Cash
Cash Management Liquidity Planning
Credit Risk Market Risk Portfolio Analyzer
Hedge Management Exposure ManagementMoney Market
Foreignexchange Securities Commodities
SAP Cash & Liquidity Management
Derivates Debt Mgmt
BPCForecasting
4. Next steps
5. Lessons Learned
Understanding the business is key
Identify key (corporate) objectives and quick wins
Early involvement relevant stakeholders
Stay flexible
Don’t let best get in the way of better (2014, Peter Fels, Sabic)
Etienne KleutersTreasury & Credit [email protected]
Michel HanssenSAP Finance [email protected]
Thank you