This document summarizes a panel discussion on the evolving strategic role of treasury. The panel discusses how treasury has moved from a transactional to strategic function by owning risk management, managing working capital, and embracing growth-driving roles. Treasury now plays a key part in areas like M&A due diligence, technology adoption, and relationship management across departments and with banks. The treasury function has expanded from cash processing to strategic planning, integrated risk oversight, and interactive communications across the enterprise.

1. 1© 2013
Unlocking the Strategic
Value of Treasury
Nick Guglielmo Linda Wright Bruce Lynn
Treasurer Financial Consultant Managing Partner
The Associated Press Former SVP & Treasurer The FECG, LLC
Fireman’s Fund Insurance, Co.
Moderator: Ernie Humphrey, CEO, 360 Thought Leadership Consulting

2. 2© 2013
Our Panel
Nick Guglielmo
Treasurer
The Associated Press
Linda Wright
Financial Consultant
Former SVP, Treasurer
Fireman’s Fund Insurance, Co.
Bruce Lynn
Managing Partner
The FECG, LLC

3. 3© 2013
Panel Discussion
The evolution of Treasury from transactional to
strategic over the past five years
The strategic value of working capital
Owning risk management
The new realm of bank relationship management
Embracing a strategic role in driving growth
Leading across the enterprise

4. 4© 2013

5. 5© 2013

6. 6© 2013
The Evolving Role of Treasury

7. 7© 2013
The Evolving Role of Treasury
Source: 2011 AFP Strategic Role of Treasury Survey
N= 673

8. 8© 2013
The New Strategic Role of Treasury
Source: Treasury Strategies

9. 9© 2013
Today’s Treasury: Top Priorities

10. 10© 2013
The Strategic Value of Working Capital
How the function of managing working capital
has evolved from transactional to strategic, and
how is working capital being managed, and
mismanaged in today’s world?
How do firms define their optimal level of
liquidity?
How do companies find the right home for
excess cash in today’s global investment
markets?

11. 11© 2013
Risk
Mgt
(Mkt, Credit, Ops)
Cash Accounting
(focus on posting, reconciling transactions)
DebtInvestment
Cash Management
(focus on balances)
The Traditional Treasury
• Focused on Processing
• Resources devoted to repetitive tasks
Basic
Advanced
Goals
Cash
Processing
Planning
2013 THE FECG LLC

12. 12© 2013
The Modern Treasury
Cash
Management
Risk Management
Debt
Management
Investment
Management
Financial
Markets
&
Institutions
Company
&
Operating
Units
• Policies Highly Visible
• Interactive Communications
• Plan, Actual & Forecast in Sync
• Functions & Systems Integrated
• Performance Metrics in Place
• Effective Bank Network
Technology
2013 THE FECG LLC

13. 13© 2013
Liquidity Metrics
Frequency = weekly
Time Horizon > 90 days
Definition / Comments
Liquidity
1. Free Cash Flow
2. Cash Conversion
3. Debt Utilization
4. Available Liquidity
5. Op cash flow as %
EBITDA
6. Target Balances
1. Trend: Op cash Flow – CAPEX – Dvds
2. Trend: DSO – DIO + DTP (days)
3. O/S vs Total (% / $): 3rd party & interco.
4. Cash + un-utilized credit lines ($)
5. Profit is ―leading indicator‖, but relation to
cash flow should be parallel
6. Set limits per account or per bank.
Amounts above target are ―excess‖,
subject to ―best use‖ (invest, pay debt,
dividends, etc) by Treasury
2013 THE FECG LLC

14. 14© 2013
How Much Liquidity is ―Enough‖?
S & P 500 (423 non financial co.) as of June 2013
Selected Financial Trends - Year end
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 (est)
Fiscal Year
$inBns
-20
0
20
40
60
80
100
120
140
Cashflow($inMillions)
Cash + S/T Investments Total Debt Total Cash Flow
2013 THE FECG LLC

15. 15© 2013
Owning Risk Management
Risk management not all that long ago was thought of
as only encompassing risk management
insurance, what is your definition of risk management?
How has treasury’s role evolved in managing key
elements of financial and operational risk management?
What role has technology played the arena of risk
management and how are firms leveraging technology
on this area?
Why does it make sense for Treasury to ―lead the
charge‖ in technology adoption in this area, and in
general ?

16. 16© 2013
Risk Management:
Treasury’s Contributions
Financial Risk Management
Counter Party Risk
Investments- short term and pension
Customers, suppliers, and contingents including letters of credit
Balance Sheet Protections
SOX- key controls
Segregation of duties
Data integrity
Claims & Near Miss Analysis
Prelude to purchasing insurance policies

17. 17© 2013
Risk Management:
Treasury’s Contributions
Operational Risk Management
Near Miss Analysis, via Inter-department Coordination and
Data Mining
Establishment of Real Estate Standards
Safety
Cube and Office Space
Travel, Entertainment and Fleet Standards
Litigation Settlement Practices

18. 18© 2013
Risk Management:
Treasury’s Contributions
Credit Risk Management
Credit Terms, including Discounts
Collection Efficiency Measurement
M&A Assistance, including but not limited to:
Market Scans—Credit Worthy Buyers/Sellers
Due Diligence including System Compatibility and
Lawsuits, Planned or Pending
Standard Contract Terms and Conditions
Post Transaction Assessments

19. 19© 2013
Risk & Related Metrics
Frequency = weekly
Time Horizon > 90 days
Definition / Comments
Risk
1. Exposure – Currency
2. Exposure – Var. rate debt
3. Financial Leverage
4. Compliance
5. Op error / error rate
1. Compare to policy by currency
2. % or $ variable debt to total
3. Ratio total debt to equity
4. # of covenants (financial + non financial)
5. # / % errors (need to define ―error‖)
Counterparties & Operational
1. # global banks & accounts
2. Cost of funds
3. Fees Pd
1. Count by total and by legal entity
2. After tax COF (% gross, net int.), $ Expense
3. $ by business unit
2013 THE FECG LLC

20. 20© 2013
Bank Relationship Management
How have you seen the strategy of bank
relationship management change over the past 5
years, and how you define the expectations of
your banking partners?
Do you believe that Banks can play a key role as a
strategic partner in offering advice and technology
in driving growth and managing risk or do you
believe that this is just ―hype‖ from the
banks, maybe good in theory, but not in practice?

21. 21© 2013
Bank Relationship Management
2008 Paradigm Shift
It’s all about Communication!
More Consultative/Advisory Partnership
Change in Expectations about Relationship
Profitability

22. 22© 2013
Treasury’s Role in Driving Growth
CFOs are taking more a leadership role in
leading growth strategy and obviously M&A is a
key part of this strategy, can you comment on
the role that treasury has played in M&A
throughout your career, and the strategic role
that treasury plays in your current role?

23. 23© 2013
Treasury’s Role in M&A
Member of the Due Diligence Team
Bond Indenture and Debt
Cash and Cash Equivalents portfolio
Risk Management including Insurance Policies
Credit Facility Covenants
Hedging the FX Risk of the Transaction
Capital Structure Analysis

24. 24© 2013
Leading across the Enterprise
How have you seen the strategic role of treasury
evolve over the past 5 years, and where is it
going?
In what areas has Treasury taken open and
embraced a key role in driving strategy and
execution?
How have you as a Treasury Leader been
successful in building relationships that allowed
you to drive results across departmental borders?
How have you seen the relationship of Treasury
with the CEO, and CFO during your career?

25. 25© 2013
Treasury’s Strategic Role
From Transaction Processor to Strategic
Adviser
Optimize Cash Flow and Cash Visibility
Build Closer Relationships with Business
Units/Peers
Monitor and Remediate Organizational Risks

26. 26© 2013
The Modern Treasury
Cash
Management
Risk Management
Debt
Management
Investment
Management
Financial
Markets
&
Institutions
Company
&
Operating
Units
• Policies Highly Visible
• Interactive Communications
• Plan, Actual & Forecast in Sync
• Functions & Systems Integrated
• Performance Metrics in Place
• Effective Bank Network
Technology
2013 THE FECG LLC

27. 27© 2013
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