Etienne Kleuters Michel Hanssen 14 November 2014 Table of Contents Introduction Business case for Treasury Management System Treasury system landscape Cash and Liquidity Management Hedge Management ID: 564049
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Slide1
Treasury focused on growth
Etienne KleutersMichel Hanssen
14 November 2014Slide2
Table of Contents
Introduction
Business case for Treasury Management SystemTreasury system landscape
Cash and Liquidity Management
Hedge Management
Business forecasting
Exposure Management
Next steps
Lessons LearnedSlide3
1. Introduction -
Qrcus
Michel Hanssen
SAP Finance Consultant
Michel.Hanssen@Qrcus.nlSlide4
1. Introduction - OCI NV
Facts 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 producerSlide5
1. Introduction - OCI Fertilizers
LocationsSlide6
Challenges:
Combining
two separate companies into one OCI
Nitrogen
Disconnected from corporate environment and operate as
a
stand alone company
1. Introduction - OCI Nitrogen
One of the European market
leaders in fertilizers and
ammonia products and the
largest producer of melamine
worldwide. Over 80 years of
history and as from 2010 part
of OCI
Location
HQ in Geleen (The Netherlands)
(approx. 800 employees worldwide)
Production
Ammonia,
M
ineral Fertilizers and Melamine Annual TurnoverEUR 1.2 billion
Key strategic player within OCI FertilizersSlide7
2. Business case for TMS
2010
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 system
Achieve process efficiency
Secure accuracy / Data integration
Meet the increased need for informationSlide8
Treasury applications from SAP
SAP Treasury and Risk Management
Risk Analyzer
Transaction Manager
SAP Bank Communication Management
SAP In-House Cash
Cash Management
Liquidity Planning
Credit Risk
Market Risk
Portfolio Analyzer
Hedge
Management
Exposure
Management
Money
Market
Foreign
exchange
Securities
Commodities
SAP Cash & Liquidity Management
Derivates
Debt Mgmt
BPC
Forecasting
3. Treasury system landscapeSlide9
Treasury applications from SAP
Cash Management
Liquidity Planning
SAP Cash & Liquidity Management
3. Treasury system landscape
Cash & Liquidity
ManagementSlide10
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
F
1 Creditors
Sales and Purchases
P1 Purchase orders
P
2 Sales orders
300
300
800
-800
-800
-800
A0 FI Banks
Level / Short text
500
500
500
D C
D C D C
D C D C500
-800Slide11
Treasury applications from SAP
SAP Treasury and Risk Management
Risk Analyzer
Transaction Manager
Cash Management
Liquidity Planning
Market Risk
Hedge
Management
Money
Market
Foreign
exchange
SAP Cash & Liquidity Management
Derivates
3. Treasury system landscape
Hedge ManagementSlide12
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).
12
Hedge Management
3. Treasury system landscapeSlide13
Strict criteria
:
Existence of formal documentation
Achievement
of effectiveness tests
(
80%- 125%)
Effectiveness
tests:
13
Key
date
valuation
Retrospective
Inception date
Interim or annual financial statements
Prospective
Interim or annual financial
statements
Hedge Management
3. Treasury system landscapeSlide14
Treasury applications from SAP
SAP Treasury and Risk Management
Risk Analyzer
Transaction Manager
Cash Management
Liquidity Planning
Market Risk
Hedge
Management
Money
Market
Foreign
exchange
SAP Cash & Liquidity Management
Derivates
BPC
Forecasting
3. Treasury system landscape
SAP Business Planning & Consolidation (BPC)Slide15
SAP BPC is used for:
Budget & Forecast
Ad 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 landscapeSlide16
SAP BPC
Cash flow
BS
Reporting
BPC
Exposure
Mgmt
Automated
CF
Statement
Identify exposures
Scenario
analysis
3. Treasury system landscapeSlide17
Treasury applications from SAP
SAP Treasury and Risk Management
Risk Analyzer
Transaction Manager
Cash Management
Liquidity Planning
Market Risk
Hedge
Management
Exposure
Management
Money
Market
Foreign
exchange
SAP Cash & Liquidity Management
Derivates
BPC
Forecasting
3. Treasury system landscape
Exposure ManagementSlide18
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 landscapeSlide19
Exposure Management
3. Treasury system landscapeSlide20
Treasury applications from SAP
SAP Treasury and Risk Management
Risk Analyzer
Transaction Manager
SAP Bank Communication Management
SAP In-House Cash
Cash Management
Liquidity Planning
Credit Risk
Market Risk
Portfolio Analyzer
Hedge
Management
Exposure
Management
Money
Market
Foreign
exchange
Securities
Commodities
SAP Cash & Liquidity Management
Derivates
Debt Mgmt
BPC
Forecasting
4. Next stepsSlide21
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)Slide22
Etienne
Kleuters
Treasury & Credit officer
etienne.kleuters@ocinitrogen.com
Michel Hanssen
SAP Finance consultant
michel.hanssen@qrcus.nl
Thank you