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Comprehensive Approach to Global Liquidity Management
July 20th, 2016
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 2
Webinar logistics
• Listen only mode during the web...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 3
Today’s presenters
Priscila Nagalli, CFA, CTP
Manag...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 4
 Corporate liquidity
 Three-pronged approach
– Wo...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 5
 Do I have visibility to my corporate liquidity, a...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 6
 Investment returns versus available liquidity
– P...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 7
Three-pronged approach to treasury liquidity
Interc...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 8
Working capital optimization approach
Pay Suppliers...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 9
 Regional liquidity constraints due to US/OUS cash...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 10
Payable financing steps
1. Supplier
requests early...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 11
Workflow: payable financing example
Day 10 – appro...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 12
Intercompany liquidity considerations
Low cost liq...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 13
 Address Kyriba Singapore liquidity deficit with ...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 14
External Financing
Higher cost, more options
 Lin...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 15
External Financing in a nutshell
Line of credit
• ...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 16
External Financing in a nutshell
Repo
• Sale of a ...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 17
Considerations on borrowing
Stop! Gather all the i...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 18
Case study: Electronics manufacturing company
 He...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 19
Conclusion
 Cash Forecasting and Working Capital
...
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 20
Further Reading
Special report from T&R:
Shining a...
Questions?
Greg Person
gperson@kyriba.com
Priscila Nagalli, CFA, CTP
pnagalli@actualizeconsulting.com
© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 22
Thank You For Attending
facebook.com/kyribacorp
tw...
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"Comprehensive approach to global liquidity management" webinar slides

Ensuring adequate global liquidity is a core Treasury principal to support business objectives and execute capital allocation strategies. In fulfilling this central function, Treasury must balance the appropriate levels of operational risk and funding cost. This webinar will explore various liquidity strategies to unlock local bank balances and mobilize intercompany cash, investigate working capital strategies to shorten the cash conversion cycle, and leverage global bank relationships including financial markets products to establish a global liquidity program. Listen to the recorded session: http://info.kyriba.com/GlobalLiquidityManagementTBPwbn

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"Comprehensive approach to global liquidity management" webinar slides

  1. 1. Comprehensive Approach to Global Liquidity Management July 20th, 2016
  2. 2. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 2 Webinar logistics • Listen only mode during the webinar • Questions – submit questions at any time via the webinar console. We will do our best to address all of the questions at the end of the session  For any technical issues before the webinar (difficulty joining, audio connection, etc.) – please contact GoToWebinar support team at 1-888-259-8414. If already in session, please chat any technical issues via text.  CTP accreditation – approval letters will be emailed within 3-5 business days to full session attendees  Recorded webinar & slides – will be emailed and posted under http://www.kyriba.com/resources/webinars
  3. 3. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 3 Today’s presenters Priscila Nagalli, CFA, CTP Manager, Capital Markets Greg Person, CTP Vice President, Global Presales
  4. 4. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 4  Corporate liquidity  Three-pronged approach – Working Capital – Intercompany – External Financing  Case Study  Conclusion Agenda
  5. 5. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 5  Do I have visibility to my corporate liquidity, and can I access it?  Do my global subsidiaries have the liquidity they need to be successful?  Do I have confidence in my global cash forecast?  Do I have the right banking partners to provide liquidity for my global regions?  Do I have the available liquidity necessary to fund major capital or corporate expense?  Do I have the technology infrastructure to support the business and balance my employees’ time? How do I answer….
  6. 6. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 6  Investment returns versus available liquidity – Preservation of capital vs. higher yielding investments – Rate of return vs. cost of capital – Cash on my balance sheet vs. shareholder activism  Ensuring adequate liquidity to fund corporate investment strategies and global business units – Optimal liquidity at appropriate level of risk and cost – Executing corporate capital allocation strategy; share buyback, M&A, debt pay-down Corporate liquidity balance
  7. 7. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 7 Three-pronged approach to treasury liquidity Intercompany External Financing Working Capital  Mobilizing intercompany cash to enhance global liquidity and positively impact P&L  Working capital strategies to reduce the cash conversion cycle  Utilizing bank partners to provide liquidity resources in strategic markets
  8. 8. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 8 Working capital optimization approach Pay Suppliers with Cash - DPO Sell Acquired Inventory for AR - DIO Collect on Accounts Receivable - DSO Reduce the Cash Conversion Cycle  Time cash is tied up in working capital  Reduce DSO  Extend DPO  Optimize inventory balance Cross functional strategic initiatives  Demonstrate liquidity and P&L benefits  AP, AR, manufacturing and procurement effort  Involve your banks and technology partners
  9. 9. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 9  Regional liquidity constraints due to US/OUS cash allocation  Achieving operating cash flow targets  Large companies generally have stronger credit ratings and excellent access to credit when compared to their suppliers  Suppliers generally fund themselves via expensive working capital solutions with higher funding costs  Suppliers often encounter issue of late payments which places major strain on their cash flow Factors driving supply chain finance programs
  10. 10. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 10 Payable financing steps 1. Supplier requests early payment from buyer invoice 2. Bank pays supplier early at discount 3. On due date of invoice buyer pays the bank full value of invoice A win-win-win for supplier, buyer and bank
  11. 11. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 11 Workflow: payable financing example Day 10 – approved invoice Buyer Supplier Day 10 – bank pays discounted 3% APR invoice of $99,583 Scenario: Buyer receives $100,000 invoice from supplier with extended 60-day payment terms Technology Solution and Bank Partner Day 60 – debit original invoice amount of $100,000
  12. 12. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 12 Intercompany liquidity considerations Low cost liquidity source  Internal cash is cheapest form of finance  Automation through bank pooling structures  Global deployment involving global entities, currencies and multiple bank relationships Initial investment and due diligence  Collaboration with treasury, tax, local finance and legal  Loan documentation and arm’s length terms (reg 385)  Optimization through automated bank pooling  Technology investment and transparency
  13. 13. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 13  Address Kyriba Singapore liquidity deficit with Kyriba Canada surplus  Reduce SGD external expense, achieve higher consolidated investment balance In-house bank liquidity example Kyriba BV (IHB Entity) Kyriba Canada Kyriba Singapore External Bank External Bank Deposits USD 50M Sell USD 10M Buy SGD 15M Invests USD 40M Borrows SGD15M (USD 10M)
  14. 14. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 14 External Financing Higher cost, more options  Line of credit  Bank loans / Structured financing  Factoring  Repo  CP issuance  Bond issuance  Others: Asset Back Securitization/ AB Warehouse Loan
  15. 15. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 15 External Financing in a nutshell Line of credit • Safeguard for possible future needs, established with one or more banks, fees associated to commitment • Duration: All • Risk: Committed vs Uncommitted • Complexity: Low • Cost: Medium Bank Loans / Structured Financing • Highly customizable, depend on bank and company needs, may involve collateral and syndication • Duration: All • Risk: Low • Complexity: Medium- High • Cost: Medium Factoring • Sales of receivables to a bank or factoring company, similar structures offered on supply chain finance • Duration: Short term • Risk: Low • Complexity: Medium • Cost: Medium
  16. 16. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 16 External Financing in a nutshell Repo • Sale of a financial asset with the commitment of repurchase, borrower holds a liquid asset in FI portfolio, widely used by investment firms • Duration: Short term • Risk: Low • Complexity: Medium • Cost: Low CP Issuance • Financing of short term liquidity gaps. Discount, borrower to establish issuing and paying agent to support process, monitoring of rating and liquidity • Duration: short term • Risk: Ability to roll • Complexity: Medium – High • Cost: Low rate, medium for maintenance and operations Bond Issuance • Financing of long term cash needs. Interest paid along the life, supported by banks, tracking of interest, accruals, etc. monitoring of rating and liquidity • Duration: long term • Risk: Higher interest rate (mitigated by derivatives) • Complexity: Medium – High • Cost: Low rate, medium for maintenance and operations
  17. 17. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 17 Considerations on borrowing Stop! Gather all the information, analyze and negotiate!  Duration  Risk profile  Operational capability  Disclosures, compliance, covenants  Regulation and credit rating – liquidity needs  Market environment and interest rate curve
  18. 18. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 18 Case study: Electronics manufacturing company  Headquarters in US, with regional centers across the globe  Intercompany loans to entities in need and invoice netting  Little cash visibility, no global cash forecasting, limited operational capacity and timeframe for debt issuance  M&A (“one off”) on horizon, need to raise cash and repay in medium term 1. reached out to subsidiaries to identify cash needs, potential for repatriation based on local forecasts 2. analysis for reduction of cash conversion cycle 3. negotiated loan with banks, syndication, no collateral, repayment in 5 years, libor + spread
  19. 19. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 19 Conclusion  Cash Forecasting and Working Capital analysis as starting point  Intercompany, when possible, is the less expensive form of financing  Working Capital is often not prioritized by treasurers, but there are affordable and easy ways to optimize cash  External financing provides a large array of options but requires deeper analysis for the optimal strategy
  20. 20. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 20 Further Reading Special report from T&R: Shining a Light on Receivables. Optimizing Liquidity. Download at: http://kyri.ba/TRLiquidityReport Survey report from ACT: Prioritizing Technology to Support the Treasurer’s Expanding Role and the Challenges Download at: http://kyri.ba/ACT2016survey
  21. 21. Questions? Greg Person gperson@kyriba.com Priscila Nagalli, CFA, CTP pnagalli@actualizeconsulting.com
  22. 22. © 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 22 Thank You For Attending facebook.com/kyribacorp twitter.com/kyribacorp linkedin.com/company/kyriba-corporation youtube.com/kyribacorp slideshare.com/kyriba kyriba.com/blog

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