Treasury & Cash Management TCM GUIDE 2007 CONTENTS TREASURY & CASH 8 MANAGEMENT ID MANAGEMENT Businesses and GUIDE 2007 their banking partners are devising innovative techniques to ensure only elcome to Global Finance’s annual Treasury & Cash authorized personnel can Management Guide, in which we explore the latest trends make payments. Wand issues in the world of global cash management. With record corporate earnings, companies are wanting to get the most from their cash. To some extent they have already been able to achieve 14 greater visibility into their cash flows by centralizing treasury operations GLOBAL LIQUIDITY and deploying sophisticated treasury management systems and liquid- Corporates have long ity management techniques such as multi-currency pooling. Now firms dreamt of being able to see are pondering the question, Can liquidity be managed globally? Do liquidity in real time on a treasurers know at any given moment where they have excess liquidity global basis. This dream is globally that can be deployed to help finance acquisitions or invest for becoming a reality as banks higher returns? While there are significant challenges in achieving this and systems suppliers level of visibility, high-end treasury management systems, Internet- provide the real-time based reporting, harmonization and standardization across Europe and reporting and systems relaxation of foreign exchange controls in some countries are helping integration necessary to companies move closer to having a global view of their liquidity. make it happen. Meanwhile, the number of options for companies to trade FX online is increasing as companies move smaller trades online in an effort to 16 achieve greater price transparency, with larger trades still being con- ONLINE FX ducted via the phone. Companies can choose from a plethora of multi- Key players in the online bank and single-bank portals for trading FX, but online trading is not foreign exchange markets just about price discovery. It is also about improving back-end are hoping that new processes. Some concerns remain, though, about the ability of online entrants and the integration FX platforms to handle workflow into clients’ systems. of interdealer and dealer-to- On a slightly different note, the increased incidence of identity fraud client platforms will end the is presenting new challenges for companies globally. Regulations such stagnation that is hindering as Sarbanes-Oxley are also placing pressure on companies to ensure workflow development. incidences such as Enron don’t recur. With that come myriad chal- lenges for companies, weighed down by different proprietary identity- management solutions, which can number in the hundreds depending 18 on the number of banking relationships they maintain. A few pioneer- WHO’S WHO ing corporates are leading the way, forcing banks to abandon their pro- The most important, prietary solutions and embrace a single identity-management solution influential, creative and that can be used across multiple banks. powerful people in international treasury and Anita Hawser cash management. Europe Editor [email protected]

4 CORPORATE ID MANAGEMENT

IDENTITY SOLUTION As corporate treasury systems become increasingly automated, businesses and their banking partners are devising innovative techniques to ensure only authorized personnel can make payments.

By Anita Hawser

ans-Maarten van den Nouland jokes that he is not determine who authorized the payment and whether that earning a reputation among cash management person has authorization to make payments for that amount. Hbanks as being demanding. As director, interna- Gary Greenwald, global head of capabilities and infor- tional treasury services, Europe, for US pharmaceuticals mation products at Citi Global Transaction Services, says company Merck, van den Nouland is leading a major the potential for security breaches in corporate payment overhaul of Merck’s cash management processes. The transfers has been exacerbated by the increasing automa- multi-year project includes, among other tion of payment transfer files from compa- things, enhancing the security of nies’ accounts-payable systems to a bank’s processes related to payments initiated by systems. “As payment files are pushed out the company’s enterprise resource plan- automatically to the banks to execute, the ning (ERP) systems. risk of someone in a company’s IT depart- Van den Nouland says the current situa- ment, for example, going in and changing tion for securing payment transfers is less the beneficiary of the payment increases,” than ideal. Every account that is opened he says. requires all information regarding the per- A survey of IT and security professionals son to be resubmitted, and there is no cen- by DigitalPersona and the Business Perfor- tral repository to quickly revoke signatory mance Management Forum highlights the rights if needed. Van den Nouland adds Wendel: In approximately potential for information security breaches that every bank has devised its own security 25% of cases, account by company employees. Sixty percent of signatories are wrong tokens to gain access to proprietary bank- respondents in its survey said that they or ing platforms. For shared service centers someone in their company had shared a and centralized treasuries, this means a myriad of forms, network password with a colleague. Seventeen percent processes and, potentially, security tokens to manage. had either given out or received someone else’s security “Some companies don’t know how many bank accounts token or smart card. they have,” says Karen Wendel, CEO of IdenTrust, a global Although banks have implemented proprietary identity- network of banks that issues digital certificates certifying management solutions, van den Nouland says only three someone’s identity, “and in approximately 25% of cases banks were willing to try to meet Merck’s demands for a account signatories are wrong.” Adding to corporates’ con- single interoperable digital identity-management solution cerns with the current system, van den Nouland says, at pre- to be implemented by the beginning of 2008. sent, payment files are signed at a company identification The banks appear to have been caught napping, which level, not at the individual level. In other words, the bank is surprising given that as early as 1999, when the hype knows a payment transfer is being initiated from Merck’s around B2B e-commerce peaked, 11 leading global account in the United States, for example, but the bank can- banks, including Citi, Bank of America, ABN AMRO and

8 CORPORATE ID MANAGEMENT

Deutsche Bank, formed Identrus (now called IdenTrust), Enron and Sarbanes-Oxley, which according to Wendel the only global network of its kind whereby banks repre- prompted companies to implement more robust identity- senting 50 countries agreed on a set of uniform system management solutions. rules, contracts and business practices for facilitating trust Authentication at the individual as opposed to the cor- and risk management in B2B e-commerce transactions. porate level has become essential, particularly given that a IdenTrust uses bank-issued digital certificates to certify number of major multinationals are now using the bank- that people are who they say they are. The certificates owned and -operated SWIFT network to transmit bulk pay- bind an identity to a pair of electronic keys, otherwise ment files to multiple banks. Last year at SWIFT’s annual known as Public Key Infrastructure (PKI), which uses a pub- user conference in Sydney, Australia, Citi, BNP Paribas and lic and private key to encrypt and sign digital information. IdenTrust successfully demonstrated a “double” digital PKI-encrypted digital certificates are con- signature proof of concept, which used sidered to be one of the strongest means SWIFT’s PKI security protocol (it provides of authenticating someone’s identity. “It is authentication at the corporate level) and the most secure, robust mechanism you an IdenTrust digital certificate identifying a can find, as the identity of a person is specific corporate employee, to authenti- vouched for,” Wendel explains. cate a payment transfer between two dif- Yet when IdenTrust was starting out, PKI ferent banks. “was very expensive, complicated and dif- Greenwald says the proof of concept also ficult to implement,” Wendel explains, demonstrated that a single digital identity “and it was less focused on compelling issued by one bank could be recognized by business applications.” Greenwald says another bank. “Companies are looking for banks also tended to build proprietary PKI Greenwald: Automation is identity-management solutions that operate and identity-management solutions, and increasing the potential for across their physical and financial supply up until recently “interoperability” was not security breaches chains without having to enter into bilateral high on corporates’ wish lists. agreements each time they cross the fire- PKI has gone through different adoption cycles, says wall,” Greenwald explains. Pilots are also currently under Wendel, with its popularity plummeting to an all-time low way whereby IdenTrust digital ID credentials and legally at the turn of the millennium. It was replaced by pin and binding digital signatures will be embedded in bank password, which authenticated a user to a website or elec- account mandate and account signatory applications. tronic banking application. One of its shortcomings, how- Merck, with the support of its two leading cash man- ever, was that it did not vouch for a user’s actual identity, agement banks and using IdenTrust digital ID credentials, and as the incidence of identity theft has increased in is implementing an identity-management solution that is recent years, Wendel says the tide of opinion has turned more robust than ever—and not entirely dependent on again in PKI’s favor. internal IT controls. Every payment message generated by Banks are now using IdenTrust’s legal, policies and rules- its ERP system triggers an authorization button, invoking a based framework—which ensures digital certificates are digital signature. A copy of the encrypted payment mes- binding in more than 175 countries, and interoperable sage is also sent to a secure external database, called an cross-border between banks—to help solve the problems e-vault. The message contained in the e-vault and the one faced by multinationals such as Merck. “There is now an received by the bank are then compared. “If there is a inflection point within the industry where things like digital change between the originally authorized payment mes- identity are no longer considered niche but core to the sage and the one the bank receives, the bank will not exe- treasury and cash management process,” Greenwald cute the message,” van den Nouland explains. “If some- remarks. And one cannot forget the fallout from 9/11, body manipulates a payment, it will get detected.”

9 GLOBAL LIQUIDITY

REALIZING THE DREAM Corporates have long dreamt of being able to see liquidity in real time on a global basis. This dream is becoming a reality as banks and systems suppliers provide the real-time reporting and systems integration necessary to make it happen.

By Denise Bedell

anaging global liquidity is a difficult and increas- surers want transparency into their overall cash position. ingly important part of the job of any treasurer. As While this has always been important, we are seeing an in- Mregulatory controls grow, having full global visibil- creased demand for information around the movement and ity of liquidity across an organization becomes ever more control of cash positions. Additionally, they are seeking the important. According to Jeannot Jonas, director of global capability to integrate into their treasury workstation and are FX and international treasury at aerospace supplier asking their banks to provide solutions to manage liquidity as Goodrich, this is particularly important for listed companies: well as the tools to enhance cash forecasting capabilities.” “Free cash flow is a hot topic in any quoted company. Ana- “Recently we have been seeing customers consolidating lysts are now looking at cash flow very closely, and it has a quite a bit on the systems side as well as on the vendor direct impact on the stock price. One may have very nice side,” says John Killen, who handles cash and treasury sales, growth figures and so on, but with poor cash perfor- management products at Oracle. “They are consolidating mance that may still affect the company’s outlook.” in terms of ERP systems they use, treasury management Elyse Weiner, global head of liquidity at Citi, says: “Cor- technology vendors and also banking relationships.” One porations have been sitting on record levels of cash driven goal of that is to simplify connections and increase ease of by corporate earnings and a greater focus on control and automation between systems. liquidity from the point of view of shareholders. Now, com- However, Jonas says that in order to get a clear view of panies are focusing on the next phase—how to get the global liquidity, it is essential to have a fully Internet-based most value out of excess cash balances.” Corporates are reporting system and a high-end treasury management going after pockets of cash that, before, they may not system. “You really want a system that can give you a glob- have been aware of or could not move because they did al view, where you can drill down to region, country and not have the product capabilities to do it. entity,” he says. He points out that to achieve a total view Companies that may have put in an initial liquidity struc- of liquidity, it is important to have a view on not only bank ture a few years ago, for example dollar pools or euro accounts themselves but also any investments or borrow- pools implemented at the inception of the euro, are re- ings that are outstanding and also including cash in transit evaluating those structures to see if they are capturing or cash equivalents. maximum value for the company. Weiner says: “Today, we Corporates are looking for real-time reporting with infor- see increasing functionality and capability—for example mation provided wherever they are. “They want the ability multi-currency pooling—that can provide additional op- to see real-time information to manage positions and feed portunities to maximize cash efficiency.” different systems,” says Rossi. “Also they want the ability to Increasing focus on centralization of cash management for integrate into their treasury workstations, and they want improved operational efficiency has really helped this their banks to provide solutions to manage that liquidity.” process, according to Lisa Rossi, head of liquidity manage- Although global cash management has been possible for ment, global transaction banking, at Deutsche Bank. “Trea- quite some time, technological developments by banks

14 GLOBAL LIQUIDITY

and clients—along with ongoing harmonization in Europe the management of this on an integral basis.” and relaxation of exchange controls and tax regimes in cer- As the tools and the regulatory environments continue tain parts of the world—make it far easier to achieve now. to evolve, having a single global cash position is increas- Phillip Lindow, head of global treasury and investment ingly achievable. “Global banks are linking the main cur- management, transaction banking, at ABN AMRO, says rencies across regions,” notes Lindow. “It is now possible that cash management banks have moved to take advan- to globally move on a same-day basis, without loss of val- tage of this greater openness by de- ue days, positions across a group into veloping tools to help treasurers cre- a single global position.” ate greater visibility and efficiency in Companies want flexible solutions to managing day-to-day working capital. centralize and manage liquidity that is “For example, cash management as automated as possible. They are us- banks have developed cash control ing solutions such as multi-bank cash tools that provide either intra-day or concentration, notional pooling of mul- end-of-day concentration of cash po- tiple FX positions and automated sitions to treasury hubs,” he says. sweeping. One big development is the “Where local circumstances require increasing use of money market por- companies to make use of more than tals, where treasurers can trade in mul- one bank, they can opt to achieve tiple funds, monitor performance, sub- global liquidity management by scribe and redeem all from one screen. means of automated multi-bank cash A greater focus on risk and invest- concentration solutions,” he adds. ment diversification has contributed “Online real-time systems provide to the significant increase in usage of the treasurer and cash manager with money market funds, as they offer the means to support the impact of treasurers a low-risk investment op- the accounting and regulator require- tion while providing competitive ments that arise from the centraliza- yields and same-day liquidity, says Lin- tion of funds,” Lindow says. For ex- dow. “The underlying mix of instru- ample, where concentration occurs ments and counterparties provides di- across different legal entities, the versification for the corporate’s movement of funds between ac- investment portfolio,” he explains. counts can be tracked automatically However, the ability to take advan- in order to administer and manage tage of many such tools globally is still the inter-company loan positions and dependent on the legal and financial Lindow (top): Regulators require settle the interest on loan positions. structure of the company and the spe- watertight structures While regulatory regimes have re- Rossi: Corporates want the ability to cific regulatory regimes in which it op- laxed somewhat in terms of structures see real-time information erates. Also, it is critical to get the right that can be used, regulators are de- mix of liquidity management tools. manding greater control and visibility of corporate finan- The ability to see liquidity on a global basis was, until re- cial processes. They require watertight structures, espe- cently, solely the domain of the largest of corporations. How- cially when it relates to inter-company lending and cross ever, more companies can and do have the systems and guarantees. “This requires tight control over and trans- structures in place to manage global cash positions in near parency of a company’s liquidity positions,” says Lindow. real time. And of those that don’t, more and more compa- “Banks will have to deliver the tools and means to support nies are looking at how they can begin the process.

15 ONLINE FOREIGN EXCHANGE

EXCHANGE CHANGE Key players in the online foreign exchange markets are hoping that new entrants and the integration of interdealer and dealer-to-client platforms will end the stagnation that is hindering workflow development.

By Denise Bedell

irms accessing the online FX market have more and “Corporate clients are using them for smaller trades, but the more products and services to choose from, yet the big trades are still relationship-based,” he says. “They get a Fworkflow development and integration into back-end lot of volume but not the responsibility of the big trades.” systems continues to lag. However, with players in the inter- Richard Thornton, partner at PA Consulting, says that dealer market now breaking into the dealer-to-client space, there is a change happening in terms of what is being of- this could signal big changes on the fered. “We are seeing a shift in the way, not least the continuing develop- marketplace. Bank platforms are be- ment of multi-asset-class platforms. coming more multi-product to encour- Online foreign exchange trading age customers to use their own propri- continues to grow in terms of both etary platforms. But that does not volumes and numbers of firms using provide the same amount of price online platforms for FX. Elena transparency as the independent mul- Theodorou, head of electronic client ti-bank platforms,” he points out. “The solutions in foreign exchange for Eu- multi-bank platforms are also moving rope and North America at JPMor- to provide other products, such as gan, says: “As with electronic trading money market funds,” he notes. across other products, we have seen Firms are looking for more of an over- an increase in use of online FX trad- all service, and systems that offer a full ing across the board in all types of Theodorou: Many corporations use range of tools rather than purely the ex- clients. In the middle markets we see electronic systems to trade exposures ecution piece, says Theodorou. “Unless a preference for single bank systems, generated by their subsidiaries you have a one-stop shop, then clients while larger corporates and invest- may need more than one system.” ment managers still tend to go for multi-bank systems.” While better pricing and ease of use are big drivers of on- Active traders are increasingly treating currencies as an line trading, another big advantage of moving online is that asset class while asset managers and corporations are in- it can help companies improve efficiency across their inter- creasing their trading activity in step with the growth of nal processes. “If you look at why many corporations use cross-border investing, says Keith Hill, head of EMEA sales electronic trading systems, it is to trade exposures generat- at online FX trading giant FXall. “These drivers of growth ed by their subsidiaries,” says Theodorou. The collection of remain firmly in place, and as a result we anticipate further information from subsidiaries around the globe is still typi- growth in both the bank-to-customer and anonymous cally done manually. Head office will receive information by trading models,” he adds. fax or email and will manipulate the information in Excel One market watcher notes that corporates tend to give spreadsheets to collect the cashflow forecast, FX exposures the portals 80% of their volume but only 20% of the value. and so on. “Corporates can then use an electronic trading

16 ONLINE FOREIGN EXCHANGE

system to execute transactions for those exposures. Over Street Systems, agrees: “Post-trade workflow is still an is- time we have begun to see more banks and third parties of- sue. There needs to be improvement in the integration of fering solutions that assist with the piece that comes before post-trade services.” execution—the actual collection of information,” she adds. However, not everyone agrees that online FX platforms, NEW ENTRANTS particularly the multi-bank platforms, are doing a good job One big change that could have a profound impact on of handling workflow into client systems. “What customers the online FX markets is the interdealer platforms breaking are really looking for is a solution to into the dealer-to-client space. As Ce- the whole STP issue and integration lent analyst Axel Pierron notes in a re- back into their internal trading and cent report: “The importance of new processing systems,” says Thornton. market participants on the buy side Simon Wilson-Taylor at State Street, and their ability to improve and gen- which in addition to owning the FX erate liquidity is blowing the wind of Connect platform recently bought change in FX markets. The segrega- multi-bank platform Currenex, be- tion of the market between interdeal- lieves that corporates still have the er and dealer-to-client is already be- same needs as they did when the on- ing attacked, with the two major line FX market first began. “What they interdealer platforms reaching the need is something that helps them wall to attract these profitable new manage the complexity of inflows and customers. The question to ask is not outflows, handle risk management, do Benjaminsen: Portals create whether the FX market will adopt an trades and handle accounting require- transparency and with that the exchange model, but when.” ments,” he says. “Generally we in the potential to take margins away Interdealer giant Reuters now of- market have not been very good at fers Reuters Trading for Foreign Ex- meeting those needs. Partly it is the economics of it.” change (RTFX), which allows banks and their clients to han- The corporate market is a very small portion of the over- dle trading from their Reuters desktops. RTFX saw 500% all FX market. And whereas in the institutional market growth in 2006. It opens the way for Reuters to attract new there are a number of major players taking up much of the clients—corporate treasurers, hedge funds and so on— volume, in the corporate market there are thousands of and creates a multi-asset offering, including equities and companies, each with unique needs in terms of workflow fixed income. processes. Thus the ongoing investment that would be re- Reuters’ main competitor in the interdealer market, EBS, quired has simply not been seen as economical. has also taken steps to enter the dealer-to-client market Bent Benjaminsen, a senior vice president at SunGard, with EBS Prime Professional, which opens up spot market explains: “FX portals are part of a process for corporate trading to non-bank market participants. treasury that is ripe for workflow enhancement. The tech- There is also a trend toward multi-asset trading plat- nology is there to do it, but there has to be a willingness to forms. Pierron notes in the report: “During 2006, financial put the money behind it.” One of the problems with online institutions and especially hedge funds promoted the trading applications for corporations, he says, is that every- emergence of multi-asset trading venues, which would al- one is in a race to the bottom; they want to get applications low them to implement sophisticated strategies across for- for a very low cost. “The question is, Who is going to keep eign exchange, fixed income, options, futures and equi- putting money into it? Portals create transparency and with ties.” He says that e-trading platforms could soon play an that the potential to take margins away,” he adds. important role as consolidation and expansion continue Melissa Stevenson, director of foreign exchange at Wall across asset classes.

17 TREASURY &CASH MANAGEMENT 2007 “WHO’S WHO” IN TREASURY AND CASH MANAGEMENT

Within her position as financial director, the access to credit to bank revenues. He Jill Bradley-Guerrino is in charge of all has testified before congressional com- cash operations of Allianz Life and asso- mittees and other regulators and has ciated entities. The main functions with- helped to raise awareness on key issues ANNE BODEN in these departments include bank rela- affecting the practice of treasury and the Head, Transaction Banking, Europe tionship management and services, cash capital markets. His efforts on the global ABN AMRO operations and forecasting, financing landscape include the launch of the China Anne Boden manages ABN AMRO Trans- strategies, strategic planning and risk Forum and the acquisition of London- action Banking across Europe. She is also management. During her 16-year tenure based GTnews, an online resource for the responsible for preparing it for future with Allianz, Bradley-Guerrino has held treasury and finance community used by commercial and regulatory challenges. numerous positions in the finance arena. 47,000 professionals worldwide. These will include addressing the chang- [email protected] ing business environment that will be brought on by the single euro payments MACHADO DE OLIVEIRA RIZAELCIO area (SEPA). Boden joined ABN AMRO’s Head of Treasury and Cash transaction banking unit from Aon, where Management she served as chief information officer LOREN STARR Banco Bradesco and sat on the board of directors. Senior Managing Director and CFO Machado de Oliveira Rizaelcio has de- AMVESCAP veloped and manages payment solu- ANN CAIRNS Loren Starr is the chief financial officer at tions for cash management at Bradesco, CEO, Transaction Banking AMVESCAP, a leading global investment which is the largest private bank in ABN AMRO manager. Starr was previously CFO of Brazil. His department analyzes, devel- Ann Cairns is responsible for the glob- Janus Capital Group and has held posi- ops and provides customized solutions al product business unit, a $5.8 billion tions with Putnam Investments, Lehman for each corporate customer and covers revenue generator that develops and Brothers and Morgan Stanley. In 2006 he receipts, payments and treasury. Rizael- delivers cash management, trade and was elected to a two-year term as chair- cio has also developed several products, card products and services to all of man of the board of directors of the Asso- services and systems that focus on the ABN AMRO’s clients worldwide—in- ciation for Financial Professionals, where improvement of business structures. cluding commercial clients, consumers, he has served as a member since 2002. private clients, global clients and finan- MARCO ANTONIO SUDANO cial institutions. Before joining ABN Treasury Director AMRO, Cairns held senior manage- Banco Itaú ment positions in corporate and invest- Marco Antonio Sudano manages trea- ment banking at Citigroup, culminating sury operations at Brazilian Banco Itaú. in the role of chief operating officer for JIM KAITZ He was the former president and is a cur- the bank’s Global Transaction Services. President and CEO rent member of the National Association [email protected] Association for Financial Professionals of Open Market Institutions and ex-pres- As president and CEO of AFP, Jim Kaitz ident of the Markets/Treasury Commit- manages the operations of an association tee of the Brazilian Association of Inter- that represents more than 15,000 treasury national Banks. Sudano’s previous and financial professionals throughout the corporate finance positions have includ- JILL J. BRADLEY- US and in more than 40 countries. Kaitz is ed six years with Bunge Group and nine GUERRINO a strong advocate on key issues such as years at JPMorgan. He has also worked Financial Director, Cash Operations the reform and oversight of the credit rat- at Unibanco Asset Management, Quan- Allianz of America ing agencies and banks’ practices of tying tix Investments and BankBoston.

18 WHO’S WHO 2007

tablished all strategies pertaining to sales, product management and product development, and his initiatives have in- fluenced the approach to world markets CATHERINE P. BESSANT throughout the banking industry. Under DAVID SWANN President, Global Treasury Services his direction, his group has grown sales Group Treasurer Bank of America and revenues significantly and devel- British American Tobacco Catherine Bessant leads a business that oped major client bases in Europe, Asia In recent years BAT has been at the lead- generated $6.7 billion in revenues and and the Americas. ing edge in looking at holistic risk man- $2.2 billion in net income in 2006 and [email protected] agement. That focus takes into account that ranks number one in market share the diverse risks across its businesses in of treasury revenue globally. Global 180 countries, while managing them as a Treasury Services serves more than whole. Over the past six years group 120,000 business and institutional treasurer David Swann has led an initia- clients worldwide and offers treasury tive to centralize treasury operations in management, trade finance, foreign ex- ROBERT W. STASIK London, Singapore and South America. change, short-term credit facilities and Executive Vice President Such centralization allows the firm both global liquidity management. Bessant, The Bank of New York Mellon to spread savings and to improve visibil- who joined the company in 1982, was Robert Stasik oversees several of the ity for managing risks. most recently global marketing execu- company’s key strategic businesses, in- [email protected] tive for Bank of America and, before cluding treasury services, liquidity man- that, president of Bank of America, agement and shareholder services. The Florida. businesses support the delivery of The Bank of New York Mellon’s global port- MICHAEL FOSSACECA folio of integrated products and ser- FRANCESCO VANNI North America Large Corporate vices. These are designed to help D’ARCHIRAFI Treasury Executive clients optimize their cash flow, raise Global Head of Cash Management Bank of America capital, manage liquidity, conduct inter- Citi Bank of America recently appointed national commerce and manage their Francesco Vanni d’Archirafi recently was Michael Fossaceca to its Global Trea- accounts payable and accounts receiv- appointed global head of cash manage- sury Services business, where he will able functions. ment at Citi, where he focuses on deliv- take care of large corporate clients in ering best-in-class solutions for clients North America. Fossaceca drives rev- and driving continued innovation. Be- enue in North America by executing fore taking on his current role, d’Archi- winning sales strategies, deepening rafi was in charge of the Global Transac- client relationships and improving client tion Services unit’s largest region, which satisfaction. As an 18-year veteran of MARK STOCKLEY encompasses Europe, the Middle East JPMorgan Chase, Fossaceca served Managing Director, Global Head of and Africa. In that role, he doubled there on the Treasury Services Execu- Cash & Liquidity Sales business turnover and tripled net in- tive Team and Operating Committee to Barclays Global Investors come contribution to the franchise in develop and execute global business Mark Stockley is responsible for the three years. D’Archirafi, who has been a strategy. sales and client service of BGI’s cash senior banker at Citi for more than 24 management capabilities and money years, is a member of Citi’s Manage- market funds, managing teams based in ment Committee and chairman of London, San Francisco and Hong Kong. Citibank Europe. As of June 2007 BGI managed approxi- mately $238 billion in cash assets global- ERIC D. KAMBACK ly, including more than $70 billion in Eu- Executive Vice President and Group rope. Stockley, who brings 17 years of Head for Global Payment and Trade experience in the cash business, joined Services BGI from JPMorgan Asset Management, PAUL GALANT The Bank of New York Mellon where he was head of institutional liq- CEO, Global Transaction Services Eric Kamback’s group at The Bank of uidity (EMEA). Prior to JPMorgan, he Citi New York Mellon provides trade finance was head of Asian operations for Gold- Paul Galant is CEO of Global Transac- and treasury services to financial service man Sachs Asset Management. Stockley tion Services, one of Citi’s 12 publicly companies, corporations and govern- is the treasurer and a director of the In- reported product lines. It offers cash ments worldwide. Kamback, who joined stitutional Money Market Fund Associa- management, trade services and fi- The Bank of New York in 1980, has es- tion (IMMFA). nance and securities and fund services

19 TREASURY &CASH MANAGEMENT 2007

worldwide, processing over $3 trillion pany’s debt and mortgage-funding pro- in payments daily and handling more grams, as well as equity, debt and mort- than 1 billion transactions annually. gage securities investor relations. Prior Galant was previously head of Citi’s to working at Freddie Mac, Bitsberger cash management business. Under his WERNER STEINMUELLER served as assistant secretary for financial leadership the business grew signifi- Head of Global Transaction Banking markets at the US Department of the cantly and improved its operating per- Deutsche Bank Treasury for four years. He worked on formance. In addition, it has gained Werner Steinmueller has led Deutsche such issues as federal debt manage- recognition for innovation and excel- Bank’s Global Transaction Banking on a ment, financial market oversight and lence from many publications, includ- growth and performance-driven course regulation, federal credit and privatiza- ing Global Finance. throughout Europe, Asia and the Ameri- tion, and state and local finance. [email protected] cas. GTB’s strategic investment in new opportunities across developing cash FREDERICK A. SCHNACKNIES markets in Asia and Europe has strength- Assistant Treasurer, International ened the bank’s position. By a similar to- Constellation Energy Group ken, expansion of its custody footprint in Fred Schnacknies joined Constellation trust and securities services businesses DENNIS SWEENEY Energy in June 2007 as assistant trea- has enhanced its standing. By leveraging Deputy Treasurer surer international. He is responsible SEPA, the bank builds on its foothold in General Electric for providing financial analysis and de- Europe while continuing to develop Dennis Sweeney is in charge of GE’s veloping financial and capital struc- global solutions based on its worldwide global treasury operations, managed tures to support international acquisi- delivery network. Steinmueller has im- from a base in Stamford, Connecticut, tions and implementing international plemented important architecture re- through regional treasury centers in Del- treasury policies and systems. Prior to designs in Deutsche Bank’s infrastruc- hi, Tokyo, Dublin, Mexico City and São Constellation Energy, Schnacknies ture, such as a single global platform for Paolo. He and his team provide forex worked for Lucent Technologies for high-value payments (money transfer and derivative execution, middle-office eight years, most recently as director, new architecture) and a next-generation support, cash management, acquisition in-house bank. At Lucent he imple- of messaging and routing functionality. integration and inter-company fund- mented an in-house bank and global ing/accounting to GE’s businesses treasury system, which brought the CHRISTOPHER DEL MORAL-NILES worldwide. Sweeney is promoting GE’s company three Alexander Hamilton Treasurer proactive efforts as a corporate user of Awards in 2004 in Financial Risk Man- The First American Corporation the SWIFT network. He has also led the agement, Cash Management and Christopher Del Moral-Niles coordinates initiative by the International Bank Com- Overall Excellence. all cash management, investment, financ- pensation Group to create a new inter- [email protected] ing and capital management activities national bank billing standard. across the First American Family of Com- [email protected] panies. Niles also supports several initia- tives related to the centralization of trea- CHRISTOPHER F. DONUS sury functions, financial planning and Assistant Treasurer, Corporate Finance budgeting for the company. He assumed Hertz DINKAR JETLEY his duties with First American in August Christopher Donus oversees the entire Head of Trust & Securities Services 2006, coming from Union Bank of Califor- debt portfolio at Hertz, which consists of and Cash Management for Financial nia, where he most recently served as se- both asset-backed securities and corpo- Institutions, Global Transaction Banking nior vice president and director of liability rate debt facilities. He is also responsible Deutsche Bank management for the bank. Niles has also for rating agency relationships and capi- Dinkar Jetley has established Deutsche served as president and director of tal planning activities. Donus joined Bank as a leading global provider of pay- UnionBanCal Commercial Funding Corp., Hertz in December 2005, coming from ments and securities services to financial with prior stints as an investment banker Lucent Technologies. institutions. Global Transaction Banking with Lehman Brothers and Merrill Lynch. [email protected] has committed to investing in its tech- [email protected] nology and accommodating the latest regulatory requirements for SEPA, Tar- TIMOTHY BITSBERGER get II and Know Your Customer. As a re- Senior Vice President and Treasurer, sult, it has secured significant payments Funding and Investor Relations clearing and private-labeling cash man- Freddie Mac MICHAEL GALLAGHER agement mandates. Under Jetley’s lead- Timothy Bitsberger joined Freddie Mac Executive Vice President ership, Trust & Securities Services has al- as treasurer and senior vice president, HSBC Bank USA so continued to expand into new funding and investor relations, in Janu- Michael Gallagher takes responsibility for markets. ary 2006. He is responsible for the com- HSBC’s payments and cash management

20 WHO’S WHO 2007 and bank notes services in North Ameri- SUSAN J. WEBB in risk, strategy and human capital. Biel- ca. He is also global head of the institu- Executive Vice President and Product er started at MMC in 2001 as assistant tional payments business within Global Executive, Treasury Services Global treasurer and was appointed treasurer in Transaction Banking. Gallagher, who Core Cash Management October 2006. Before joining MMC he brings more than 20 years of transaction JPMorgan Chase spent eight years at PepsiCo, where he banking experience, joined HSBC in On a global basis, Susan Webb is re- served in a variety of positions, including 1997 as a senior vice president, head of sponsible for US dollar and euro clear- director of corporate finance and direc- corporate and institutional sales. Prior to ing, multi-currency and foreign ex- tor of international treasury. He has also joining HSBC, he held a variety of senior change payments, global ACH services worked at Cooper Industries and with positions at CoreStates Financial Corp. in and in-country treasury services for GE Capital Corp. Philadelphia, Tokyo and New York. clients in Asia, EMEA and Africa. With- [email protected] in the United States she oversees de- posit services, including currency and MARK E. MCDONOUGH vault, disbursement and wholesale, re- Vice President and Treasurer tail and government lockbox services. Merck Webb’s transformational approach is Mark McDonough was appointed to his ANDREW LONG helping to reposition the bank’s core current position at Merck in February Head of Global Transaction Banking payments franchise as it moves to the 2007. His mandate includes developing HSBC next generation. policies for the company’s capital struc- Andrew Long manages Global Transac- ture, treasury stock and debt, raising cap- tion Banking, whose products include ital, directing investment of a $15 billion payments and cash management, trade worldwide portfolio of marketable secu- services, securities services and whole- rities, and managing foreign exchange sale banknotes. Long joined HSBC in hedging activities. He is also involved in 1978 in the imports department in Hong PAMELA A. CARSON financing employees’ pension and bene- Kong and subsequently worked in a Senior Vice President, Global Treasury fit plans and directing the firm’s world- number of positions throughout Asia. He Management wide insurance programs. McDonough, continued his career in New York and the KeyBank who began at Merck in 1990, most re- United Kingdom, eventually becoming As leader of KeyBank’s global treasury cently served as assistant treasurer, Glob- head of operations and processing for unit, Pamela Carson has seen her busi- al Capital Markets, since 2004. the Asia-Pacific region in 2001 and chief ness unit achieve substantial growth operating officer for HSBC in the region since she took over her current respon- in 2004. sibilities in 2005. Among recent accom- plishments of her unit, she particularly cites the A+ rating by Phoenix-Hecht in automated clearinghouse, balance re- MALCOLM COOPER porting, depository services and Inter- Group Tax and Treasury Director net services. Carson received a ranking National Grid MELISSA MOORE by NACHA in the top 10 for ACH pay- Malcolm Cooper is responsible for the President and Chief Operating Officer ments in 2005, following a volume im- tax, treasury, corporate finance, business JPMorgan Chase Treasury Services provement of over 20%. She has planning and insurance activities for Na- Melissa Moore is responsible for the worked at KeyBank since 1992 in rela- tional Grid. The group’s tax charge last global day-to-day management of trea- tionship management, product man- year was about £600 million. On the sury services and oversees all aspects of agement and operations. She is active- treasury side, this includes the manage- product direction and delivery. Under ly involved in various environmental ment of its £11 billion debt portfolio and her leadership, the business has earned not-for-profit organizations in the the group’s funding, together with inter- recognition for delivering innovative Cleveland area. est rate risk management, project fi- treasury, cash management, liquidity, [email protected] nance and foreign exchange require- trade finance and information solutions, ments. A major current activity has been with annual revenue approaching $8.8 the funding of KeySpan Corp. This trans- billion. Moore has garnered top industry action is expected to close shortly, after rankings, such as first in ACH credit and which the group debt will be around £20 debit ACH originations and number-one billion. Cooper was appointed group financial institution for US corporate liq- ALAN BIELER treasurer for National Grid Transco (now uidity for large corporate and middle Treasurer National Grid) in 2002 at the completion market (treasury strategies). Internation- Marsh & McLennan Companies of the merger between National Grid al awards include best at implementing Alan Bieler is responsible for worldwide and Lattice Group. He became group cash management solutions in Asia and treasury activities for MMC and its sub- tax and treasury director in 2006. best liquidity solution provider in EMEA. sidiaries, which provide global services [email protected]

21 TREASURY &CASH MANAGEMENT 2007

mestic and global treasury manage- ships and foreign exchange. Paquette is ment. Graham oversees a broad array of known for his determination to put REI’s treasury management products and ser- innovative efforts at the forefront of the vices for PNC, which is the seventh- retail treasury world. DONALD E. BERK largest treasury management provider in [email protected] Senior Vice President and Head of the United States and has a nationwide Product Management, Treasury lockbox network. He is also responsible Management Services for PNC being the sole provider of The Northern Trust Co. CA$HLINK II to the US Treasury Depart- Don Berk started his career at IBM, ment, which ties federal agencies, com- where he worked on the first PCs in mercial banks, the Federal Reserve CARRIE W. TEFFNER 1984. After moving into banking at Wa- banks and the Treasury Department to- Chief Financial Officer chovia, he joined The Northern Trust gether through an electronic network. Sara Lee Company. He is now responsible for any [email protected] Carrie Teffner is CFO at Sara Lee. She product that the firm deploys into the was elected an officer of the corporation global banking business, including US in 2005. Prior to that position, Teffner commercial banking, international bank- served as vice president and treasurer, ing and personal finance services prod- responsible for global treasury functions, ucts such as deposits, credit cards and which include cash management, pen- loans. He is also in charge of all of the FRED COHEN sion investment, corporate finance and bank’s outsourcing solutions for item Global Advisory Leader for Energy, financial risk management. During her processing, lockbox and residential Utilities and Mining career at Sara Lee, she has held various mortgage processing. In a technology PricewaterhouseCoopers positions, including assistant treasurer, initiative, he led the development and Fred Cohen is PricewaterhouseCoopers’ chief financial officer of Champion Jog- implementation of Northern Trust Trea- lead on the political risk management al- bra, vice president of administrative sury Passport, a web-based client plat- liance with the Eurasia Group. The al- transformation and general manger of form that offers a customizable package liance was formed to help multinational Sara Lee Business Services. Teffner is a of information reporting, image delivery organizations integrate political risk man- member of the boards of directors of Girl and transaction initiation services. agement into their overall enterprise risk Scouts of Chicago and the financial advi- [email protected] management framework. Cohen works sory board of DePaul University. with top executives and board members of large organizations to help them un- derstand political risk and how to incor- porate political risk management into their business strategy and operations. CHRIS LEONE He assists them with developing tools E. KEVIN MOORE Group Vice President, ERP Application and techniques for monitoring and man- Vice President and Treasurer Product Strategy aging those risks, bringing more than 30 Schering-Plough Corp. Oracle years’ consulting and management ex- Kevin Moore is responsible for manag- Chris Leone leads the strategic direc- perience in financial risk management ing Schering-Plough’s assets, external fi- tion at Oracle for developing the ap- and financial reporting. nancial relations and investments for plications that treasurers use world- [email protected] employee benefit plans. He also over- wide. Oracle’s ERP applications range sees the company’s risk management from financials, compliance and pro- and insurance functions. Moore was ject management, to procurement, hu- elected to his present position in Janu- man resource management and corpo- ary 1996, after serving as staff vice pres- rate performance management. Leone ident and assistant treasurer when he drives the business requirements, the RUSSELL PAQUETTE joined Schering-Plough in 1993. As trea- product roadmap and strategies. Prior Treasurer surer, Moore brings to the position a to his role at Oracle, he developed en- REI Recreational Equipment broad finance background that encom- terprise software applications at Peo- Russell Paquette is treasurer of REI, a passes both domestic and international pleSoft and Hyperion. $1.8 billion national cooperative retailer experience. Over the past three years of outdoor gear and clothing. Paquette he has been responsible for raising JAMES G. GRAHAM is responsible for all aspects of REI’s cor- more than $4.5 billion in the capital Executive Vice President porate treasury, ranging from the invest- markets, which has been an important PNC ment portfolio, line of credit, enterprise- element in ensuring that the company James Graham serves a dual role at wide risk management and insurance, to had the financial strength and flexibility PNC, as deputy manager of corporate banking structure, cash management op- to support its turnaround. banking and business executive of do- erating platform, investment relation- [email protected]

22 WHO’S WHO 2007

transaction took place in 2003 and in- responsibilities at Tiffany, where he has volved private equity firms Thomas H. been treasurer since 1997. Connolly’s Lee Partners and Fenway Partners. bailiwick covers treasury operations, [email protected] such as global cash, debt and invest- CHRISTIAN DAHLBERG ment management, foreign exchange, President and General Manager, KENNETH DUMMITT hedging and banking relationships. He New York President, Corporates & Treasury also oversees risk management and in- SEB Group SunGard surance issues. On the taxation front, he Christian Dahlberg manages the New Kenneth Dummitt’s corporates and trea- looks after global planning, domestic York branch of SEB, which serves the sury segment at SunGard delivers liq- compliance and international customs North European banking group’s core uidity management, transaction man- duties planning. In 2006 Connolly was clients in the North American market. agement and integrated risk and elected to the board of the Association Clients include Nordic and German sub- performance solutions to a diverse cus- sidiaries that conduct business in North tomer base of corporations and finan- for Financial Professionals. America, as well as US corporations and cial institutions. The segment is made [email protected] financial institutions active in Northern up of SunGard AvantGard, SunGard Europe. Prior to his New York post, BancWare and SunGard Step. Dummitt E. JUDD HOLROYDE which he began in 2004, Dahlberg was offers guidance and leadership across Senior Vice President, Head of Global client executive for client relationship the entire segment, based on a strate- Product Management and Delivery management in Stockholm for SEB Mer- gic vision of a comprehensive approach Wells Fargo chant Banking. to enterprise liquidity and risk manage- Judd Holroyde is responsible for Wells ment. That holistic view is changing how Fargo’s global treasury management, companies and financial institutions ap- consumer forex and trade product units. proach collaboration and connectivity, He also leads the overall global strategy both with trading partners and between of the Wholesale Services Division. His disparate functions. entire career at Wells Fargo, which be- ERIK ZINGMARK gan in 1997, has concentrated on look- Global Head of Cash Management ing at banking from the customer’s SEB viewpoint. In 2000 he developed overall Erik Zingmark is responsible for SEB’s strategy and design of the end-to-end cash management offering, which today customer experience on the business In- covers 16 markets. He is also a member ROSSINI ZUMWALT of the Global Transaction Services Man- Head of Global Treasury ternet portal, in 2004 he established a agement Group. Zingmark has worked Symantec panel of customers to provide experi- with cash management from the buy- Rossini Zumwalt was appointed head of ence feedback, and he has led product er’s, the intermediary’s and the seller’s global treasury in 2005. She manages development to automate customers’ perspectives, as cash manager and EMU Symantec’s capital market, debt, for- implementation of treasury manage- coordinator at the Skanska Group and eign exchange, banking, treasury oper- ment services. as head of cash management at ABN ations, corporate insurance and e-com- AMRO’s Stockholm branch. merce functions. Since joining Symantec DANIEL PELTZ in 1994, she has completed a variety of Executive Vice President, Wholesale key assignments; highlights include the Internet and Treasury Solutions establishment of a $1 billion credit facil- Wells Fargo ity, the execution of a $4.5 billion stock Danny Peltz is responsible for Wells Far- buyback, a leadership role in the evalu- go’s global treasury management ser- BRIAN P. BREEN ation and integration of more than 24 vices for corporate and commercial cus- Senior Vice President and Treasurer target companies and repatriation of tomers, overseeing a 750-member team Simmons $500 million under the American Jobs of product, sales, technology and mar- Brian Breen joined Simmons in July Creation Act. keting professionals. As a 16-year veter- 1996 and has served as vice president [email protected] an of Wells Fargo, Peltz has been at the and treasurer since January 2002. As treasurer, Breen has led and directed forefront of the paper-to-electronic rev- the transformation of the treasury de- olution. He developed and manages the partment into an industry leader, partic- Commercial Electronic Office portal, ularly in the area of working capital used by two-thirds of the bank’s com- management. He has been an active MICHAEL W. CONNOLLY mercial customers. Under his leader- member of the Simmons management Vice President, Treasurer ship, Wells Fargo has received recogni- team, engaged in various buy/sell en- Tiffany tion for its use of innovative technology terprise transactions. The most notable Michael Connolly has a wide range of in treasury management.

23 CONTRIBUTED ARTICLE:THE BANK OF NEW YORK MELLON

GLOBAL DIRECT REMITTANCES: DEVELOPING LOW-VALUE PAYMENTS CAPABILITIES

By Eric Kamback workforce and employee mobility is growing. As a result, companies increasingly need to offer global remittance or generations, immigrants have sent money back services to employees as part of their banking packages, to their homes to support their extended families. It placing greater demand on cross-border payments activ- Fis estimated that upward of $230 billion was remit- ity, and providing opportunities for banks that can meet ted by more than 175 million immigrants and migrant that demand. workers worldwide in 2005, a figure projected to swell to Both banks and governments have an interest in chan- $289 billion this year, according to neling this payment activity into the the World Bank. Today, major money banking system, creating new oppor- service businesses are the primary tunities for banks that can develop servicers of the remittance market. It competitive solutions quickly and is estimated that only 10% of remit- cost-effectively. But many banks lack tance transactions from the US are a global retail payment capability. sent through banks. Many immigrant Varied payment systems; formatting workers are wary of established standards, rules, and regulations; banking institutions, unfamiliar with and a lack of global standards the customs and faced with a lan- regarding market practice and bank- guage barrier, or have no experience ing laws are also barriers for banks with banks at all. Many are simply seeking to compete in this space. unaware that different remittance The gathering and distribution of options exist. payment-related information present

Financial institutions around the Eric D. Kamback is Executive Vice other, multiple levels of complexity. world have increasingly shown inter- President and Group Head for Global For example, entities initiating pay- est in remittances. Initially, money Payment and Trade Services at ments need to collect and maintain transfers are the primary financial The Bank of New York Mellon the necessary routing information to need among immigrants, and remit- pay beneficiaries, given the differing tance service offered at a competitive rate provides an requirements by country. entry point for banks into the immigrant market. Once There are additional barriers to entry. Without an established, remittances are an opportunity to create extensive correspondent banking network or the invest- long-term client relationships, leading to increased mar- ment in technology to develop a global payments capa- ket share, income potential, and customer loyalty as bility, banks lack the robust infrastructure to offer a cost- worker wealth increases and remittance clients seek effective remittance solution, and the time and cost of credit, car loans, and mortgages. establishing and maintaining a network and developing a Further, in an age of globalization, companies are more remittance platform is prohibitive. Lacking that infrastruc- and more dependent on global networks of customers, ture, banks are confined to executing payments by wire. suppliers, and investors, and dependence on a global The cost and complexity of complying with Know Your CONTRIBUTED ARTICLE:THE BANK OF NEW YORK MELLON

Customer, anti-money laundering regulations, and other of scale and rigorous payment controls. control activities add further complications. The Bank of New York Mellon can offer banks a global To compete, banks need low-cost payment methods direct remittance solution that meets all these criteria. that enable them to offer sustainable competitive prices Our solution is: to their customers. Banks that are quick to market, with ● Easy to use, allowing payments to be initiated through an easy-to-use service that simplifies our existing banking platform; the payment flow and lowers cost, “Private labeling can be ● Comprehensive, allowing access to stand to benefit. The problem is how a strategic alternative multiple payment delivery options in to bring this about. to building an in-house local countries; and ● Utilize The Bank of New York Mel- THE PRIVATE LABEL global remittance lon’s extensive network of receiving SOLUTION capability. It can correspondent banks around the Private labeling can be a strategic compress time-to-market world. alternative to building an in-house and enable a bank to gain Currently, many providers offer ser- global remittance capability. It is a vice only from one into another or viable way to tap into the growing competitive advantage. only a few other countries, serving retail cross-border market; it can Leveraging an established only established corridors such as US compress time-to-market and enable system eliminates the cost to Mexico or India. Our network of a bank to gain competitive advan- correspondent banks is one of the tage. Leveraging an established sys- of development, largest and most well-maintained tem eliminates the cost of develop- maintenance, and ongoing networks in the industry. Our global ment, maintenance, and ongoing investment, while network includes 12 branches, 18 investment, while providing access providing access to the representative offices and 1,600 cor- to the latest advances in technology. respondent bank relationships. latest advances in Based on our strength in payment EVALUATING A PROVIDER technology.” processing, technology, and corre- A provider should bring consider- spondent banking, The Bank of New able experience and expertise to implementing a solu- York Mellon can be a major facilitator of remittances by tion. It should offer a well-established, extensive, corre- linking correspondents worldwide. Those banks that spondent banking network, the technology to automate establish a global remittance structure today will be the entire payment transaction, and a full spectrum of dis- best positioned to take advantage of the rise in retail bursement options. A solution should feature a flexible global payments and increasing customer demand for infrastructure that can scale to volume growth, new prod- new payment services in the years ahead. The Bank of uct developments, and continuously emerging market New York Mellon’s global direct remittance offering can opportunities. It should integrate seamlessly with cus- bring that about. tomer payment initiation points, including teller systems and online banking platforms. And it should guarantee speed of payment delivery, and allow for the ability to track payments. Payments processing should be a core business of the provider, and it must provide efficiencies TCM SS Citi.REV 9/4/07 2:42 PM Page 6

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S E PA: RE A C H I N G BE Y O N D EU R O P E A N BO R D E R S

By Naveed Sultan could trade as easily across Europe as within their own national boundaries. SEPA is the banking industry ’s he birth of a new currency used by more than 300 response to the determination of Euro p e ’s politicians to million consumers is a remarkable event. Since facilitate the free flow of capital, labor, goods and serv i c e s T1999, corporates around the world have embraced within Europe. Under SEPA, the introduction of new pan- the single currency and gained from a degree of stan- E u ropean payment instruments will standardize the core dardization. Less easy to grasp perhaps is the creation of payment products and services used across the re g i o n , an infrastructure that enables the euro zone to truly oper- remove the long-standing re q u i rements to maintain local ate as a single market. While using one currency, Euro- accounts in each country and eliminate the need to under- pean countries operate today as a stand the myriad of diff e rences that patchwork of domestic payments exist between national payment markets. However, the opportunities i n s t ruments today. It holds out the for businesses to access new markets p rospect of a single, streamlined pay- and streamline business processes— ment and collection process to sup- following the planned introduction of p o rt relationships with customers and the Single Euro Payments Are a suppliers across the continent. SEPA ( S E PA) in 2008—will have an even makes Europe an easier place to do greater impact than the arrival of the business in, as well as making it an euro. Whether you already have busi- easier place to do business with. nesses operating in multiple Euro- pean markets or are looking to SEIZING THE OPPORTUNITY expand trading partnerships in To understand the impact of SEPA E u rop e, SEPA could support your in more detail, let’s take two types of business growth significantly. business; the large multinational For those not directly involved in Naveed Sultan is Managing Director, a l ready doing business acro s s Head of Global Transaction Services in SEPA’s creation, there are two com- E u rope and the fast-growing com- Europe, Middle East and Africa (EMEA) mon misconceptions. Misconception pany that’s increasingly looking at 1: “Because SEPA concerns only trading abroad. euro payments, it is just a matter for Europeans”. Mis- Many multinationals with extensive operations in Euro p e conception 2: “Because it is merely a change to formats a re already centralizing and standardizing their payments, passed between banks, only bankers need to know about collections and liquidity management processes. But firm s it”. Wrong in both cases: all firms that trade in and with that have sought efficiencies through adoption of a single Europe could be affected. global ERP system—or centralized stru c t u res such as pay- S E PA stems from the same vision of a single Euro p e a n ment factories, in-house banks or shared service centers— marketplace that gave birth to the euro. The intro d u c t i o n have been compromised by the persistence of local pay- of the euro left Euro p e ’s payment instruments and clear- ment practices. Payment factories still have to consolidate ing infrastru c t u res largely untouched; cro s s - b o rder pay- payment files from multiple local offices and shared serv i c e ments remained costly to process and acted as an ongo- centers still need to maintain expertise in local payment ing barrier to a true single market in which businesses practices. The question all multinationals should ask is: how TCM SS Citi.REV 9/4/07 2:42 PM Page 7

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much more efficient could our payment pro c e s s e s be under SEPA? As the single market takes shape ● SEPA will replace today’s disparate local payment and new sources of competition emerge, low oper- products with a new set of services based on common ating costs will be increasingly critical. Cro s s - b o rd e r standards. trade is central to the SEPA vision; a uniform pay- ● SEPA will force changes to the ways corporates make ment and collection process across Europe can and receive non-urgent euro transactions, greatly remove the constraints that previously accompanied simplifying payments and collections processes for management of supply chain relationships, there b y end users. enabling firms to source from the best suppliers ● SEPA Credit Transfers will be launched on 28th re g a rdless of where in Europe they are located. January 2008. For firms that conduct increasing volumes of ● SEPA Direct Debits are scheduled for launch business with Europe, SEPA offers a different kind during 2009. of opportunity. When establishing operations in ● Today’s local euro payment products will be phased say, France, Germany and Spain, it has typically out over the coming years—although no firm been necessary to establish banking relationships, timetables are in place yet. open bank accounts and define best practice for ● Corporates should evaluate the impact of SEPA and payment and collections processes in all thre e plan for migration during 2008/9 countries—adding considerable cost and effort to ● Corporates can exploit the standardization that SEPA the decision to expand into new markets. If busi- will offer to make payment/collection activities nesses can operate out of a single account with more efficient and less complex. one bank in any Member State, the costs of serv- ing the European market are reduced consider- ably. While technology drove efficiencies in the physical design and implementation of the new standards puts us in supply chain to make it easier to reach remote markets, an ideal position to guide our clients through the many the development of common payment standards is now changes that SEPA will bring. We talk to customers every having the same impact on the financial supply chain. day about how their European business could be more eff i- Automation and standardization lie at the heart of SEPA, cient and streamlined. For example, making all euro pay- enabling integration and interoperability with companies’ ments out of a single account sounds like a great opport u - existing systems, for example by taking advantage of nity for cost savings, but this may not be the most eff e c t i v e XML-based ISO 20022 message standards. a l t e rnative for many firms. Customer pre f e rences, industry Although SEPA is key to doing business in Europe more practices, plus legal and tax considerations, must all be ana- e a s i l y, many questions remain. For example, SEPA payment lyzed before re s t ructu ring your payment and banking i n s t ruments include a common field for remittance data, a rrangements. Citi can help you identify and pursue the re a l but corporates need to agree on standard approaches to o p p o rtunities in Europe and across the world, helping us all s t ructuring this information to leverage it eff e c t i v e l y. The to reap the benefits of the new payments market. timing of migration to SEPA instruments also needs care f u l consideration. SEPA credit transfers will be available fro m Naveed Sultan is Head of Global Transactions Services (GTS) for J a n u a ry 2008, but direct debits will be introduced later and E u rope, Middle East and Africa (EMEA) responsible for cash management, trade finance and services and securities and fund existing instruments will be withdrawn according to diff e r- s e rvices across the region. Prior to his appointment to his curre n t ent national migration plans. The opportunities are there ; role, effective October 2007, he was Head of Cash Management but corporates must plot their own course. and Tre a s u ry Services for GTS in EMEA

PARTNERING FOR SUCCESS As a global bank with a pan-European cash management network that offers clients a combination of both domestic and regional capabilities, Citi has been taking a leading ro l e in the creation of SEPA. Our active engagement in the CONTRIBUTED ARTICLE: JPMORGAN CHASE

BEYOND FINANCE: THE TREASURER AND SUPPLY CHAIN MANAGEMENT

By Jonathan Heuser focused on securing the lowest possible cost for goods or services, but may not take into account the impact of olely focusing on traditional approaches to cash payment terms and methods on the ultimate cost of management can limit a treasurer’s ability to manage goods. Unfavorable terms could have a ripple effect on Sworking capital in a holistic way. One of the keys to the supplier, as well as the buyer and its cash flow. Fac- effectively managing working capital is to apply a strategic toring in free trade agreements, quotas, duties and taxes, approach to all operational areas of a business. In other and transportation complexities earlier in the planning words, treasurers can better manage process can help to lower costs and working capital by looking into func- “As globalization manage risks. tions beyond finance. Once payment terms are finalized, The supply chain is one place that increases, technology systematizing, streamlining and treasurers can look to gain more vis- advances and the automating the payment process ibility into operational working capi- number of suppliers and should be explored through joint tal. Understanding a company’s sup- vendors available to an planning between finance and the ply chain processes, and how procurement team. Including suppli- decisions within the supply chain are organization proliferate, ers in the discussion of their preferred made, can give treasurers the infor- the foresight to take a payment methods, and establishing a mation they need to profoundly broader view of working process they can rely on, can help affect working capital. reduce costs and improve supplier Specific functional areas to con- capital management can relationships. sider include procurement, trans- become a competitive Direct knowledge of sourcing portation, and compliance and risk advantage.” strategies, payment terms, seasonal management. Who better than a variations, transportation and inven- treasurer to help other departments within a company tory will allow treasurers to plan cash requirements with understand the financial impact of what may initially greater precision and take advantage of investment appear to be nonfinancial decisions? The end result opportunities. could be impressive gains on the balance sheet. SUPPLY CHAIN FINANCING PROCUREMENT Treasurers should also understand an organization’s Procurement should be an area of great interest for cost of capital versus the supplier’s cost of capital. Open treasurers. When selecting a vendor, organizations account terms, for example, may bear lower fees than a should ideally include trade regimes, payment terms and letter-of-credit-based transaction, but they can also overall financial footing, in addition to capability, loca- restrict a seller’s access to working capital financing and tion and price. increase its costs of working capital. The costs the sup- Decisions about which supplier to use, and how and plier bears for accepting extended payment terms may when to pay that supplier, are typically made within the be finding their way back into the cost of goods. procurement department. This often begins with a broad- In many cases, longer payment terms place a greater stroke analysis that focuses on comparable product offer- financial burden on the seller, while shorter terms place a ings and the ability to deliver. Negotiations are often greater burden on the buyer. Treasurers and procurement CONTRIBUTED ARTICLE: JPMORGAN CHASE

staff should determine which party has the lower financ- are restrictions on currency flows or difficult transaction ing costs and greater access to capital. Payment terms reporting requirements. Treasurers must also be prepared should take this discrepancy into account. to have the hedges they need against currency deprecia- Buyer discounts for early payment may be available or tion or appreciation. can be negotiated. Often when a company decides to extend payment terms in conjunction with a supply chain RISK MANAGEMENT financing program, suppliers welcome the option of Another opportunity for treasurers is in the area of immediate payment at a discounted rate, especially if that compliance and risk management. Lack of awareness rate is more attractive than the sup- around risk exposure, overlooking plier’s typical borrowing cost. regulatory requirements or failure to Another option is for the buyer to establish necessary controls and pro- self-finance a program of accelerated cedures can expose the enterprise to payments. This requires supplier potential fines and penalties. invoices to be processed rapidly and Another threat to efficient working- thus places a heavy burden on the capital management is the uncer- accounts payable staff, making an tainty inherent in the supply chain. If automated platform a necessity. A the transportation network is unreli- self-financed program also requires able, companies must carry extra an infusion of working capital, so a inventory to create buffer stock. If the thoughtful analysis of cash availability distribution network is inefficient, and uses is important. then inventory is delayed or mishan- A number of strategic financial dled, leading to shortages and an considerations should be included Jonathan Heuser is Vice President of inability to replenish stock. If goods as part of the decision-making Trade Services at JPMorgan Chase. are held for inspection due to process. For buyers, is there a bet- improper or missing paperwork, then ter use of balance sheet cash? And for sellers, is it more the transaction is disrupted and the ultimate sale is important to convert receivables to cash quickly? Is a delayed. All of these can result in lost business and hin- discounted early payment really beneficial to the bot- der cash flow. tom line? Having established processes, automated tools, and professional advisory services can create a more secure CURRENCY CONCERNS and compliant global supply chain, thus minimizing the For organizations working in a global environment, cur- risk of supply chain delays, penalties, rising expenses or rency issues can also affect working capital. Transaction the loss of customers. fees, volatility of dollar-based invoices versus a domestic currency and fluctuating exchange rates can complicate CONCLUSION otherwise well-thought-out plans. Treasurers have the opportunity to bring a greater level There are many things for companies to consider. For of structure and financial discipline to all areas of an orga- example, which currency is most efficient for your organi- nization. As globalization increases, technology advances zation and your vendors—the buyer’s currency or the and the number of suppliers and vendors available to an seller’s? Would an international exchange medium such organization proliferate, the foresight to take a broader as dollars or euros be more advantageous? How do the view of working capital management can become a com- payment terms affect each party’s currency risk? What are petitive advantage. the currency and tax implications of purchasing through an overseas buying entity? In which currency does your supplier finance its operations, and how do suppliers pre- fer to be paid? Other currency factors that can impact working capital