International Treasury Transformation Overview. May 29 th, 2014

Transcription

1 International Treasury Transformation Overview Frank Sassano Senior Director Treasury Operations Wyndham Worldwide Prashant Patri Senior Manager, Treasury Advisory Deloitte & Touche LLP May 29 th,

2 Table of Contents Section Page # Wyndham Worldwide Corporation: Company Overview 3 Pre-Transformation Challenges 6 Future State Objectives 7 In-House Bank Capabilities 8 Global Cash Pooling 9 FX Risk Management 11 Intercompany Netting & Settlements 13 Implementation Plan & Considerations 14 Summary of Benefits Realized 15 Key Take-Aways and Lessons Learned 16 Q&A 17 Deloitte & Touche Treasury Advisory: Practice Overview 18 2

3 Wyndham Worldwide Corporation Three Business Units Hotel Group Exchange & Rentals Vacation Ownership 3

4 Wyndham Worldwide Corporation Industry Leadership Business Segment Market Position Worldwide % of 2013 Adjusted EBITDA Major Brands Include Hotel Group #1 Hotel franchisor by hotels 23% Exchange & Rentals #1 Timeshare exchange and rental company 28% Vacation Ownership #1 Timeshare developer 49% 4

5 Wyndham Worldwide Corporate Treasury Overview Corporate & Regional Treasury Centers Parsippany, NJ North America & Corporate Treasury & Risk Management 12 employees London, UK Regional Center EMEAI Treasury 3 employees Montevideo, Uruguay Regional Center Latam Treasury 4 employees Key Finance Offices Las Vegas USA Mexico City Mexico Singapore Queensland Australia 3 Treasury Centers & Key Finance Offices 25 Relationship Banks (15 with cash mgt) 1,100 Bank Accounts across 90 Banks 80-90% International vs. Domestic Cash 5

6 Wyndham International Treasury Transformation Pre-transformation Challenges Wyndham s international treasury operations were not optimized or integrated since spin-off from Cendant Cash structure provided limited visibility and access to overseas liquidity Bi-weekly liquidity visibility to 6 8 Wyndham s foreign legal entities and with limited or no automation Inability to deploy available cash balances across pool participants Tax structure challenges relative to substance requirements FX risk management practices were fragmented, non-automated, and not transparent, resulting in greater cost and increased systemic risk to Wyndham Exposure gathering and tracking systems and accounting processes were not standardized or robust, resulting in operational inefficiencies and unexpected P&L volatility Performance reporting was non-existent Lack of consistent intercompany netting/settlement processes resulted in Ad-hoc decisions to net and settle payables, lacking a structured approach Significantly manual record keeping, introducing risk of errors Higher volume of FX transactions for settling intercompany payables and receivables 6

7 Wyndham International Treasury Transformation Future State Objectives Key objectives of the international treasury transformation initiative include: Optimization of visibility to and control of cash balances across Wyndham s global entities Access to incremental liquidity from existing balances via pull system, generating annual interest savings For restricted entities with trapped cash, utilize interest optimization yielding enhanced earnings credit Coordinating treasury restructuring initiatives with ongoing tax planning and restructuring efforts to optimize operations and mitigate potential tax exposures Creation of an in-house bank (IHB) structure to focus on optimization and integration of Wyndham s international treasury operations inclusive of cash management, netting and FX processes Centralization, standardization and automation of FX exposure gathering and transaction execution processes to enhance the level of control and reduce risk to the Company Generate cost efficiencies in FX transaction execution through minimizing number of external transactions Implement regular FX hedge program performance reporting through FX Scorecard. Leveraging Treasury technology to enhance visibility and control and streamline workflow Automation and streamlining of intercompany netting and settlement processes to generate operational efficiencies and enhance level of control 7

8 In-house Bank Capabilities Capabilities provided by an IHB structure were identified to help Wyndham achieve many of the future state objectives outlined above Continuous Improvement Global Cash Pooling Centralized FX Improved visibility and Improved efficiency enhanced control over in risk mitigation due cash ( pull system) to centralization Reduced resources Lower transaction required for FX costs due to reduced management and volume of execution if multicurrency notional pool is Lower costs of transactions used compliance Efficiencies gained as a Improved result of ability to management and manage liquidity exposure reporting centrally and leveraging TMS. Global Netting Reduction in banking fees and FX cost as the result of fewer transactions Automated accounting eliminates manual processes Increased efficiency through automated Intercompany process Increased control of intercompany processes and reduction of LT risk Payments Factory (Out of Scope) Consolidated payments to global vendors, enabling lower bank fees Lower idle cash as only the Payment Factory needs to keep Liquidity Single bank payments file and STP from payment to accounting and bank reconciliation Collections Factory (Out of Scope) Centralized cash receipts and application, netting of 3 rd party payments and receipts Lower idle cash as only the Collections Factory receives receipts Straight-throughprocessing (STP) from invoicing to cash receipt In-House Bank (Full Service) Approach: Implement Global Cash Pooling, Intercompany Netting and Centralized FX functions as part of IHB. Payment and collections factory implementations would be considered in the future potentially aligning with shared services strategy. 8

9 Global Cash Pooling Pre-Transformation & Current State Overview Considerations Liquidity Visibility Information Flow Access to Liquidity Automation to Access Liquidity Operating Model Pre-Transformation Visibility to cash balances limited to only 6-8 entities and only twice per week through manual process Monthly visibility only to other entities cash balances as part of monthly reporting process Visibility to US legal entity balances available through Kyriba Foreign entity process of getting visibility to cash is Excel based and manually intensive Access to cash balances limited to only 6-8 entities and only twice per week through manual process Access to other entities cash balances is ad-hoc as part of monthly reporting process Non-existent, push structure with heavy field interaction Hands-on and ad hoc interaction between Corporate Treasury, Regional Treasury, and Field Current State Enhanced roll-out of technology platform to enable real time visibility for all pool participants Real time visibility to more entities cash balances as part of daily Kyriba reporting process EMEAI, IHB and Latam Treasury live on Kyriba Automated through Kyriba cash module Access to all legal entities in scope for the global cash pooling project Real time access to liquidity of the legal entities in scope for the global cash pool Access to incremental liquidity is generating substantial annual savings as compared to Wyndham s cost of funds Optimized use of Kyriba and SWIFT network for daily settlement of the legal entities and the respective banks in scope for inclusion in the pool Enhanced operating model structure with defined responsibilities for Corporate and Regional Treasury, and legal entities supported by Corporate and Regional Treasury Bank Account Infrastructure Carried forward legacy bank accounts, which are redundant in the consolidated/combined organization Overlay Structure Manual cash concentration structure Streamlined bank account structure by country and rationalization of accounts identified as redundant Single entity multi-currency notional pool 9

10 Global Cash Pooling Overlay Structure Recommendation A notional pool overlay structure was identified to help Wyndham obtain a consolidated view of cash balances across all pool participants. Created a new IHB entity (Wyn Overseas Operations Limited, WOOL) with 20 participating entities. Currently existing underlying physical pooling structures will continue to consolidate in-country cash balances and sweep into respective WFC accounts. Wyndham Worldwide Corporation (USD) BOA Wyn Overseas Operations Limited (USD) BOA GBP USD EUR DKK NOK SEK AUD CHF GBP USD EUR EUR DKK NOK SEK EUR AUD CHF RBS UK Pool* WER UK H Treasury Header Accounts Danske Nordic Pool Novasol A/S BOA Wyndham Global Finance Plc Westpac/NAB/BOA RCI Australia (AUS) WVRAP (AUS) Wyn Lux Hldgs (Lux) WW Swiss GmbH IEV GBP RCI SA Holdings (IOM) USD HSBC WHAP Co Ltd. (HK) USD BBVA RCI Latam SA (NY) RCI Mexico (NY) EUR Landal GreenParks GmbH EUR Rabobank - Landal GreenParks Holding BV Automated Sweep (daily) Manual or Kyriba Sweep (frequently) Funding to the pool and repayment of funding * In the future state some legal entities that are currently part of the UK pool will move to the US pool. Further detail is available in the appendix 10

11 FX Risk Management Pre-Transformation & Current State Overview Considerations Exposure Identification & Aggregation Exposure Analytics Hedge Execution Pre-Transformation Fragmented with lack of reliance on systems or best practices Limited high level exposure review prior to hedge execution Centralized at corporate regardless of entity that has exposure with manual transaction capture into Reval Current State Fireapps automated BS exposure extract from main ERP systems (Oracle R12, Peoplesoft) Exposure analysis performed in Fireapps and Reval by Treasury Operations before hedging decisions are made* Automated FX workflow from pre-trade input, approval, execution and settlement using Reval and FXall. Business Visibility & Overall Governance of Risk Management Function Performance Measurement and Reporting Process Automation & Technology No monthly review of hedge strategy & policy not updated for current needs of the business Limited definition of policy goals and lack of routine performance reporting to key stakeholders. This is a key priority and needs to be addressed soonest (i.e. before the technology implementation) No automated accounting or hedge effectiveness testing processes exist Monthly FX Scorecard review with business unit Finance teams as part of FX Risk Management Program Redefined FX Risk Management goals and creation of monthly FX Scorecard vs. defined metrics Established automated links between hedge execution, Reval, and ERP GL modules** NOTE: future state go live: *Q2 2014, **Q

12 Monthly FX Scorecard Balance Sheet Exposure Review Balance Sheet Exposure Scorecard: BU: WER As of: 3/31/2014 Percentage Hedged Actual 3/31 BS Exposure (FC) BS Hedge as of 3/31 (FC) Actual Goal Bands RCI Europe - DKK 10,860,165-6,286,735 58% % >90%, <110% RCI Europe - EUR -23,306,333 24,013, % % =80-90%, = % RCI Europe - NOK 12,712,469-12,297,218 97% % <80%, >120% RCI Europe - SEK 15,863,638-14,590,249 92% % RCI Europe - USD -1,342,252 1,395, % % RCI Europe - ZAR 12,797,637-10,405,124 81% % RCI US Interco - ZAR 10,713,461-11,137, % % RCI US Royalties - ZAR 20,622,393-19,206,431 93% % RCI Brazil - USD -4,710,583 5,463, % % RCI Chile -USD 3,197,874-3,097,531 97% % RCI Colombia - USD 2,009,343-1,801,016 90% % RCI Mexico - USD 11,203,926-11,182, % % RCI Uruguay - UYU -41,118,133 40,679,445 99% % WWC (Novasol) - SEK -136,145, ,035, % % Novasol - GBP 8,009,618-6,961,232 87% % P&L Impact Impact on Underlying Exposure (LC) Impact on Hedge (LC) Net Impact % of Unhedged Net Impact Bands RCI Europe - DKK 1, % 852 >90%, <110% RCI Europe - EUR - 51,036 60, % 9,640 =80-90%, = % RCI Europe - NOK 9,193-8,662 94% 532 <80%, >120% RCI Europe - SEK - 6,713 8, % 1,715 RCI Europe - USD - 4,151 2,463 59% - 1,688 RCI Europe - ZAR 15,187-14,879 98% ,042 47,401 11,358 RCI US Interco $ 21,952 $ (21,264) 97% $ 689 RCI US Royalties $ 37,856 $ (37,864) 100% $ (8) RCI Brazil $ 155,721 $ (178,362) 115% $ (22,641) RCI Chile $ (53,112) $ 56, % $ 3,578 RCI Colombia $ (66,875) $ 70, % $ 3,270 RCI Mexico $ (155,951) $ 163, % $ 7,595 RCI Uruguay $ 5,588 $ (29,806) 533% $ (24,218) WWC (Novasol) - SEK $ 146,008 $ (153,050) 105% $ (7,042) Novasol - GBP $ (28,425) $ (6,194) -22% $ (34,620) $ 91,187 $ (129,965) $ (38,778) Metric: % Cover FX Policy Compliance Hedge Cost - (Loss)/Gain Full Year Hedge Cost - Budget (USD) YTD Hedge Cost - Budget (USD) YTD Hedge Cost - Actual (USD) Variance (USD) RCI Europe - DKK $ 7,032 $ 1,758 $ 1,621 $ (137) RCI Europe - EUR $ (182,942) $ (45,735) $ (27,503) $ 18,232 RCI Europe - NOK $ (14,178) $ (3,545) $ (5,040) $ (1,495) RCI Europe - SEK $ (10,391) $ (2,598) $ (2,064) $ 534 RCI Europe - USD $ (4,100) $ (1,025) $ (1,138) $ (113) RCI Europe - ZAR $ (50,061) $ (12,515) $ (12,776) $ (261) RCI US Interco - ZAR $ (89,783) $ (22,446) $ (14,989) $ 7,456 RCI US Royalties - ZAR $ (67,455) $ (16,864) $ (21,318) $ (4,454) RCI Brazil - USD $ (221,351) $ (55,338) $ (104,709) $ (49,371) RCI Chile -USD $ 107,319 $ 26,830 $ 9,522 $ (17,307) RCI Colombia - USD $ 33,401 $ 8,350 $ (1,567) $ (9,918) RCI Mexico - USD $ 619,874 $ 154,969 $ 56,818 $ (98,150) RCI Uruguay - UYU $ 29,363 $ 7,341 $ 8,890 $ 1,550 WWC (Novasol) - SEK $ 241, $ 60,288 $ 56,715 $ (3,573) Novasol - GBP $ (4,293.00) $ (1,073) $ (11,545) $ (10,472) Total $ 393,587 $ 98,397 $ (69,083) $ (167,480) Metric: Hedge Cost v. Budget Hedge Efficiency Metric: % Offset Hedge Effectiveness 12

13 Intercompany Netting and Settlements Process Overview The process for IC netting and settlement will be designed for all entities in scope for netting*, and the netting calculation process will leverage Kyriba s Netting module. WOOL is expected to be the netting center entity. Considerations Identification of IC Transactions to be Netted and Settled Netting Calculations Settlement Outputs Accounting Outputs Current State Ad-hoc N/A N/A N/A Future State Upload transaction data into Kyriba netting module Performed by the netting center via Kyriba Participants obtain final net position via Kyriba final netting settlement reports. Kyriba provides Consolidated Netting report to feed FX trading process as well as generate wires to participants owed by the netting. Accounting entries provided either by third party netting solution or flow automatically from Reval into GL if netting process is performed in house Technology and Operating Model N/A Perform input, settlement, and accounting functions via Kyriba Netting module required to perform end-to-end netting in house *To be determined in coordination with Tax and Legal departments. 13

14 International Treasury Transformation Milestone Plan Phase 1 (IHB), Phase 2 (FX), Phase 3 (Netting) Validate Structure 12/15 IHB Policy 1/31 Cash Mgt Design, 2/28 Open Accts/ MCNP, 3/31 Dom. Struct. Changes, 5/30 Kyriba Build, / Test 6/30 Live 7/11/13 Cash Structure Validation and Policy Design Account Opening and Infrastructure Development Execution/Go Live New FX Policy, 1/31 6 Mapping 4/17-19 Complete Design, 5/31 Reval / FXall Build, 7/31 Testing 8/31 Live 1/1/14 FX Process Structure Validation and Policy Design Sr. Management Buy- In and Process Rationalization Execution/Go Live Collect Baseline Exposure Data & Metrics, 8/31 11/1/12 12/1/12 1/1/13 3/31/13 6/30/13 9/30/13 SOW & IC Net Policy, 7/1 Pilot Scope, Tax Review, 8/1 Complete Design, 9/1 Kyriba Build, 10/1 Pilot Test 12/31 Global Rollout 2015 Netting Structure Validation and Policy Design Business Buy-In and Process Rationalization Execution/Go Live 7/1/14 8/15/14 10/1/14 12/31/14 14

15 Implementation Considerations Wyndham Worldwide Corporation s International Treasury Transformation has been successful due to a disciplined implementation approach that brought together cross-functional internal and external resources that executed the project under a strong governance structure Resources: Internal: Treasury, IT, Accounting, Tax, Legal, PMO, Lean Six Sigma Master Black Belt and Internal Audit External: Banks, Vendors (Fireapps, Reval & Kyriba), Advisor (Deloitte & Touche Treasury Advisory) Project Governance: Capital Approval Request, Project Charter, Business Case Lean Six Sigma Steering Committee Tollgate Reviews Budget: Capitalized expenses: external and internal design & development hours Operating expenses: incremental Reval module & Fireapps, FXAll subscription fees net of Treasury outsource and retired system savings Hardware: One virtual server (Reval/Fxall connector) 15

16 Summary of Benefits Realized Key benefits realized to date from phases 1 & 2 of the implementations include: Phase 1 New IHB and Cash Overlay Structure: Cost Savings: $1.03M FX hedge cost p.a., net $580K interest savings = $1.6M total uplift. Productivity Gains: Cost of additional EMEAI Treasury Analyst more than offset by Operating Expense savings from eliminating prior IHB outsource Treasury admin fees. Process Efficiencies: Dynamic daily liquidity pull solution replaces twice weekly push system. Yield Enhancement: New cash overlay released 10M of previously untapped liquidity, and working with Corporate Tax developed further means to access quarter end excess liquidity. Phase 2 FX Risk Management Process Redesign: Cost Savings: FX Scorecard feedback loop and Fireapps implementation exposure reviews resulted in finding unhedged and incorrect exposures, thus reducing P/L volatility. Productivity Gains: Targeted 25% reduction in time spent on transaction processing, elimination of IHB outsourcer trades (342 p.a.), reduced monthly accounting and reporting burden. Process Efficiencies: Paperless workflow from hedge input through approval, execution and settlement results in significant time savings and refocus toward analysis. 16

17 Key Take-Aways and Lessons Learned Adopted a Six Sigma approach with focus on transforming processes and using systems as enablers of process change Phased approach to manage scope and resource intensity implementation would be too intensive without phasing (and sub-phasing) into logical chunks. Buy-in from international and business units is critical; participation from dependent functional teams is mandatory (e.g. IT, Finance and Accounting). Tone at the top Upfront approval and ongoing involvement from cross-functional executive team (Six Sigma Steering Committee). Require detailed SOW up front from every vendor. Software as a Service (SaaS) is low IT intensity, however, regular upgrades sometimes create uncertainty in the process. Watch out for vendors who upgrade frequently, results in increased freeze periods. Require SaaS vendors to supply a test environments to avoid testing in production. Test, test and re-test! Several iterations of our straight through processing connectivity. Check bilateral agreements and feeder bank SWIFT capabilities up front every bank is different If using part-time internal project resources, be prepared for longer roll-out timelines. Utilize and leverage internal PMO s if available. Allow for extra time in your plan for vendor negotiations and bank documentation (KYC s). 17

18 Q&A 18

19 Deloitte & Touche LLP Treasury Advisory Practice Overview Dedicated Treasury & Commodity Risk Management Practice Deloitte has the largest treasury and commodity trading & risk management (TCRM) consulting practice in the United States Our professionals have significant industry or vendor experience and many have joined us from treasury departments of Fortune 1000 companies as well as from some of the Treasury technology vendors We have served both the global and regional treasury requirements of Fortune 1000 companies in various industries, such as goods manufacturing, financial services, pharmaceuticals, petrochemical, private equity Deloitte has deep capabilities in our treasury technology practice. With the scale of our practice come the methodologies, discipline, and insight that boutique players and other firms without a similar practice do not have We have strong relationships with most treasury vendors and are a preferred implementation provider for SAP. We work in a collaborative way with our clients. We recognize that treasury engagements require a strong understanding of the interdependencies between treasury, accounting, finance, tax, IT and legal, and our team has direct experience in efficiently and effectively working through these challenges Deloitte Touche Tohmatsu Limited s Global Scale More than 200,000 people in 150 countries; $27.4B in revenue Vast global network provides reach on complex issues across major functional finance, technology and human resourcerelated areas that global corporations have to deal with Treasury Advisory Practice Capabilities Global Cash and Liquidity Management: assess, design and implement cash and liquidity management strategies Treasury & Commodity Technology: IT strategy, architecture design, vendor assessment/selections and implementation of integrated technology solutions Commodity & Financial Risk Management: assess, redesign and implement integrated commodity & financial risk management strategies Treasury & Commodity M&A Services: help you with integration, divestment and carve out of a new independent treasury and commodity risk management capabilities As used in this document, Deloitte means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting Copyright 2014 Deloitte Development LLC. All rights reserved.