1 International Treasury Transformation Overview Mike Cassidy & Dominika Ward In-house Banking & EMEAI Wyndham Worldwide Corporation June 21, 2017 Kyriba Live, London
Wyndham Worldwide Corporation Industry Leadership Business Segment Market Position Worldwide % of 2016 Adjusted EBITDA Major Brands Include Hotel Group #1 Hotel franchisor by hotels 25% Destination Network #1 Timeshare exchange and rental company 25% Vacation Ownership #1 Timeshare developer 50% 2
Wyndham Worldwide Corporate Treasury Overview 3 Corporate Treasury Centers Parsippany, NJ Treasury Operations Securitization & Risk Management 14 employees London, UK In-house Banking & EMEAI Treasury 3 employees Montevideo, Uruguay Latam & Asia Treasury 5 employees Key Finance Offices Las Vegas USA Mexico City Mexico Singapore Queensland Australia 3 Treasury Centers & Key Finance Offices 22 Relationship Banks (15 with cash mgt) 1,000 Bank Accounts across 90 Banks 85% International vs. Domestic Cash
Wyndham International Treasury Transformation Pre-transformation Challenges 4 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 with no automation Inability to deploy available cash balances across pool participants Tax structure challenges relative to substance requirement 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
Wyndham International Treasury Transformation Future State Objectives 5 Key objectives of the international treasury transformation initiative included: Optimization of cash balances across Wyndham s global entities by setting up efficient cash management structures Automation and streamlining of intercompany netting and settlement processes to generate operational efficiencies and enhance level of control De-risking tax issues resulting from the legacy set-up and changing banking and regulatory environment with set up of new IHB Leveraging Treasury technology to enhance visibility and control and streamline workflow
6 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 Phase 1 Global Cash Pooling Phase 2 Centralized FX Improved visibility and Improved efficiency enhanced control over in risk mitigation due cash 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. Phase 3 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, replacing the IFSC structure. Payment and collections factory implementations can be considered in the future potentially aligning with shared services strategy.
Global Cash Pooling Pre-Transformation & Current State Overview 7 Considerations Pre-Transformation Current State Liquidity Visibility Visibility to cash balances limited and provided as snapshots by weekly e-mails Real time visibility to more entities cash balances as part of daily Kyriba reporting process via H2H and SWIFT Information Flow Visibility to US legal entity balances available through Kyriba Foreign entity process of getting visibility to cash is Excel based and manually intensive All three Treasury centers live on Kyriba Automated through Kyriba cash module Access to Liquidity Access to cash balances limited - twice per week through manual process 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 Operating Model Hands-on and ad hoc interaction between Corporate Treasury, Regional Treasury, and Field Enhanced operating model structure with defined Treasury responsibilities and legal entities supported by Treasury Overlay Structure Manual cash concentration structure Single entity multi-currency notional pool
Global Cash Pooling Overlay Structure Recommendation 8 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 58 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 CAD DKK NOK SEK CHF JPY AED SGD AUD TRY GBP USD EUR EUR DKK NOK SEK EUR AUD TRY Barclays UK Pool Wyn Hold Treasury Header Accounts Danske Nordic Pool Novasol A/S Rabobank - Landal GreenParks Holding BV Westpac/NAB/BOA RCI Australia (AUS) WVRAP (AUS) Wyn Lux Hldgs (Lux) Netting Participant WHG Turkey GBP RCI SA Holdings (IOM) USD HSBC WHAP Co Ltd. (HK) USD BBVA RCI Latam SA (NY) RCI Mexico (NY) CHF WW Swiss GmbH IEV JPY RCI Asia Pacific Co. Ltd AED WHG Middle East SGD RCI Asia Pacific Singapore CAD Netting Participant Dolce International Canada
Intercompany Netting and Settlements Process Overview 9 The process for IC netting and settlement is designed for all entities in scope for netting*, and the netting calculation process will leverage Kyriba s Netting module. WOOL is the netting center with 48 entities participating. Considerations Identification of IC Transactions to be Netted and Settled Ad-hoc Pre-TT Post-Treasury Transformation Upload transaction data into Kyriba netting module Netting Calculations Settlement Outputs N/A N/A 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 Outputs N/A Accounting entries provided from Kyriba GL module 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 *Currently we are rolling out netting within the business.
10 Netting Process Workflow Open Netting Cycle on BD1 and enter preliminary netting rates From BD 1 users can begin entering IC payables Simulate a preliminary netting report & send to netting participants on BD 8 Enter preliminary netting rates on BD 13 Perform reconciliation to verify payments and FX trades match final netting report Enter final netting rates and re-run final netting reports Execute FX trades over the phone on approximate amounts Simulate a preliminary netting report and preliminary deal report Send final netting report to participants to advise them of settlements with netting center Payments & receipts to/from netting participants are automatically generated Approve and release payments Post SD - ensure receipts have been received on time to the netting center
11 Summary of Benefits Realized Key benefits realized include: Modernised 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 WOOL Treasury Analyst more than offset by Operating Expense savings from eliminating prior IHB outsource Treasury admin fees. 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. Introduction of Inter-Company Netting Structure: Cost Savings: $300k with $1 mio potential in reduced forex and banking costs. Productivity Gains: Reduced effort in tracking outstanding inter-company balances. Brings structure and discipline to Intercompany. Process Efficiencies: Improved cash management as less need to ad-hoc fund service companies. Reduction in credit/settlement risk.
12 Future projects and ongoing developments SWIFT Setting up automated sweeping via Kyriba / Bredbank Swift bureau for main cash pools Phase 2 implementation with smaller secondary banks on business unit level within EMEA Potential of rolling out globally and switching from H2H where possible (cost, reliability, efficiency) 360T and MMF automation direct connection to streamline fx and investment processes (pre-trade, trade and post-trade) Forecasting (short and long term) introduction of best practices and standardization across all BU s, better understanding of cash position in in-house bank, comprehensive tool to analyze data
13 Key Take-Aways and Lessons Learned Buy-in from the business is critical Step by step implementation to take into account resources available. Consider availability of IT and other technical expertise internally in project planning 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 Allow for extra time in your plan for vendor negotiations and bank documentation (KYC s).
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