Treasury and Trade Solutions October 2017 Going Global Business without Borders Enabling International Growth Simona Anghel Romania Sales Head Treasury and Trade Solutions, Citi
The Pursuit of Growth Treasury Challenges Emerging market companies are increasingly expanding their businesses beyond home borders into international markets. These companies face numerous challenges and risks in the pursuit of global growth. Growth Strategies Key Treasury Challenges Growing domestic market share Fragmented banking structures across multiple banks and countries Managing multiple different currencies Partnerships and Joint Ventures Balancing Growth and Risks Access to international markets High FX costs Cash forecasting challenges Difficulty funding local businesses Inefficient repatriation of cash ecommerce growth Mergers and Acquisitions Negative rate currencies and trapped cash markets Post M&A integration challenges 1
Typical Cash Management Structure Structures & Challenges As organisations expand internationally, they frequently maintain fragmented structures across multiple banks & countries. CAD Canada USD EUR GBP USD United Kingdom EUR SEK Sweden USD USA EUR USD France EUR USD Germany USD JPY Japan Key Pain Points High operating costs multiple banks, platforms & processes EUR Italy INR India HKD USD Hong Kong Fragmented liquidity & negative rate ccys Difficulty funding local businesses Inefficient repatriation of cash Forecasting challenges High FX costs Lifting fees on cross border payments BRL Brazil AUD Australia USD Reconciliation challenges Transactional payments and collections 2
The Citi Solution Value Proposition Citi s solution minimises your overhead costs, reduces FX exposure and optimises working capital to provide you with a direct competitive advantage and a scalable platform for your growth agenda Technology integration and workflow automation solutions Dashboard tools enable you to view your positions & get actionable analytics Optimise Liquidity Streamline Operations Improve EBITDA Consolidate liquidity across Citi and 3 rd party banks, with automated sweeps Single view of global cash positions Optimise use of cash across currencies including automated repatriation Bank & Account Rationalization leveraging Citi s global network Payments to 190 countries in over 130 currencies with FX transparency Full Value Transfers to beneficiaries Earnings Credits to offset bank fees and reduce expenses Payer ID accounts to accelerate cash application & improve DSO Virtual Card Accounts for greater security & control and extended payment terms 3
Liquidity Optimisation Case Study
Managing Multiple Currencies across Markets As organisations expand internationally, they frequently maintain fragmented structures across multiple banks and countries. Client Characteristics and Pain Points Invoicing in different currencies Multiple banks and multiple currencies Counterparty risk concerns Fragmented balances Negative rates Overdraft costs Inefficient and manual cash repatriation USD 2MM UK EUR (1)MM Slovakia EUR 2MM Germany High FX costs and lifting fees for cross border payments RON 3MM Romania BGN 1MM Bulgaria USD 2MM US Payments and Collections 4
Solution: Global Cash Concentration via Physical Sweeps Extended transactional window and automated cash repatriation. 6 5 Cross Currency Payments Globally 1. Open in-country accounts with Citi branches for domestic payments and collections Concentration Centre Romania In-country Accounts 1 2 3 Pre: USD 2MM Post: 0MM UK USD 4.5MM Pre: USD 0.5 Post: USD 0 Bulgaria FX 4 RON 3MM EUR 1MM Pre: EUR 2MM Post: 0MM Germany 2. Open concentration accounts to consolidate and repatriate liquidity 3. Set up automated end of day sweeps between country and header accounts single or multi entity 4. Automated FX sweep for balances in non-core currencies 5. Reduce levels of negative yield currencies use EUR to fund payments in 100+ currencies Pre: USD 2MM Post: 0MM USA Pre: BGN 1 Post: BGN 0 Bulgaria Pre: EUR -1MM Post: 0MM Slovakia 6. Single global platform for visibility and workflow automation Automated End of Day Sweep FX Automated FX Sweep (Intraday) 5
Solution Financial and Operational Benefits Item Current State Average Bal (USD Equiv.) Interest Rate Interest/Cost USD Balances 4,000,000 0% $0 Item Proposed Structure with Citi Average Bal (USD Equiv.) Interest Rate Interest/Cost USD Balances 4,500,000 0.20% $9,000 EUR Balances 2,000,000 (0.40)% $(8,000) EUR Overdrafts (1,000,000) (1.00)% $(10,000) BGN Balances 1,000,000 0% $0 Transactional Costs across 6 different banks $(30,000) Total Treasury Economics $(48,000) EUR Balances 1,000,000 (0.40)% $(4,000) EUR Overdrafts 0 $0 BGN Balances 0 $0 Transactional Costs (e-banking, Payments, FX, etc.) $(30,000) Total Treasury Economics $(25,000) Balances scattered over multiple bank accounts held at different banks Cost reduction from lower e-banking maintenance costs and operational efficiencies from end to end automation Client Challenges High operating cost Fragmented liquidity in multiple banks Low yield and overdraft charges Forecasting challenges Counterparty risk concerns Benefits of Citi Solution Cost Savings Elimination of unnecessary overdrafts Improved returns Funding of local businesses automatically Extended transactional window 6
CASE STUDY The proposed structure implies the centralization of funds at the level of the US entity. Non-resident accounts will be opened with Citi Romania and the funds collected from all subsidiaries through TBA sweeps will be transferred to these accounts and further exchanged into USD using the Auto-FX solution. Citi s Customer Non-Resident accounts (RON, EUR, GBP, JPY) Citi s Customer Non-Resident accounts (USD) RON EUR GBP JPY RON, EUR, GBP, JPY USD Auto FX Solution RON Account EUR Account GBP Account JPY Account USD Account Customer Ro Customer Ro Customer UK Customer Ro Customer UK Customer Japan Customer Ro Customer UK Customer US Manual FX Customer Japan Customer Singapore SGD Account Singapore we cannot preform cash pooling on the SGD currency. Manual FX should be performed by the customer, from SGD to USD. 7
Collection & Payment Global innovative solutions
Accelerate Cash Application Payer ID Accounts For organisations facing challenges to reconcile incoming payments to open debtor entries in a fast and efficient manner, Citi offers Payer Identification Accounts which are virtual account numbers that can be assigned to individual payers to make payments. Payments to these accounts are posted to a single physical collections account. 1 2 3 What are Payer ID Accounts? Account number(s) assigned to the collecting client as a means of identification / visibility A Payer ID Account is visible as if it is a Real Account Number Payer ID accounts map to, and actual funds flow to, a single Real account owned by a single entity Benefits of Payer ID Accounts Real account Entity A Unique Payer ID Accounts: Range of account numbers Usable in the market (payer, payer bank, clearing etc.) Identification / mapping to real account Client reporting / visibility: Transactions at Virtual Account level Funds aggregated at real account level 1000123456 7001234567 7001234568 7001234569 7001234560 7001234561 RO 12 CITI 1234 1234 1234 1234 Identification: Each payer identification account number will map into the transaction reference field which is reported on the statements of the physical account. For Romania, a next day reconciliation file is provided. Efficiency/ Administration: Payer ID accounts are faster and easier to set up and require no account level documentation Cash Management: Actual funds are consolidated into single real account Cost Efficiencies: Minimizes the number of collection accounts required by the Citi client (collector) 8
Citi Virtual Card Accounts Overview Clients can gain financial benefits, process improvements, and greater security & control by leveraging Citi Virtual Card Accounts (VCA) for supplier payments. Virtual Card Numbers (VCNs) Increased Transaction- Level Control Virtual Card Numbers (VCNs) Unique, non-plastic account numbers used for secure purchasing Secure VCN can be delivered via encrypted email to suppliers Increased Transaction-Level Control Define authorization controls for each VCN: Number of transactions (single- or multi- use) Transaction amount limit (exact, maximum) Validity Period & more Three Interface Options Enhanced Client- Supplied Data Enhanced Client-Supplied Data Capture client-specified data elements with each VCN for enriched data analysis, allocation, and reconciliation Three Interface Options Request website with customizable approval workflows Batch File Interface Real-time API 9
Virtual Card Accounts Technology VCN requests can be completed using one of three interfaces: Web, Batch, or API. Interface Description WEB The company Request VCN Web A web-based application that allows a user to login and request a virtual card number (VCN). Additionally, approval flows can be configured to have a requestor and approver review prior to receiving a card account BATCH The company Uploads File Batch The company can request a batch of virtual card numbers for payments via file transfer. Web portal upload returns the payments file with VCNs API Integration Leverage the company s system using a real-time web service to generate VCN s from its eprocurement system or any other payment system The company System API 10
Global Banking Connectivity
Standardised Global Platforms - Global Banking Connectivity CitiDirect BE Global web-based electronic banking tool supports transaction services in a real-time environment Payments and collections in over 90 countries, supports 26 languages Manual (or scheduled) file import/export available for many file formats CitiDirect BE CitiConnect for Files CitiConnect for Files Single channel for global transmission and receipt of files and formats such as ISO20022 XML Host-to-Host gateway for integration with TMS/ERP Connects with treasury centres and links with Citi s Integrated Payment Services for global payment processing CitiConnect API Cost effective, real time access to Treasury Services via API to deliver a straight through processing solution Access Treasury Services directly from your application of choice Collaborate through an API ecosystem with ERP and TMS vendors CitiConnect API CitiConnect for SWIFT CitiConnect for SWIFT Full payment and reporting capabilities globally Centralised hub: Connection to Citi via one local branch BIC via FIN and FileAct for global access Consistent SWIFT messages for true STP Reduce SWIFT costs up to 3x by eliminating cross border traffic fees 11
CitiConnect API The Challenge: Our clients are in need of fully automated solutions to process transactions directly from their own Treasury Workstation (TWS) and Enterprise Resource Planning (ERP) platforms to their banking partners, without having to rely on banking portals. The solution: CitiConnect API provides cost effective, real time access to Treasury Services that deliver a straight through processing solution for our clients. Payment Initiation Account Statement Request Transaction Status Inquiry Account Statement Download Balance Inquiry Value for our clients: Flexibility and choice to access Treasury Services directly from their application of choice Accelerate implementations by simplifying integration and reducing onboarding time 12
What is an API? Citi API Platform APIs providing access to Business Assets Business Apps Use services and data through Web APIs Business Assets Exposable Citi TTS Data and Services Developers Use Web APIs to create apps End Users Use Business Apps Application Programming Interface (API) is the primary entry point for business whether it is called from a company s own applications (Internal API) or by client or business partner. API enables nimble interactions in digital ecosystems. Source: IBM (adopted by Rene Schuurman 13
WRAP-UP
Wrap Up: Best Market Practices Cash Management Solutions Integration Automation Risk Management Flexibility 14
Citi Contacts Simona Anghel Romania Sales Head Treasury and Trade Solutions +40 21 203 67 31 Simona.anghel@citi.com Mihai Cocheci Commercial Subsidiaries Group Head, Romania Commercial Bank +40 21 203 52 65 mihai.laurentiu.cocheci@citi.com Alexandru Toma FX Corporate Dealer Markets Romania +40 21 203 55 20 Alexandru.toma@citi.com Aidar Kaliev Commercial Subsidiaries Group Head, US Commercial Bank +1 (212) 559-0996 aidar1.kaliev@citi.com 15
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