 Treasury Hot Topics Seminar Technology and controls - ‘Tools for the Credit Crunch’ 19 February 2009

PricewaterhouseCoopersSlide 2 Things Changed Quickly Over the last couple of Months: Market Cap

PricewaterhouseCoopersSlide 3 Things Changed Quickly Over the last couple of Months: Oil Price

PricewaterhouseCoopersSlide 4 Things Changed Quickly Over the last couple of Months: EUR/GBP

PricewaterhouseCoopersSlide 5 What did we use to say? Treasury was… Isolated from the business Misunderstood by the Board and Senior Management Considered too expensive and not sufficiently value added Struggling to implement new technologies Operationally: a mixture of manual / spreadsheet-based processes and automated but poorly integrated functionalities Technology a major drain on resource, but not a core skill-set Under pressure from management and auditors to improve controls / segregation of duties Short of skills and career prospects

PricewaterhouseCoopersSlide 6 And what has the credit crisis changed? Treasury is no more… Isolated from the business Misunderstood by the Board and Senior Management Considered to expensive and not sufficiently value added But still.. Struggling to implement new technologies Operationally: a mixture of manual / spreadsheet-based processes and automated but poorly integrated functionalities Technology a major drain on resource, but not a core skill-set Under pressure from management and auditors to improve controls / segregation Short of skills and career prospects

PricewaterhouseCoopersSlide 7 Treasurers’ perspective on most value-adding activities Bank relationship Long term funding Treasury risk management Cash management Capital structure Decision support to management Working capital management Support/services to other areas of the business Credit rating/agency management Tax M&A support Insurances Pensions Other No. of responses

PricewaterhouseCoopersSlide 8 What should you have been doing during the Credit Crisis 1. Funding & liquidity

PricewaterhouseCoopersSlide 9 1. Funding & liquidity 2. Credit & counterparty risk What challenges need to be tackled in the short term?

PricewaterhouseCoopersSlide Funding & liquidity 2. Credit & counterparty risk 3. Financial risk management What challenges need to be tackled in the short term?

PricewaterhouseCoopersSlide Funding & liquidity 2. Credit & counterparty risk 3. Financial risk management 4. Accounting What challenges need to be tackled in the short term?

PricewaterhouseCoopersSlide 12 What are the treasury operations and controls that could have mitigated the impact of the credit crunch on you?

PricewaterhouseCoopersSlide 13 Counterparty and credit Risk: What Treasury Operations and Controls could have mitigated impact of the credit crunch on you? Better/ real-time view on… 1.Counterparty Risk Management -It’s not good enough to say they are bigger, therefore they take the risk! -Set limits per Counterparty, Counterparty group, Market, Instrument etc. -Measure limits on a fair value basis NOT nominal -What is your plan if credit rating goes down or limits are breached? -Measure credit risk not just to financial counterparties but also to commercial counterparties

PricewaterhouseCoopersSlide 14 Funding & Liquidity Risk: What Treasury Operations and Controls could have mitigated impact of the credit crunch on you? 2.Funding & Liquidity Risk Management -How many still have excel forecasts of cashflows and related FX - once a month or even once a quarter? ‼A lot can happen in a month!! -How accurate are your forecasts? Do you analyse the variances? -Headroom calculations – under different stress scenarios -WCM monitoring – best use of existing finance -Increase centralisation and pooling of cash to fund deficits/ invest wisely

PricewaterhouseCoopersSlide 15 Financial Risk Management: What Treasury Operations and Controls could have mitigated impact of the credit crunch on you? 3.Financial Risk Management -Single, timely view of all exposures -Worst case scenario stress testing Impact if rates moving by extreme amounts? Impact if cashflow pattern changes drastically? -Alternative valuation models in the absence of liquid markets

PricewaterhouseCoopersSlide 16 Flexible/Balanced KPI’s to suit the environment: What Treasury Operations and Controls could have mitigated impact of the credit crunch on you? 4.Flexible/ Balanced KPI’s to suit the environment -Last year – How much return on our investment portfolio? -This year – How much did we lose compared to our competitors? Better would be to measure your maximum probable loss and your risk adjusted return?

PricewaterhouseCoopersSlide 17 Conclusion These were all known elements to manage and measure… So why weren't we using them ? 1.Budget reasons 2.Priority/ Resource 3.It’ll never happen to me

PricewaterhouseCoopersSlide 18 Technology Solutions to Credit Crunch Controls? Controls and measurement of performance & compliance “If you don’t measure it … you won’t manage it”

PricewaterhouseCoopersSlide 19 Counterparty and credit Risk: How could the use of treasury systems have reduced the impact of the credit crisis? 1.Counterparty Risk Management -On demand Counterparty risk management – Dealer & Middle office -Multiple limits possible – Counterparty, Dealer, Position, Settlement etc. -Multiple measures possible – Nominal, MTM, Potential Future Exposure Need for on-demand rates and position updates -Automatic consolidated exposures (are all deals on central system?) -Alert reports – go to whom and when? – Workflow technology

PricewaterhouseCoopersSlide 20 Funding and Liquidity Risk: How could the use of treasury systems have reduced the impact of the credit crisis? 2.Liquidity Risk Management -Accurate cashflow forecasts Direct link to AP and AR - Centralised payment factory Learning capability for payment behaviour -Calculation and analysis of forecast versus actuals -Headroom calculations -WCM monitoring

PricewaterhouseCoopersSlide 21 Financial Risk Management: How could the use of treasury systems have reduced the impact of the credit crisis? 3.Financial Risk Management -Worst case scenario stress testing Impact if rates move by extreme amounts? Impact if cashflow pattern changes drastically? -All of the above are possible but require the set-up and maintenance of benchmark portfolios

PricewaterhouseCoopersSlide 22 Flexible/Balanced KPI’s to suit the environment : How could the use of treasury systems have reduced the impact of the credit crisis? 4.Flexible/ Balanced KPI’s to suit the environment -“If you don’t measure it you won’t improve it” -“If you don’t automate the calculation … you won’t measure it!”

PricewaterhouseCoopersSlide 23 Conclusion Applying very well know controls will help you in improving your way of working Implementing the correct software/technology will help you to better manage and measure your company’s performances However, when looking for the right system, pls keep the following in mind: Although very flexible, Excel spreadsheets are not the best tool to measure and manage your risks Before selecting a TMS, pls prepare a proper list of functional requirements When implementing a system, pls make sure you understand how to use the system to it’s full extent In order to make best use of your systems, pls make sure they are well integrated

PricewaterhouseCoopersSlide 24 Conclusion The spot-light is on Treasury Now is the time to get things done!!

© 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).  Thank you! Damien McMahon Director – Finance & Treasury Solutions Group Gunter Geysen Manager – Finance & Treasury Solutions Group