Transcript Document 7554218

Treasury:
The Corporation’s
Bankers
&
Risk Mgt.
Treasury Functions
• Financial Plans
• Cash Flow Forecasts
• Debt Management
Treasury & Rating Agencies
• Affect the Rates of the Money you get
• Allow People to Invest in your Debt
• Long Term Goal: No Restriction
– Standard & Poors
– Moody’s
– Duff & Phelps
Credit Analysis Factors
Financial Risk
• Financial Characteristics
• Profitability
• Capital Structure
• Financial Flexibility
• Financial Policies
• Cash Flow Protection
Credit Analysis Factors
Business Risk
• Industry Characteristics
• Business Characteristics
– Competitive Position
• Marketing
• Technology
• Efficiency
– Management of Company
S&P Debt Rating Process
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•
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•
•
Request Rating
Assign Analytical Team
Conduct Basic Research
Meet Issuer
Rating Committee Review
Appeals Process
• Issue Rating
• Surveillance
Treasury Functions
• Banking
• Currency/Foreign Exchange Mediations
• Insurance
• Pensions
Banker’s Functions
• Physical Cash Management
– Lock Boxes
– Sweeps
• Lines of Credit
– Compensating Balances
• Help Maintain Liquidity
• Term Debt
– LT/ST : 50/50
• Provides Lowest Rates
Investment Bankers
• Goldman-Sachs
• Warburgs
• Merrill-Lynch
• Morgan Stanley
Underwriter – Intermediary
• Agree to Purchase Debt/Equity for Resale,
Creating a Market.
• Firm Commitment
– Their Responsibility; their Money
vs.
• Best Efforts
– Your Responsibility; More your Money
Due Diligence
• Background
• Financial Reliability
• Intended Use
Risk Management
The Shifting of Risk
As in Insurance
Or Hedging
Risk Management
Return
Risk
Currency/Foreign Exch. Functions
• Developed Markets
– Hedge
• Undeveloped Markets
– Leverage
Insurance
• Premiums for Protection
– Based on Probability of Loss
• Multiple Classes of Risk
• Experience Based
Pension Liabilities
• Compensation
• Work Force Demographics
– Age
– Turnover
• Programs
– Defined Benefit
– Defined Contribution
Pension Management
• Active
• Passive
– Employee Options
• 401 K’s
• Cash
• Ability to Invest
Treasury Functions
• Physical Cash Management (Rec./Pay)
• Credit, Collections/Sales Coordination
• Capital Market Investments
Lessons Learned - Treasury
• Insure that the Treasury Group is using the Same
Forecast as the rest of the company or that
exceptions are spelled out and resolved.
L.L. – Treasury
II
• Rating Agencies are Necessary Evils
• Coordinate Road Shows for Everyone’s Sake
• You Don’t have to be in NYC
• Get 2 Investment Bankers, and Use Them
• Do Not Need Multitudes of Bankers
• Depending on the Situation & Personalities
I.R. can be in the Treasury Group
L.L. – Treasury
III
• People at: OM, PEP, YUM
• Capital Markets are Important
– The Single Largest Line on P&L.
• Need a Close Relationship with Both Investor
Relations and Reporting & Planning
• Do Not Dabble in International Markets
Strategic Planning
Company
Strengths
&
Weaknesses
Strategies
Think Outside the Box
Opportunities
&
Threats
Strategic Planning
•
•
•
•
Global
Industry
Company – Product
Functions w/in Company
• 6 months to 5 years
3 yr.
Strategic Plans
Strategic Planning
• Product Life Cycle
– Emerging
– Maturity
– Declining
– Global
Product Life Cycle
Sales
Stable
Growth
Increasing
Growth
Start-Up
Slowing
Growth
Minimal or Negative
Growth
Consolidation Maturity Relative Decline
Time
Growth Stage
•
•
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•
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Maximize Existing Customers
Attract New Customers
Innovate Products & Services
Innovate Value Delivery Systems
Acquisition and/or Consolidation of Current
Industry
• Expansion into New Geography
• Step into New Competitive Arenas
Specialization / Niche
vs.
Mass Market
Return
on
Investment
Market Share
Strategic Planning
• Company Life Cycle
– Focused
– Fragmented
– Integration
• Horizontally
• Vertically
Strategic Planning Functions
• Acquisitions
• Divestitures
• Competitive Advantages/Disadvantages
Strategic Planning Functions
• Competitive Analysis / Response
• Market Research
• Creating Barriers into Business
• Opportunity Identification
Strategic Panning Implementation
• Planning Process
– Weekly
– 3-5 Year
– Business Plans
• Integration of Functional Groups
Differentiation
vs.
Competitive Advantage
Structure
• Traditional
• New
• Vertical Stacking
• Horizontal
• Tall
• Flat
• Central
• Decentralized
• Departments
• Teams
• Integration
• Subcontracting
• Delegate
• Empower
Techniques
• Traditional
• New
• Mass
• Niche
• Efficiency
• Quality
• Synergy
• Breakup Value
• Returns
• Options
• Goal Setting
• Benchmarking
• Remuneration
• Gain Sharing
Action
• Traditional
• New
• Planned
• Responsive
• Predictability
• Ambiguity
• Analysis
• Intuition
• Method
• Speed
• Hours
• Nanoseconds
Culture
• Traditional
• New
• Organization
• Clan
• Divisions
• Family
• Standards
• Shared Values
• Formal
• Informal
• Diversity
• Homogeneity
• Control
• Guide
Board of Directors
• Traditional
• New
• Friends of the Chairman
• Investors
• Monitors
• Strategists
• Passive
• Active
• Supporters
• Critics
• Rule Makers
• Police of the Game
When Times Get Tough:
• Maintain a Clear View of Reality, No Matter
how unpleasant or unexpected
• Focus on the Quality of your People
• Continual, Day-by-Day Insistence on Improving
Productivity
• Be Bold. Act Now. Move Fast.
13 Moves for the Slowdown
Fortune – Ram Charan
1. Opportunity to Evaluate People
2. Find New Sources of Profitable Growth
3. Get out of the Bunker – Be Visible
4. Get it Right with the Street
5. Be a Hero to your Customers
6. Get Even Closer to your Customers
13 Moves for the Slowdown
7. Lower your Break-Even Point
•
Before your Competitors
8. Focus on Nurturing New Ideas
9. Keep Investing in Information Technology
10. Revamp your Budget Process
•
Force Top Down
13 Moves for the Slowdown
11. Keep Track of Early Warning Signals
12. Watch Out for a Pension Double Whammy
13. Keep Communicating
Strategic Plans
vs.
Multiple Annual Plans
Strategic Planning Addresses:
Profits – where there’re going
Costs - Structure
Returns – How to reinvest into business
Strategic Planning Responsibilities:
Strategic Resource Allocation
Strategic Planning Responsibilities:
Strategic Performance
Measurement Systems
Strategic Planning Responsibilities:
The 15 % Delusion
vs.
Real Growth