June 2015

Business Case

2

Client Structure

• 8 Legal entities: SAA, API, AIL, RMI PSL, RMI INC, RMI PTY, AFSS, ADPL

• 9 Bank relationships, over 46 bank accounts

• Currently do not strategically position cash

• Inconsistent processes across legal entities

• Monthly Cash Forecasting, data filled out by subsidiaries and consolidated in Canada

• Bank reconciliation performed daily or weekly (depending on the subsidiary) and at month end

• Long-term loans, intercompany and invoicing in USD

• Intercompany activity mainly for invoices, small non-interest bearing loan activity

• Desire to continue to move towards more centralized and automate processes

• Treasury responsible for: cash management, covenant report, financing, liquidity management, support

trade finance activities in the organization, risk management

• Accounting general ledger system is Baan, also used for AP/AR aging, check clearing/printing and

electronic transmission of payments to bank

• Bank fees possibly incurred due to lack of visibility, no bank fee analysis being performed

Current ProcessTask /Modules Hours Spent Across Entities /

VolumeDetails

Visibility of Bank Accounts

46+ accounts9 banks

90+ hours/month

• Segregated information• Manual extraction of data• Time consuming due to multiple banks and accounts• Delayed management visibility for action• Inconsistent file formats across subsidiaries

Cash Reconciliation

SAA 8-12h/weekAPI 8- 12h/weekAFSS 3h/weekADPL/ AAIMPL 4-5h/week148+hs/month

• Multiple bank portals• Manual extraction of data and reconciliation• Some subsidiaries perform daily, others weekly• Inconsistent processes across subsidiaries

Cash Forecast 75+ hours/ month • Updated monthly, potential for stale data• Manually produced by subsidiaries and centralized by

headquarter• Core report for historical cash, forecast, FX exposure and

intercompany flows• Local controllers using other sources for cash management

decisions• Risk of manual errors and loss of data

Payments SAA 200 payments /moAPI 360 payments /mo

ADPL/AAIMPL 40h/week, manual

• Inconsistent processes across subsidiaries / banks• Limited reporting capability• Potential for low governance and controls• Multiple depository of payment instructions• Multiple bank login for user and approvers (tokens)

Accounting Month end

276 hours/ month • Manual posting of loans, dividends and bank charges• Multiple bank statements manually reconciled

480 h/month of data gathering and reconciliation

4

Current State (Highly Decentralized & Duplicative Processes)

Armstrong – Current State Treasury ProcessA

ILA

PI

SA

AA

DP

L

& A

AIM

PL

RM

I

(PS

L, IN

C & P

TY)

AF

SS

Bank portals (balances & payments)

Cash Forecasts

Armstrong Corporate

Cash balances

Daily Consolidated Cash Position

Monthly Cash Forecasts

Cash Recon

Banks

Supplier Payments

Bank portals (balances & payments)

Cash Forecasts

Cash balances

Cash Recon

Bank portals (balances & payments)

Cash Forecasts

Cash balances

Cash Recon

Supplier Payments

Baan

Supplier Payments

Bank portals (balances & payments)

Cash Forecasts

Cash balances

Cash Recon

Bank portals (balances & payments)

Cash Forecasts

Cash balances

Cash Recon

Baan

Bank portals (balances & payments)

Cash Forecasts

Cash balances

Cash Recon

Baan Supplier Payments

Supplier Payments

Supplier Payments

Baan

Baan

Baan

5

Areas for improvement

• Decentralized cash, currency and liquidity management

• Lengthy and time consuming manual processes

• Low visibility on liquidity and currency management

• Inconsistent processes across subsidiaries

• Limited reporting capabilities on cash and stale data

• Heavy month end activities due to manual processes and decentralized sources

of information

• Reduce bank fees and overdrafts

• Internal controls

• Reputational risk driven by operational risk

• Risk of fraud due to manual controls

Future StateTask /Modules Hours Spent Across Entities /

VolumeEnhancements

Visibility of Bank Accounts & Balances

46+ accounts9 banksFully Automated (from 90+hs)

• Centralized source of bank account information• Automated feed of daily prior day balances• Available at start of business day

Cash Reconciliation

60h/month - analysis / exception handling(from 148+hs)

• Enhanced KPIs and reporting capabilities• All bank statements and transactions loaded in the system as

forecasts can be reconciled• No manual intervention, enhanced controls

Cash Forecast /Reporting

40h/month - collection of forecasted activity (from 75+hs)

• Variety of views and grouping for different reporting purposes• Dynamic data• Ability for timely currency risk and liquidity management• Comparison of prior forecasts to actuals (system snapshots)• Single source for controllers and management/ headquarter• Intercompany flow management, ability for interest bearing loans• Debt reporting centralized

Payments SAA 200 payments /moAPI 360 payments /mo

ADPL/AAIMPL 40h/week, manual(Potential for automation)

• Strong governance, system controls of templates and payments• Single source for users and approvers• Centralized source of payment information with appropriate

controls• Debt payment management connected to forecasted flows• Audit trails

Accounting Month end

80h/ month – analysis / exception handling (from 276+hs)

• GL entries mapped and ready to be loaded in Baan• Reconciliation performed daily on all accounts, reduced month

end effort• Uniformity of information

Potential savings of over 400h/month

7

Future State

8

System Security

• Weak passwords are the easiest entry point to hack a software solution and access data

Kyriba offers strong password controls, such as password timeouts, resets, history,

alphanumeric requirements, virtual keypad, two-factor authentication (SMS or

Yubikey), IP Filtering, VPN Tunnel

• Other Kyriba safeguards:

Encryption of data - in transit and at rest

Hosting within SOC1 certified data centers that feature 24/7 security, biometric

access

Separation of duties & other policy driven protections to restrict access to hosting

infrastructure and client data

Numerous firewalls to protect externally and between tiers and frequent penetration

testing

9

Treasury Transformation Data manipulation >>> Analysis of data & Value added

• Industry best practice model, greater controls and audit reports

• Opportunity for Shared Services model

• Cost savings on bank fees of approx. $7,200/ year

• Potential savings of 400 hours / month of manipulation of data

• Liquidity management across entities – in-house banking, internal factoring

• Lower credit needs by optimizing internal resources

• Possibility for reduced financing cost given higher governance and stronger liquidity control

• Currency risk management, lower FX cost and exposure affecting financial statements

• Potential for re-invoicing center

• Better analytics to influence Cash Conversion Cycle

• Ability to shift focus of staff to more value added analysis

Benefits

10

Assumptions:

Cost of staff hour - $35/hour

Overdraft fees - $500/mo

Paperless savings - $100/mo

Inflation not considered on calculation

Given implementation timing, 2015 may not present gain

ROI: Phase 1

High Estimate - 200h savings per month

Low Estimate - 140h savings per month

Category 2015 2016 2017 2018 2019

Staff - 84,000 84,000 84,000 84,000

Bank Fees - 7,200 7,200 7,200 7,200

Cost

(58,410) (20,160) (20,160) (20,160) (20,160)

(58,410) 71,040 71,040 71,040 71,040

Category 2015 2016 2017 2018 2019

Staff - 58,880 58,880 58,880 58,880

Bank Fees - 5,040 5,040 5,040 5,040

Cost (58,410) (20,160) (20,160) (20,160) (20,160)

(58,410) 43,760 43,760 43,760 43,760

Break-even point = 1.8 years

Break-even point = 2.3 years

11

Apendix A – Summary of Kyriba security checkpoints

Detection Prevention

Bank Account ReconciliationSunset procedures

Application SecurityOne-Time Password, IP Filtering

Daily Cash ReconciliationReviewing daily bank transactions

Data SecurityEncryption, Penetration Testing, Audit

Certification

GL ReconciliationMonthly true-up of bank to ledger

Bank Account ManagementOpening/Closing, Signatories

Kyriba Control CenterFile & Task Monitoring, Approval of

workflow changes

PaymentsApprovals, Limits, Automation,

Authentication

Audit Trails Per transaction and system reporting

Financial TransactionsControls, Limits, Settlements

Source: Kyriba