UNICEF Treasury · PDF fileSAP Financial Accounting SAP In-House cash SAP Cash and Liquidity...

UNICEF Treasury

Agenda

1. Treasury Overview

• SAP Treasury • Functional Overview

2. UNICEF Treasury Activities • ‘AS IS’ • ‘TO BE’

3. Treasury – Manage Financial Instruments • ‘AS IS’ • ‘TO BE’

4. Treasury – Manage Cash & Liquidity

• ‘AS IS’ • ‘TO BE’

5. Treasury – Manage Financial Risk

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6. Reporting 7. Bank Account Management

8. Summary of Significant Process

Changes • ‘AS IS’ • ‘TO BE’

9. Compliance with Audit

Observations

10. Future Opportunities

1 – Treasury Overview

Standard Treasury Functions & SAP Architecture

MM = Money Market DER = Derivatives SEC = Securities FX = Foreign Exchange FM = Funds Management GM = Grants Management

SAP Treasury and Risk Management

Risk Analyzer

Credit Risk Market Risk Portfolio Analyzer

Transaction Manager

MM FX DER SEC

SAP Cash and Liquidity Management

Cash Management Liquidity Management

SAP Bank Communication Management

Manage Cash and Liquidity

Manage Financial Risks

Manage Financial Instruments

SAP ERP

Finance Excellence Financial Core

Treasury FSCM

FM AP/AR Controls General Ledger GM

Treasury Functions Applications from SAP

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1 – Treasury Overview (cont’d.)

Treasury modules in SAP

SAP NetWeaverTM Portal, Security, Business Warehouse, and eXchange infrastructure

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SAP Financial Accounting

SAP In-House cash

SAP Cash and Liquidity

Management

Credit Risk Analyzer

Market Risk Analyzer

Portfolio Analyzer

Money Management

Foreign Exchange

Derivates Securities

Transaction Manager


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SAP System External Systems

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1 – Treasury Overview (cont’d.)

Functional Overview

Back Office Accounting Reporting Front Office

• Exposure analysis

• Decision support

• Optimized deal entry

• Online limit check

• Position reporting

• Flexible process definition

• Confirmation

• Settlement

• Correspondence

• Interest Rate Adjustments

• Standing instructions

• Payments

• Alert monitor

• Proper recording of all aspects of Treasury in Financial Accounting

• Valuation according to Generally Accepted Accounting Principles (GAAP) – IPSAS

• Standard Reporting

• Ad hoc Reporting

• Internal Controls

• Limit reporting

• Management Reporting

• KPI Reports

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2. UNICEF Treasury Activities – ‘AS IS’

Morning

Task Purpose

Review the Manual MT940 (faxed by the Bank / extracted from Chase Insight) • Identify transactions not front ended through SAP

(Contributions, ZBA sweep, Bank Charges etc) Identify, create and post manual journal

entries • Compare MT940 transactions against the

Treasury Daily Dairy Report

•To ensure the accuracy of all bank transactions •To ensure that all trades are settled through the bank accounts •To record transactions in SAP

Update the Cash Position Report in Excel for USD / EUR

•To ascertain the cash balance (Opening Balance for the day)

Generate / Print MT942 from the bank • Manually enter them in Excel Cash Position Report

•To ascertain the current day cash transactions during the day (Transactions for the day)

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2. UNICEF Treasury Activities – ‘AS IS’

All Day

Task Purpose

Buy / Sell Currencies and Investments •Risk, Liquidity & Investment Management

Match Buy / Sell positions with counterparties

•To confirm trades with counterparties

Provide Liquidity for Cashiers to Transfer

Cash to Country Offices globally (though

cumbersome manual processes)

•To provide Liquidity for business functions

Analyze Risks based on positions and market movements

•Risk Management

Enter Profit & Loss on Trades in Excel

•MIS for Value add by Treasury

Prepare manual deal tickets and create trades in SAP

•Create trades in SAP - original data input

Update the Cash Position Report in Excel for all trades

To determine the cash balance

All

Day

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2. UNICEF Treasury Activities – ‘TO BE’

Morning

Tasks Purpose

Execute Bank Statement Monitor (BSM) (BSM is a part of Bank Communication Management (BCM) • This provides the upload status of the Bank

Statements into SAP and identifies potential problems.

•Ensure that the Bank Statements have been received, are in sequence, have bank balances matching with GL and are processed in SAP.

Review MT940 excel output from the system (An excel output of the Bank Statement would be available with posted document numbers)

•To ensure that the bank transactions are accurate.

Run the Cash Position Report (An excel output stating the Cash Position)

•To determine opening cash position for the day

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2. UNICEF Treasury Activities – ‘TO BE’

All Day

Tasks Purpose

Upload bank transactions for contributions, ZBA sweep, bank charges etc.) (These transactions are not front ended by SAP – and an excel upload would be available to the users)

•Manual entries are avoided, reducing errors, time and enhancing efficiency

Upload the MT942 file received from the bank (MT942 is the intra day bank statement)

•To know the correct current day bank balances

Perform Treasury Functions: • Buy / Sell Currencies • Buy / Sell Investments • Match Buy / Sell positions with counterparties • Provide Liquidity to Country Offices globally • Analyze Risks on account of currency and market movements

•Everyday Treasury Functions

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3. Treasury – Manage Financial Instruments

Bank Statement Monitor (BSM)

• Bank Statement Monitor (BSM) displays the status of bank statements from individual house bank accounts

• A bank statement that is delayed or that does not reach the monitor can be immediately as well as any differences occurring between the bank statement balance and the internal G/L account balance

Key Benefits:

• Treasury starts the day with determining the cash balance. BSM ensures that the balance in SAP matches the bank balance

• Any missing bank statements are identified Note: BSM is part of the BCM (Bank Communication Management)




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(cont’d.)

MT940 upload • Once MT940 is uploaded, VISION will email specified Treasury users a Daily

Report in an excel format. • Show MT940 uploaded transactions (previous day transactions) • Identify transactions to be uploaded (non SAP front ended) including a pre-

filled up upload sheet • Have a Cash Position Report (previous day - Actual) • Forecast current day Cash Position Report based on Treasury, AR & AP

Treasury starts the day by having the previous day Cash Balances reconciled

Key Benefits:

• Eliminates time spent on reconciliation • Automatic upload of transactions – streamline data input for non-treasury flows • Cash Balance updated in SAP • Reduce operational risks




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(cont’d.)

MT942 upload • Treasury receives the MT942 file from the bank and uploads it in SAP

• All same day transactions are recorded in SAP treasury (not in FI) • Cash Management positions are updated • Cash Management report forecasts cash position for the future • Current data Cash Position Report (based on actual data ) is generated

Treasury executes transactions with accurate cash balances in the system

Key Benefits:

• Accurate cash position visible at all times in Cash Management • Eliminates reconciliation • Optimizes investment of available funds • Mitigate overdraft risk




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(cont’d.) (‘As Is’)

Paper document

Front Office

Back Office

1

Counterparty

SAP (VISION)

Paper document

Confirmation Process

• Generate Letters • Signature • Fax

2

3

4

5

6

7

These transactions are manual and entered twice (once in the

trading system and then again in SAP)

Deal created

Paper documents

Telephone call

SAP Transactions

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(cont’d.) (‘To be’)

SAP (VISION)

Back Office

Create Deal

Settle Deal SWIFT Services

Front Office

All the above transactions are automated and need to be entered only once

Trade confirmations are

executed via a deal matching service provided by SWIFT,

called ACCORD

Counterparty

1

3




Payment 4

4

2

Matching Services

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Liquidity Management is one of the core terms of Reference for the Treasury Unit. UNICEF Treasury works to ensure that there is sufficient Liquidity at the Country Offices. Treasury ensure liquidity by: a. Provide liquidity for the Cashier to transfer Currency directly

to the Country Office House Bank Accounts or third parties

b. Sale of Currency to a counterparty (who then remits the value in the Country Office currency)




15



1070140

Treasury

USD

CHASE

1040350

Cashiers – Main

USD

CHASE 1040370

Cashiers-TRF

USD

CHASE

1051030

India

USD

CHASE 1060270

India - Main

INR

SCB 1063710

India

INR

SCB

1060240

India

INR

SBI

Vendor F02401

DONORS

Headquarters

Field Office

Cash flow to Country Office from Treasury (1/2)

Transfer of funds through the FV60 route is a workaround and carries substantial risk




1 1

2

3

3

2

4 4

Receipt of Contributions 1

Zero Balance Sweep 2

Transfer through FV60 3

Settle AP or Expense Payment 4

16



Payment through F110

Headquarters

Country Office

Flow through the Accounts Payable Route

Park Invoice 1

3




1070140

Treasury

USD

CHASE

Post Invoice 2

1040370

Cashiers

USD

CHASE

Post Invoice

Park Invoice

Internal Vendor

1

2

1060270

India - Main

INR

SCB

CO Bank Account

3

2

4

ZBA Sweep 4

17



1060270

India - Main

INR

SCB

Sale of Currency

Headquarters

Country Office

Cash flow to Field Office from Treasury (2/2)

Counterparty

Sale of major currencies held by Treasury for Country Office currencies through banks. This process is handled through the “Manage Financial Instruments” process

TX13 Request for

Currency

Request for Currency

1

3

3

1

3




TX14 Get Rate from CP

2

1070340

Treasury

EUR

CHASE

107XXXX

Treasury

Other Currencies

Any Bank

1070140

Treasury

USD

CHASE

Treasury Bank Accounts

Get Rate from CP 2

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(cont’d.) (‘To be’)

One of the major improvements of the transfer of funds from Headquarters to Country Offices would be to adopt “Bank to Bank Transfer” in SAP. This would eliminate the need to go through the “Accounts Payable” process. This would :

• Eliminate the Risk inherent tin the “Accounts Payable” process.

• Reduce lead time to complete a transfer

• Provide full control of Treasury / Cashier over the process

• Enable Treasury to front-end the lost trades

This process would streamline the entire “Cash Replenishment Process”




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(cont’d.) (‘To be’) SAP – Integration of External Systems

Credit risk analyzer Market risk analyzer Portfolio analyzer

Money management

Foreign exchange Derivatives Securities

Transaction Manager


GL AP FM AR

BANKS

Dealing platforms (360t / Bloomberg)

Data Feeds (Bloomberg / Moodys)

Treasury Counterparty

Other Vendors

HOUSE BANKS

SWIFT SERVICES BANK

COMMUNUICATION MANAGER

BANK ACCOUNT MANAGEMENT (BOLT ON)

SAP

FINANCIAL CORE

Payments

Matching Services

Trading Data flows

SWIFT Files FI

Bank MGMT

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Data from External Sources

SAP (VISION)


(cont’d.)

Liquidity Planner The Liquidity Planner provides tools for entering, adjusting, aggregating, evaluating planned cash flows, and determining actual values.

Cash Management

Cash Balances Treasury Flows

Memo records

from emails

Accounts Receivable

PFP Data from

Cognos

Pipeline data from PARMO

Accounts Payable

Open Purchase Orders

Other Sources

LIQUIDITY PLANNER (SAP & BI) / CASH ACCOUNTING




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5. Treasury – Manage Cash & Liquidity (cont’d.)

This would be through the implementation of the Analyzers




Analyzer Purpose

Credit Risk Analyzer Enables the active control of default risks by computation of attributable amounts and specification of risks. Requires Market data feeds. Example: Counterparty risks, Sovereign risks

Market Risk Analyzer Analysis of Market risks in financial positions. Example: Risks on account of changes in interest and foreign exchange rates. Requires market data feeds and would allow for straight through market valuations on treasury positions as well as other risk metrics and modeling simulations

Portfolio Analyzer Tools for the calculation of yield and performance figures, as well as the comparison of these key figures to benchmarks. Requires Market data feeds. Example: Comparison of existing investments to LIBOR

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• The effectiveness and oversight of the Treasury functions lies in timely reporting to the Senior Management.

• There is currently a large scope for improvement, notably:

Improvements under study: 1. A self-reconciling report for Treasury is under development which replaces 5

reports in the current system. 2. Reports for cash positions generated from SAP eliminating the need for bank

parser software saving $ 4000 per month on bank charges.

3. Timely Limit Management Reports

4. Report for Profit & Loss on daily FOREX trades

Country Office market rate vs Actual treasury rate

UNORE rate vs Actual rate

5. Various automated reports for FAC & Controllers Office(currently manual)

6. Reports on concentration of currency in Country Offices (for oversight purposes and to ensure adequate liquidity)

6. Treasury – Reporting

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7. Treasury – Bank Account Management

ISSUE - We have various data related to banks in various places in SAP and they are not synchronized EXAMPLES: Count No. Data Point

• 501 - House Banks created in SAP (VISION) • 1046 - Number of Banks created in BCMS • 122 - Number of Closed banks in BCMS • 543 - Bank GL Accounts

ACTIONS REQUIRED

• Cleanup and streamline Bank Account & Bank Master Management along with its dependencies like GL accounts, signatories

• Bank Account Management should capture additional data like Credit Ratings of Banks, Bank Hierarchy, last date of bank review, bank throughput, exceptions

• Signatories on accounts should be based on roles assignment to the post (through DHR)

Options : • Invest in BCMS (current) -Home grown solution with little integration • Bolt on Solution -Buy Bolt on Solutions like eBAM / Overture5

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8. Summary of Significant Process Changes

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AS IS TO BE

Cash Position is maintained outside the system

SAP will have reconciled cash balances thereby reducing operational risk and automating daily bank account reconciliation. Note: This is dependent on MT940 from the bank.

Manual data for Cash Position, Bank entries, trade entries, and excel for MIS

Manual data entry eliminated to a large extent, thereby eliminating errors and corrections

Reports created from data outside the system

Accuracy of data will ensure quality reporting from the system

Analysis is cumbersome due to spread of data in various places

Analysis possible as all data present within the system

Limited use of SWIFT. Transactions through multiple gateways like Chase, ebanking portals and the UN

More robust rollout of SWIFT at HQ with SWIFT Alliance

10. Treasury - Future Opportunities

Rollout of Automatic upload of bank transactions to HQ locations and / or

Service Centers (non front ended through SAP)

Use of SWIFT Services at Country Offices

Cash Management at Country office

Leverage BI for reporting

Positive Pay File for Checks & Wire transfers

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UNICEF Treasury · PDF fileSAP Financial Accounting SAP In-House cash SAP Cash and Liquidity...

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Transcript of UNICEF Treasury · PDF fileSAP Financial Accounting SAP In-House cash SAP Cash and Liquidity...