1. Optimizing Hedging Programs:Assessing Risk and Achieving Compliance Sponsored by Kyriba Bob Stark, Vice President, Strategy, Kyriba Robert Pierson, Director Risk Management, Kyriba April 11, 2013

2. Introductions Todays PresentersRobert PiersonDirector, Risk ManagementKyribarpierson@kyriba.comBob StarkVice President, StrategyKyribabob.stark@kyriba.com 2013 Kyriba Corporation. All rights reserved.PRIVILEGED & CONFIDENTIAL. 2 3. Todays Topics1) Types of Hedging Programs2) Steps to Build an Effective Hedging Program Visibility Assessing the Risks Regulatory concerns3) How Technology can help 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 3 4. Types of Hedging Programs 5. Assessing the Risks: Identification Most popular hedging programs: Cash Flow hedging Balance Sheet Fair Value *Visibility* Net Investment 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.5 6. Assessing the Risks: Identification Most popular hedging programs: Cash Flow hedging Program to hedge a Highly Probable or Anticipated Assets/Liabilities Can be applied to IR, FX, and Commodity exposures *Visibility* Requires Regression for Assessment in Effectiveness Testing Flexibility when releasing to OCI 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.6 7. Assessing the Risks: Identification Most popular hedging programs: Balance Sheet Most common and effective way of hedging intra-month Assets/Liabilities Short Term Derivatives to hedge effectively between exposure periods*Visibility* Anyone who has FX Exposure has need for a Balance Sheet Program Exposures typically drawn from ERP 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.7 8. Assessing the Risks: Identification Most popular hedging programs: Fair Value Program to hedge a Firm Commitments or Booked Assets/Liabilities Apply to Interest Rate and recognized FX Exposures *Visibility* Very difficult to get Fair Value treatment on Commodity hedges 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.8 9. Assessing the Risks: Identification Most popular hedging programs: Net Investment Program to hedge an investment or funding in a foreign subsidiary or business unit Often combines Fair Value Hedging for FX and Interest Rate exposure *Visibility* Cross Currency Swaps popular to Hedge Net Investment 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 9 10. Steps to Build anEffective Hedging Program 11. Steps to build an effective hedging program Effective Hedging Programs: 1) Visibility: Knowing your exposures 2) Assessing the Risks 3) Choice of Hedging Instruments *Visibility* 4) Regulatory concerns 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.11 12. Visibility What is the barrier? 50+% of financial executives cite visibility into data as the barrier to effectively forecast risk metricsSource: 2013 AFP Risk Survey 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 12 13. Visibility How to hurdle the barrier? 1) Consolidate data in one central repository 2) If forecastingrefine accuracy to build confidencein the data 3) Implement technology (if needed) Integrate ERP Recurring models Remote users 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 13 14. Assessing the Risks What are the Risks? Exposures Payables vs. Receivables Debt vs. Investments Positions *Visibility* Cash vs. Liquidity Forecasting Actuals vs. Projections 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.14 15. Assessing the Risks Best Practice: Manage what is known Payables, Receivables, Debt, and Investments Cash Position Derivative Position Accurately forecast what is unknown Future payables and receivables Market Condition impact on Cash and Derivative positions Regulatory impact on Balance Sheet and Income Statements 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.15 16. Choice of Hedging Instruments Most popular hedging instruments: Futures Guaranteed Settlement Cleared by the exchange No Counterparty Risk Heavy Collateral requirement Fixed Notional Amounts*Visibility* Forwards No Collateral Requirement Exchange of Principal on Maturity Date Can simulate a Future without the Fixed Notional Amount 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.16 17. Choice of Hedging Instruments Most popular hedging instruments: Swaps No Collateral Requirement (yet) No Principal Amount or Cash outlay for Start/End of Contract Net Settlement *Visibility* Options No Collateral Requirement Incur a cost due to time value (impact for hedge accounting) Not an obligation but a Right to Buy or Sell Can expire without incurring Realized Gains or Losses 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.17 18. Regulatory Concerns 19. Regulatory Concerns A variety of regulatory requirements for differentglobal regions FASB = United States IASB = Europe IFRS = both Dodd-Frank = United States These regulations drive hedging actions for manycorporates 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 19 20. Regulatory ConcernsFASB Long Haul or Bust Cost vs. Benefit Future of Hedge Accounting Convergence of US GAAP vs. IFRS Consolidation Reporting for Foreign Currency (FASB 52) Translation in a Hyperinflationary Economy Translation in a Foreign Operation Net Investments vs. Intercompany Loans 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 20 21. Regulatory ConcernsIAS and IFRSAssessment vs. Measurement Perform prospective hedge effectiveness assessment Retrospective is in the PastRebalance the hedge relationship, when necessaryDe-designate when risk objective changesVoluntary de-designation is not permittedFair Value and OCI and Ineffectiveness Hedge Accounting reflected as a separate Balance SheetItem 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 21 22. Regulatory ConcernsFASB vs. IASB Intentional vs. Interpretation Guidance by FASB, Implementation by Advisors Implementation by Preparers and AuditorsFAS 157 vs. IAS 37Fair Value Hedging Entry Price vs. Exit Price Exposure DraftCashflow Hedging No Changes 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 22 23. Regulatory ConcernsWhat is the best practice? Unlikely that treasury or finance has control overwhat regulatory framework you followBetter to be over compliant than under compliant Doing too much is inefficient; doing too little incurs regulatory problemsProspective and Retrospective Testing Prospective provides visibility if the hedge will be effective Retrospective proves that your hedge is effectiveAuditors can provide guidance 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.23 24. How Technology Can Help 25. How Technology Can Help Quality Data + Quality Analysis = Better decisionsTechnology can help consolidate: Visibility into Cash Visibility into Exposures *Visibility* Visibility into Market Conditions (Rates/Prices)Technology can help analyze: Impact on cash flow Impact on profitability Impact of changes in assumptions 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 25 26. How Technology Can Help Risk Analysis Most popular techniques measure potential impactTechniqueRequirementsCommon Market Data CurvesScenario/Sensitivity AnalysisMTM of Derivatives *Visibility*Advanced Simulation ModelsValue-At-Risk (VAR) (Monte Carlo)CashFlow-At-Risk (CFAR)Correlation 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.26 27. How Technology Can Help What kind of tools are you looking for?Two categories: 1) Workflow 2) Analytics *Visibility* 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.27 28. How Technology Can Help What kind of tools are you looking for?Two categories: 1) Workflow Treasury Management System (TMS) Treasury Risk Management (TRM) *Visibility*Goal: Complete workflow of: Exposure management Trade portal integration Valuation (Hedge) Accounting 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.28 29. How Technology Can Help What kind of tools are you looking for?Two categories: 2) AnalyticsMarket RatesMarket Information*Visibility*ValuationExposure optimizationRisk metricsReporting & DashboardsBusiness Intelligence 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.29 30. Summary Types of Hedging ProgramsCash FlowBalance SheetFair Value Net InvestmentBuilding an Effective ProgramTechnology Visibility is paramount Enables better decisions Properly assess risksTwo types of systems:Optimize choice of derivatives workflow and analytics Regulatory ConcernsFASB IASIFRS Dodd-Frank 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.30 31. Survey ReportDOWNLOAD Kyriba-sponsored survey reportTreasury and Risk Management: Top Financial Risksand Tools to Manage Them from Aberdeen Group.Contact Us: 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 31 32. REQUEST A CONSULTSATIONCFOs and Treasury Professionals from over 700 companies world-wide rely on Kyriba for: Enhanced visibility into cash, forecasts, positions and exposures Better financial decision making, including Cash Optimization and Hedging Centralization of processes and controls Effective 360 reporting and moreKyribas cloud-based treasury management solution offers a broad range of functionality tosupport even the most complex treasury requirements, solving the cash, treasury, and riskmanagement needs of all sizes of treasury and finance organizations.REQUEST A CONSULTATION TODAY: http://www.kyriba.com/request-demo 33. THANK YOU FOR YOUR INTEREST!