Oracle Treasury- An Overview What, Where, When and How Angus Ross 1 pwc Overview Describe and demonstrate the functionality provided by Oracle Treasury • What is Treasury and Treasury Management • Who would use Oracle Treasury? • Where does Oracle Treasury fit into my ERP? • What instruments does Oracle Treasury Support? • What is involved in a deal? • What are the benefits of Oracle Treasury? 2 PricewaterhouseCoopers Treasury Definition • Treasury is NOT accounting • Treasurers manage the company’s cash, deals and risks – their aim is to conduct financial deals to support a company’s operation and add to the company’s bottom line • Make short and long term cash forecasts • Deal Management: enter and administer fund and investment deals • Risk Management: interest rates, foreign exchange and commodity risks • Policy setting: determine risk policy, limits and exposure 3 PricewaterhouseCoopers Management Cash Management Deal Management Risk Management • Cash forecasts • Borrow • Policies. limits • Electronic payments • Invest • Interest rate • Bank relationships • New instruments • Foreign exchange • In-house bank • Deal capture • Insurance reconciliation 4 PricewaterhouseCoopers . Issues Affecting Treasurers • Centralisation of ‘Head Office’ operations Facilitated by Internet efficiency • Increased Globalisation of business • Greater complexity of financial instruments • Greater regulation of companies eg FAS 133 • Need to reduce funding costs and external financial risk • More efficient deal capture and reporting • Need to make smarter decisions faster 5 PricewaterhouseCoopers . What does Gartner Say? The future of Finance applications is moving in the direction of "analytics. Feb1999 6 PricewaterhouseCoopers . Accounting 1Q99 Large-Enterprise Magic Quadrant. treasury and process extension such as corporate services and verticalization" Gartner. Oracle Treasury Overview • New Release 11i solution – Corporate treasury across industries • Typical treasury functions – Monitor cash flows and exposures – Make funding and investment decisions – Execute transactions in financial markets – Manage lifecycle of deals – Consolidate cash requirements of subsidiaries 7 PricewaterhouseCoopers . Where does Oracle Treasury fit into my ERP? Bank Current Statements Rates/ Prices Currencies & Oracle GL Accounts Treasury Vouchers Journals Exposure & Cash Deals Oracle Oracle Oracle Cash General Payables Invoices Management Ledger Receipts 8 Oracle PricewaterhouseCoopers Receivables . Settlements .Oracle Integration Front Office Middle Office Back Office Systems Analysis & Access Web HR & Accounts Oracle Financial Self.Cash Budgeting L E Oracle Oracle Oracle Portfolio Treasury (FO) Treasury (MO) Treasury (BO) Analysis ` R .Financial Accounting .Manage Budgeting Phase Fixed Accounts . HQ. Bloomberg 9 PricewaterhouseCoopers .Confirmations Standard Reports P Positions . etc.Currency Disc Instruments Standard R Money Markets Reports Syndicated Loans A Oracle Cash Mgt Note Issuance Options .Reconciliation Limits O R T Feeds S Messages Confirmations.Review/Approve Budget Purchasing Assets Receivables .MO Analysis/Reporting .Position Keeping .Manage Planning Phase .Accounting E . Resident O Mission.Budgetary Control . Reuters Bank Interfaces.Market Feeds Capture . Swift.Monitor Budget Instruments Bonds (buy & issue) by Fund.Cashflow Analysis C FX . Inventory Payroll Payable General Analyser Service Ledger .Cash Forecasting .Dealer Support .Limits Management .Management Accounting .Deal Capture Trading Risk Management . Cash Budgeting L L E E System Oracle Oracle Oracle Portfolio Treasury (FO) Treasury (MO) Treasury (BO) Analysis ` R ` D .Cashflow Analysis C C FX .Budgetary Control Bonds (buy & issue) by Fund.Asset/Liability Management Risk Manager S E Messages .Limits Management .Scenario Analysis .Position Keeping .Management Accounting Purchasing Instruments Systems Assets Receivables . Resident O O Mission. Swift.Accounting E I .Reconciliation Limits O C R O T V Structural Risk Management Oracle Feeds .Rate Risk Management R .Settlements . HQ.Dealer Support Accounting .Market Value Analysis R Bloomberg .Financial Accounting Fixed Accounts .Confirmations Standard Reports P S Positions . .MO Analysis/Reporting .Deal Capture Loan Trading Risk Management Loan . . Inventory Payroll Payable General Service Ledger Control . etc.Oracle Integration Front Office Middle Office Back Office Systems Analysis & Access Web HR & Accounts Self.Market Feeds Capture Accounting .VaR analysis Confirmations.Stress Testing E Reuters Bank Interfaces.Cash Forecasting .Earnings at Risk Analysis 10 PricewaterhouseCoopers .Currency Disc Instruments Standard R R Money Markets Reports Syndicated Loans A A Oracle Cash Mgt Note Issuance Options . 11 PricewaterhouseCoopers . Who would use Oracle Treasury? Ideally suited for companies with: • Exposure to overseas markets • Multiple banking relationships • Portfolios with complex financial instruments – Need to look at things from an internal control and asset value rather than on a transaction basis Why not Cash Management? • Cash Management provides centralised cash positions and reconciliation • Treasury provides tracking of hedges and investment positions 12 PricewaterhouseCoopers . Key Features of Oracle Treasury • Position Management • Deal Capture • In-house banking • Risk Management.policies and controls • Deal Administration •100% web enabled 13 PricewaterhouseCoopers . What instruments does Oracle Treasury Support? Supports 2 major deal markets: Foreign Exchange Money Market •Deals •Intercompany funding •Options •Term money •Historic Rate Rollovers •Negotiable Instruments •Pre-deliveries •Derivatives 14 PricewaterhouseCoopers . What Deal Transaction Types does Oracle Treasury Support? Short term money Interest Rate swaps Discounted Securities Swaptions Fixed Income Bond Options Wholesale term money FX spot. forward. swap Retail term money FX option FRA 15 PricewaterhouseCoopers . Limits/ Security Limits monitor and notify when a policy has been exceeded. There are 8 different limits types: •Global •Currency •Counterparty •Sovereign •Counterparty Group •Dealer •Settlement •Time 16 PricewaterhouseCoopers . What you can do with Deals in Treasury • Quick Deals • Deal Orders • Linking Deals • Calculators • Exposure Transactions 17 PricewaterhouseCoopers . Enter Deal 6. The Deal Process 1. Validation 8. Accounting 3. Cash Flows 2. Accruals • Limit checking occurs throughout the process 18 PricewaterhouseCoopers . Positions 10. Settlement 9. Send Confirmation Letter 7. Validation 4. Revaluations 5. What happens when a deal is entered? Select User Deal Exceeds Issues enters new Type Tolerance Yes Warning rate No Insert deal User User Saves dismisses details Deal warning Checks deal Checks Dates details against monitored and holidays limits User Exceeds Issues cancels Checks deal Limits Yes Warning deal rates against deal rate No tolerances User User confirms accepts 19 warning PricewaterhouseCoopers save . These include: •Cash Flow by account or Currency •Maturities by counterparty •Consolidated Cash Flow •Maturities by date •FX Deal vs Spot •Retail Term money overdue •FX Exposure •Intercompany Statements •Interest Rate Exposure •Cancelled Transactions •Limit Utilisation •Intercompany Interest Settlement Report 20 PricewaterhouseCoopers . Reports There are 43 standard reports in Oracle Treasury. ) • Risk Management: as described earlier. Future Directions • Revaluation: Our current mark-to-market deal revaluation will be expanded to all the deal types included in our system. In addition. the revaluation process will calculate individual currency gains and losses associated with your deals. (FAS 52 accounting entries are handled by the General Ledger at an account summary level. 21 PricewaterhouseCoopers . • Deal Open Interfaces: The ability to upload FX and Intercompany deal information directly from legacy systems or third party providers. • Accruals: The effective interest method. • FAS 133: Comprehensive support of FAS 133 and IAS 39 Derivative and Hedge Accounting. of accruals will be added to the straight line method as another available option. 22 PricewaterhouseCoopers . or constant yield method. Future Directions • Equities: A new deal type will be added which accommodates equity securities. Reduce Costs & Risk with In-House Banking • Consolidate cash and FX requirements • Provide intercompany funding • Manage subsidiaries’ bank account balances ⇒ Reduce Exposures and Bank Fees 23 PricewaterhouseCoopers . Automate Back Office Data Entry • Split/net settlements • Calculate interest • Authorize settlements accruals • Settle in any currency • Amortize premiums • Define journal entry • Revalue portfolios templates 24 PricewaterhouseCoopers . Manage Global Positions and Exposures • Record daily bank account balances • Project cash flows from internal systems • Monitor cash position in any currency • Record funds transfers • Identify available liquidity • Identify and monitor currency and interest rate exposures • Compare exposures to internal policies ⇒ Proactively manage funds and eliminate undesirable cash positions 25 PricewaterhouseCoopers . Control and Secure Global Treasury Operations • Define exposure limits • Define interest rate and FX policies • Control access for authorized users • Audit business events ⇒ Safeguard Treasury Operations 26 PricewaterhouseCoopers . settlement. reconciliation & accounting •Controlled and secure treasury operations •Reduced exposures and transaction costs 27 PricewaterhouseCoopers . Benefits of Oracle Treasury •Companies can improve corporate: •Stability •Continuity •Profitability •Enterprise-wide liquidity. currency & interest rate exposure management •Streamlined deal capture •Automated deal admin. Benefits of Oracle Treasury (continued) •Integrated and streamlined corporate dealing •Improved internal controls •Meet international business needs •Satisfies international treasury regulations •Provides information on funding special projects •Provides access to performance and other bonds •Improved credit rating •Improved Investor Relations 28 PricewaterhouseCoopers . Benefits of Oracle Treasury (in summary) •Easy and automatic posting to General Ledger reducing GL/ Treasury reconciliation •Enables fund management to eliminate undesirable cash positions •Optimises the Global use of cash •Can make smarter funding decisions faster •Limits and policy enforcement safeguard your treasury operations •fully functional front to back office corporate treasury department •Better capture of information ⇒ better reporting •100% web enabled to leverage for global treasury operations 29 PricewaterhouseCoopers . interest rate. integrating front. Conclusion • Global exposure management Oracle Treasury delivers enterprise-wide foreign exchange. middle. 30 PricewaterhouseCoopers . and back office functions. • Comprehensive treasury solution Oracle Treasury is a comprehensive solution. and liquidity exposure management. pwc .