UNICEF Treasury

Agenda

1. Treasury Overview
6. Reporting
• SAP Treasury
• Functional Overview
7. Bank Account Management
2. UNICEF Treasury Activities
8. Summary of Significant Process
• ‘AS IS’
Changes
• ‘TO BE’
• ‘AS IS’
• ‘TO BE’
3. Treasury – Manage Financial Instruments
• ‘AS IS’
9. Compliance with Audit
• ‘TO BE’
Observations
4. Treasury – Manage Cash & Liquidity
10. Future Opportunities
• ‘AS IS’
• ‘TO BE’

5. Treasury – Manage Financial Risk

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1 – Treasury Overview
Standard Treasury Functions & SAP Architecture

Treasury Functions Applications from SAP

SAP Treasury and Risk Management

Manage Financial Risks Risk Analyzer
Credit Risk Market Risk Portfolio Analyzer

Transaction Manager

MM FX DER SEC
Manage Financial Instruments

SAP Cash and Liquidity Management

Cash Management Liquidity Management
Manage Cash and Liquidity

SAP Bank Communication Management

SAP ERP

Finance Excellence Treasury FSCM

Financial Core General Ledger FM AP/AR Controls GM

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

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1 – Treasury Overview (cont’d.)
Treasury modules in SAP
SAP System External Systems

SWIFT
mySAPTM ERP

EBS
SAP Treasury and Risk Management

Market
Data
Credit Risk Market Risk
Portfolio Analyzer
Analyzer Analyzer

Trades
Transaction Manager

Other
Money Foreign
Derivates Securities
Management Exchange

House Banks
Rate Feeds
Dealing Platforms
SAP SAP Cash and
In-House cash Liquidity
Management

SAP Financial Accounting

SAP NetWeaverTM
Portal, Security, Business Warehouse, and eXchange infrastructure 4
 1 – Treasury Overview (cont’d.)
Functional Overview

Front Office Back Office Accounting Reporting

• Exposure analysis • Flexible process • Proper recording • Standard Reporting

• Decision support definition of all aspects of • Ad hoc Reporting
• Confirmation Treasury in
• Optimized deal Financial • Internal Controls
entry • Settlement Accounting • Limit reporting
• Online limit check • Correspondence • Valuation • Management
• Position reporting • Interest Rate according to Reporting
Adjustments Generally
Accepted • KPI Reports
• Standing Accounting
instructions Principles (GAAP)
• Payments – IPSAS
• Alert monitor

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 2. UNICEF Treasury Activities – ‘AS IS’
Morning

Task Purpose
Review the Manual MT940 •To ensure the accuracy of all bank
(faxed by the Bank / extracted from Chase Insight) transactions
•To ensure that all trades are
• Identify transactions not front ended through SAP settled through the bank accounts
(Contributions, ZBA sweep, Bank Charges etc) •To record transactions in SAP
 Identify, create and post manual journal
entries
Morning

• Compare MT940 transactions against the

Treasury Daily Dairy Report

Update the Cash Position Report in Excel •To ascertain the cash balance
for USD / EUR (Opening Balance for the day)

Generate / Print MT942 from the bank •To ascertain the current day cash
• Manually enter them in Excel Cash Position Report 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 •To confirm trades with
counterparties counterparties
Provide Liquidity for Cashiers to Transfer •To provide Liquidity for business
Cash to Country Offices globally (though functions
cumbersome manual processes)
All Day

Analyze Risks based on positions and •Risk Management

market movements
Enter Profit & Loss on Trades in Excel •MIS for Value add by Treasury

Prepare manual deal tickets and create •Create trades in SAP - original
trades in SAP data input
Update the Cash Position Report in Excel To determine the cash balance
for all trades
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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.
Morning
•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 •To ensure that the bank
system transactions are accurate.
(An excel output of the Bank Statement would be
available with posted document numbers)

Run the Cash Position Report •To determine opening cash

(An excel output stating the Cash Position) position for the day

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 2. UNICEF Treasury Activities – ‘TO BE’
All Day

Tasks Purpose

Upload bank transactions for •Manual entries are avoided,

contributions, ZBA sweep, bank charges reducing errors, time and
enhancing efficiency
Morning

etc.)
(These transactions are not front ended by SAP – and
an excel upload would be available to the users)

Upload the MT942 file received from •To know the correct current day
the bank bank balances
(MT942 is the intra day bank statement)

Perform Treasury Functions: •Everyday Treasury Functions

• Buy / Sell Currencies
• Buy / Sell Investments
All Day

• Match Buy / Sell positions with counterparties

• Provide Liquidity to Country Offices globally
• Analyze Risks on account of currency and market
movements
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 Manage Financial Risks

Manage Financial
3. Treasury – Manage Financial Instruments Instruments
Manage Cash and Liquidity

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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 Manage Financial Risks

3. Treasury – Manage Financial Instruments Manage Financial

Instruments

(cont’d.) Manage Cash and Liquidity

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 11
 Manage Financial Risks

3. Treasury – Manage Financial Instruments Manage Financial

Instruments

(cont’d.) Manage Cash and Liquidity

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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 Manage Financial Risks

3. Treasury – Manage Financial Instruments Manage Financial

Instruments

(cont’d.) (‘As Is’) Manage Cash and Liquidity

These transactions are manual

and entered twice (once in the
trading system and then again in
1
Paper
2 SAP)
document

Front Office
SAP
3 (VISION)
5
Confirmation Process
Paper
• Generate Letters document 7

• Signature 4
• Fax
Counterparty
Back Office 6

Deal created Telephone call

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Paper documents SAP Transactions
 Manage Financial Risks

3. Treasury – Manage Financial Instruments Manage Financial

Instruments

(cont’d.) (‘To be’) Manage Cash and Liquidity

Front Office
Trade confirmations are
executed via a deal matching
Create Deal
service provided by SWIFT,
1
called ACCORD

SAP
2
(VISION)
Matching Services

Back Office Settle Deal 3 SWIFT

Services
4 Payment

All the above transactions are automated and

Counterparty
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need to be entered only once
 Manage Financial Risks

Manage Financial
4. Treasury – Manage Cash & Liquidity Instruments
Manage Cash and Liquidity

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)

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 Manage Financial Risks

4. Treasury – Manage Cash & Liquidity Manage Financial

Instruments

(cont’d.) (‘As Is’) Manage Cash and Liquidity

1070140 Cash flow to Country Office from Treasury (1/2)

Treasury
2
USD 1 DONORS 1
CHASE

1040350
Cashiers – Main 1060240
USD India
CHASE INR
1040370
Cashiers-TRF SBI
3
USD
CHASE
Headquarters
3
2 1051030
India
USD
Transfer of funds through the FV60 route is CHASE
1060270
a workaround and carries substantial risk India - Main
Vendor INR 1063710
F02401 SCB India
1 Receipt of Contributions INR
2 Zero Balance Sweep SCB
3 Transfer through FV60 4 4 16
4 Settle AP or Expense Payment Field Office
 Manage Financial Risks

4. Treasury – Manage Cash & Liquidity Manage Financial

Instruments

(cont’d.) (‘As Is’) Manage Cash and Liquidity

Flow through the Accounts Payable Route

1070140 1040370
Treasury 4 Cashiers
USD USD
CHASE CHASE

3
Headquarters 2

Post
Invoice
2 1060270
India - Main
1
INR
1 Park Invoice
SCB
2 Post Invoice Park
3 Payment through F110 Invoice
4 ZBA Sweep Internal Vendor CO Bank Account
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Country Office
 Manage Financial Risks

4. Treasury – Manage Cash & Liquidity Manage Financial

Instruments

(cont’d.) (‘As Is’) Manage Cash and Liquidity

Treasury Bank Accounts Cash flow to Field Office from Treasury (2/2)
1070140 1070340 107XXXX
Treasury Treasury Treasury
USD EUR Other Currencies
CHASE CHASE Any Bank
Counterparty
3

TX14 2
Get Rate
from CP 3
Headquarters

Sale of major currencies held by

Treasury for Country Office 1
currencies through banks. This TX13
1060270
process is handled through the India - Main
Request for INR
“Manage Financial Currency SCB
Instruments” process Country Office
1 Request for Currency
2 Get Rate from18CP
3 Sale of Currency
 Manage Financial Risks

4. Treasury – Manage Cash & Liquidity Manage Financial

Instruments

(cont’d.) (‘To be’) Manage Cash and Liquidity

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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 4. Treasury – Manage Cash & Liquidity
(cont’d.) (‘To be’) SAP – Integration of External Systems
Dealing platforms Data Feeds Treasury Other
(360t / Bloomberg) (Bloomberg / Moodys) Counterparty Vendors

Trading Data flows

SAP Treasury and Risk Management Payments

Credit risk analyzer Market risk analyzer Portfolio analyzer

Transaction Manager
Money
Foreign exchange Derivatives Securities
management
HOUSE
BANKS
Matching
FI BANK ACCOUNT MANAGEMENT (BOLT ON)
Services
SWIFT Files
Bank MGMT

FINANCIAL CORE
BANK
GL AR AP FM COMMUNUICATION
MANAGER
SWIFT SERVICES
BANKS
SAP 20
 Manage Financial Risks

4. Treasury – Manage Cash & Liquidity Manage Financial

Instruments

(cont’d.) Manage Cash and Liquidity

Liquidity Planner

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

Accounts Accounts Open Purchase

Cash Balances Treasury Flows
Receivable Payable Orders

Cash Management SAP (VISION)

LIQUIDITY PLANNER (SAP & BI) / CASH ACCOUNTING

Memo PFP Data Pipeline

Other
records from data from
Sources
from emails Cognos PARMO

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Data from External Sources

5. Treasury – Manage Cash & Liquidity
(cont’d.)
This would be through the implementation of the Analyzers
Analyzer
Credit Risk Analyzer
Market Risk Analyzer
Portfolio Analyzer
Manage Financial Risks
Manage Financial
Instruments
Manage Cash and Liquidity
Purpose
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
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
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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6. Treasury – Reporting

• 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
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and to ensure adequate liquidity)
 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 24
 8. Summary of Significant Process Changes

AS IS
Cash Position is maintained outside the
system
Manual data for Cash Position, Bank
entries, trade entries, and excel for MIS
Reports created from data outside the
system
Analysis is cumbersome due to spread of
data in various places
Limited use of SWIFT. Transactions through More robust rollout of SWIFT at HQ with
multiple gateways like Chase, ebanking
portals and the UN
TO BE
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 entry eliminated to a large
extent, thereby eliminating errors and
corrections
Accuracy of data will ensure quality
reporting from the system
Analysis possible as all data present within
the system
SWIFT Alliance
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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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