The Balancing Act of Cash Management: Optimizing the Financial Value Chain TEXPO Conference April 3-5, 2011

1. The Balancing Act of Cash Management: Optimizing the Financial Value ChainTEXPO Conference April 3-5, 2011 Gail Angel, FIS Commercial Treasury Solutions SVP and Business Line Executive Nanette Crocker, BBVA Compass Senior Vice President, Corporate Treasury Management

2. Session Description The Balancing Act of Cash Management: Optimizing the Financial Value Chain The events of the global financial credit crisis have had a ripple effect on the economy and thrust cash management - and the need to gain greater visibility and control over cash and liquidity - to the forefront of corporate strategy.A recent survey from Aberdeen Research found that 82% of companies have increased their focus on cash management over the past 12 months. • The purpose of this session is to highlight best-in-class company strategies for • streamlining and accelerating finance business processes • reducing operating costs • managing risk • ensuring compliance • improving visibility, control, and efficiency • Includes Industry trends, study data, reference sources and practical suggestions for taking action

3. Setting the Stage Financial Supply Chain Definition Integral components of a supply chain, connecting trading partners from order placement to receipt of payment. It carries the flow of financial information and money in the direction opposite to the flow of goods and services. BusinessDictionary.com

4. Setting the Stage “balancing act” noun n [usually singular] Definition a situation in which a person tries to give care and attention to two or more activities at the same time dictionary.cambridge.org/dictionary/british/balancing-act Multiple responsibilities Economic downturns Changing business climate Unpredictable market conditions Shifting priorities

5. Streamline and AccelerateFinance Business Processes

6. Best Practices: Streamline Business Process Processes • Migration to electronic payments/processes • Check conversion • Remote deposit capture • Moving to straight-through processing • Integrated Receivables and Payables • Generate CCD+ or batch wires from ERP System • Eliminate download or “fetch” • Bank consolidation/rationalization • Technology capabilities – smart safes • Based on credit participation • Going Green… • Electronic billing, payments and statements… http://www.payitgreen.org Founded by Financial Institutions Accessible through NACHA site

7. Best Practices: Streamline Business ProcessesPitfalls and Constraints • Executive Buy-In • Budget • Resources • Aging North American (and European) work forces • Smaller financial teams • 17% fewer COO’s in S&P 500 firms than in 1999 (*) • CFO’s assuming broader range of responsibilities 33% play active role in developing and defining strategy • Supplier/Vendor Buy-In • Other Pressures (*) Source: Crist Associates

8. Trends: Streamline Business ProcessesIncreased Pressure % Source: Aberdeen Group, Optimizing Financial Supply Chain

9. Trends: Streamline Business ProcessesCash Management Strategies Best in Class Companies – Top 20% 21 Days Sales Outstanding 84% accuracy of cash flow forecast 34 Days Payable Outstanding Laggards – Bottom 30% 72 Days Sales Outstanding 52% accuracy of cash flow forecast 56 Days Payable Outstanding % Source: Aberdeen Group, Optimizing Financial Supply Chain

10. Reduce Operating Costs

11. Best Practices: Reduce Operating CostsEfficiency • Increase staff productivity through better tools, processes & training • Explore business process optimization (Six Sigma) • Eliminate non-value added functions and expenses • Web and SAAS/Cloud-based systems • Move from paper to electronic • Work flow • Record keeping • Transactions • Payments • Consider outsourcing non-core competencies • Reassess treasury costs • Bank fees • Working capital carrying costs • Take advantage of existing options • Perform internal TM Review

12. Best Practice: Reduce Operating CostsConstraints and Pitfalls • Staff Resistance to Change • Purchase Card Processing • Posting from Images vs. paper records • Automating GL updates using STP • “Letting Go” • Negative impact to customers and/or service • Determining when enough is enough • Professionally compromised • Learning Curves • Impaired agility/innovation • Penny wise and pound foolish • Tunnel vision

13. Trends - Reduce Operating CostsOngoing Focus • Reducing costs constant focus for last 2 years • Only 19% of companies not trying to reduce cost … status quo? • Best in Class • Investing in processes, tools and training to achieve greater productivity • Focusing marketing efforts on better serving most profitable customer segments • Seeking better commercial terms from partners % Source: http://www.EY.com Competing for Growth: Winning in the new economy – Cost competitiveness

14. Manage Risk

15. Best Practices: Manage RiskInternal Process • Establish clearly defined role and responsibilities • Document and adopt methodology • Identify, characterize, and assess threats • Financial • Technical • Assess exposure and vulnerability of assets • Determine the level of risk associated with threats • Identify how to handle/manage risk • Avoidance • Reduction • Sharing • Acceptance/Retention • Prioritize risk reduction measures based on a strategy • Monitor and confirm adding value • Perform Compliance Reviews (Audit Enforcement)

16. Trends: Manage RiskTop 10 Global Risks (*) • Regulation & compliance • Access to credit • Managing talent • Slow recover or double-dip recession • Emerging markets • Cost cutting • Non-traditional entrants • Radical greening • Social acceptance and responsibilities • Alliances and transactions What about FRAUD? (*) http://www.ey.com – Risk management: The essential guide for fast-growth companies (*)

17. Best Practices: Manage RiskFinancial Risk • Take advantage of bank offered fraud controls • Positive Pay/Reverse Positive Pay (83%) (*) • ACH Debit Block (77%) • ACH Debit Filters (58%) • Payee Positive Pay (52%) • Post No Checks Restriction (37%) • Security administration and audit reporting • Leverage Marketplace Solutions • Out of Band Authentication • Mobile verification • Alternative notification • Locked-down Browser • Secure desktop • Transaction Monitoring • Low cost/no cost business changes (*) AFP 2010 Fraud Study – usage statistics

18. Best Practices: Manage RiskTechnical Risk FS-ISAC, NACHA & FBI Risk Mitigation Recommendations (2010) Business Users • Initiate ACH and wire transfer payments under dual control • Execute all online banking activities from a dedicated, stand-alone, and completely locked down computer system – no e-mail or web-browsing. • Limit administrative rights on users’ workstations to prevent downloading malware. • Reconcile all banking transactions on a daily basis. Financial Institutions • Implement awareness communication programs to advise customers of current threats and fraud activities. • Implement appropriate fraud detection and mitigation best practices. • Consider using manual or automated Out-Of-Band authentication systems … Plus 14 additional in-depth defenses, ranging from : 1. Perimeter router blocking of all unnecessary ports to 14. Develop relationship with your local FBI and USSS Field Offices

19. Trends: Manage RiskTechnical & Financial Risk • Cybercrime • March, 2009 – MacAfee reported analyzing 20 millionth piece of malicious software • 2010 Discussions with FS-ISAC, FBI and high end incident response vendors indicated anti-virus software less than 60% effective • March, 2011 – EMC disclosed a recent cyber attack that exposed non-public information related to RSA SecureID system • 2010 AFP Fraud Study • 73% of organizations experienced attempted or actual payment fraud in 2009 • 81% for organizations with annual revenues over $1 billion • 63% for organizations with annual revenue under $1 billion • 90% of the organizations that experienced attempted or actual payment fraud in 2009 were victims of check fraud • Electronic Transaction Fraud Chart • Typical loss was $17,100

20. Best Practices: Manage RiskConstraints and Pitfalls • Organizational • Lack of ownership • Insufficient processes • Attitudinal • Not enough time • Too expensive • It won’t happen to us • Insufficient resources • Training • Tools • Personnel

21. Ensure Compliance

22. Best Practices: Ensure ComplianceBest in Class Practice • Focus on Trends • Regulatory compliance one of top 10 Global Risks • Rapidly changing and increasingly complex • Internal compliance key to success of enterprise programs like Supply Chain Management • Suggestions • Work with your Financial Institutions • Take advantage of training and educational opportunities • Establish a Vendor Management Program with Key Management Oversight • Document and communicate Vendor Risk Management Program • Monitor and make adjustments as necessary Let’s look at an example…

23. Best Practices: Ensure ComplianceVendor Management Program Vendor Management Life Cycle FIS Approach • Provide enterprise-wide governance of vendors to protect client-provided consumer information and prevent a negative performance impact due to vendor provided products or services • Establish consistent vendor acquisition, assessment of controls, on-going monitoring and reporting requirements • Validate vendors have deployed adequate controls and processes for the protection of client data and NPI from unauthorized access, misuse or inappropriate disclosure • Monitor financial health for financial stability and continued viability • Program structure and activities based on key objectives within regulatory and industry standards: • Gramm-Leach-Bliley Act (GLBA) 501.b • FFIEC examination handbooks • Federal Trade Commission (FTC) • Health Insurance Portability and Accountability Act

24. Best Practices: Ensure ComplianceVendor Management Policy FIS Example • Ensure FIS consistently employs effective processes for procurement, risk management, vendor assessment and ongoing monitoring enterprise wide • Ensure vendors meet required minimum standards related to: • Technical competence • Product quality • Reliability • Delivery performance • Cost • Financial soundness • Ensure vendors selected align with FIS business objectives and maintain compliance with industry and regulatory requirements. • Policy re-evaluated on an annual basis to validate relevance and effectiveness.

25. Best Practices: Ensure ComplianceSample Vendor Risk Management Governance

26. Best Practices: Ensure ComplianceSample Program Roles and Responsibilities

27. Best Practices: Ensure ComplianceSample Program Roles and Responsibilities

28. Best Practices: Ensure ComplianceConstraints and Pitfalls   

29. Improve Visibility, Control, and Efficiency

30. Best Practices: Improve VisibilityTransparency Automate wherever possible • Bank information • Multi-Bank reporting • Treasury workstations • SWIFT • Internal interfaces • Customized or standard utilities • Electronic vs. paper Routinely explore additional technology/new services • Implement new Web-based solutions to link AP/AR and Payment systems • Apply Internet technology to overlay remittance detail onto EFT transactions • Leverage connectivity and data to improve trade terms

31. Best Practices: Improve VisibilityTransparency New Technologies • SAAS/Cloud-based applications • Trade networks • Treasury workstations • Bank portals • Commercial card services • XML EDI Formats Align Treasury as a strategic partner • Present cash management as a holistic process 31

32. Trends: Improve VisibilityKnowledge = Power “The organizations that most effectively weathered the economic crisis were those with access to timely, accurate and usable information.” Source: AITE Trends in Bank-supported, Business-Initiated Payments , February 2011

33. Trends: Improve VisibilitySignificant Business Drivers How do you compare? • Number of banks • Business needs • Risk mitigation – counterparty and FI-based • Wallet sharing • Operational cost reduction • Limiting exposure to any 1 bank Source: Treasury Strategies, 2010

34. Trends: Improve VisibilityLeveraging Technology IDC Financial Insights Preliminary Findings from Technology Trends Surveys, March, 1022

35. Best Practices: Improve VisibilityConstraints and Pitfalls • Lack of inter-departmental communication/executive support • Complexity • The bigger you get, the more complex the challenge • Insufficient resources • ROI • The longer you wait, the harder it is to get done • Cause and Effect Delays…

36. Trends: Improve VisibilityConstraints and Pitfalls AITE Supply Chain Finance: A Taxonomy, November 2010

37. “ the difference between chess masters and ordinary players is not intelligence, analytical ability or creativity …it is ‘structured knowledge.’ ” Gtnews.com - “Becoming a Grand Master in Cash Management” by Chris Nicols, 11/8/07 “An ounce of action is worth a ton of theory.” Fredrich Engels (1820-1895) “You may delay; but time will not.” Benjamin Franklin SUCCESSFUL • Knowledgeable • Focused • Disciplined • Practiced • Confident

38. Q&A

39. Thank You! Gail Angel Gail.Angel@fisglobal.com 773 907-2400 Nanette Crocker Nanette.Crocker@bbvacompass.com 205 297-7218