Treasury Technology FEI Treasurers Conference Fred Cohen February 27, 2001

1. Treasury Technology FEI Treasurers Conference Fred Cohen February 27, 2001

2. Agenda • Key market trends in treasury management services • Treasury Technology • Future market segmentation • A Global Solution • What will be the key to your treasury technology?

3. Key market trends in treasury management services

4. Current debate questions whether risk management contributes to the creation of shareholder value Today Forward Looking Focus on Revenue and Cost React to Opportunities Control -- not Manage -- Risk Portfolio Management Capital Allocation Capital Attribution Influence Profitability Analysis Control Earnings Surprises Anticipate Future Scenarios Focus on Risk Drivers Risk Based Pricing Risk Measurement Control

5. To create value the challenge for executive management and their risk managers is to…. • Deliver predictable earnings growth and reduce volatility • Awareness of complex risks • Sensitivity of earnings to external and internal factors • Advise management of potential earning surprises • Allocate capital efficiently to all parts of the business • Optimal usage of capital at enterprise-wide level • Identify value creating / eroding lines of business • Align the capital coverage with the risk appetite of the firm • Develop a robust technology infrastructure • Support decentralized decision making • Embedding risk in the decision making process • Change from historic to forward-looking to supplement the strategic planning process

6. Cost Market Op. Credit Revenue Profitability Risk Customer Level Business Unit Level Product Level Legal Entity Level Organizational Level Risk-adjusted Performance Shareholder Value Drivers The “Integrated Performance Management” delivers integrated profitability and risk information for decision making… Best Practice Methodologies for Managing business functions Achieving operational excellence Enabling consistent business management Integrated Planning Cycle Tactical, operational and strategic decision support Achieving Strategic Excellence Shareholder Value Creation

7. Cost Market Op. Credit Revenue Profitability Risk Customer Level Business Unit Level Product Level Legal Entity Level Organizational Level Risk-adjusted Performance Shareholder Value Drivers …and supports forward looking analysis for performance based planning Earnings Sensitivity Complexity Modeling Scenario analysis Impact on future earnings and Shareholder Value

8. Market VaR by Product 5,000,000 4,500,000 4,000,000 3,500,000 Gasoline 3,000,000 Power 2,500,000 Natural Gas Gas Storage 2,000,000 Propane 1,500,000 1,000,000 500,000 - 1994 1995 1996 1997 1998 YTD 99 By product type…..

9. Credit VaR by Area 4,500,000 4,000,000 3,500,000 ECAR 3,000,000 FRCC 2,500,000 MAPP MAIN 2,000,000 WSCC 1,500,000 ERCOT 1,000,000 500,000 - 1994 1995 1996 1997 1998 YTD 99 By Location ….

10. Credit VaR by Industry 7,000,000 6,000,000 5,000,000 Power Marketers IOLL’s 4,000,000 Municipal Utilities Utility 3,000,000 C&I Retail 2,000,000 1,000,000 - 1994 1995 1996 1997 1998 YTD 99 By industry sector ...

11. By Geography ….

12. Treasury Technology

13. Integrated Performance Management IPMDelivering the methodologies and platform to enable integrated and forward-looking decision making that leads to superior performance Meeting investment community expectations Implementation Approach Risk & Performance Measurement Technology Architecture Forward Looking Decision Making Actionable Information …...How we will deliver?

14. To integrate and deliver all the information in an efficient manner, the technology architecture has to be flexible and scalable Translation Processor (Middleware) Information Processing and Storage Information Presentation Source Data • Flexibility • Leverage existing (ERP) investments • Support plug-in best of breed applications • accelerated organizational changes due to shorter, less costly implementations • Facilitates integration of new systems (M&A) • Scalability • Accommodate growth in the organization • support high volumes of transactions and level of detail • enhance timeliness of delivery due to capacity Traditional ERP Financial & Management Accounting External Feeds Summarized financial postings Transaction Capture • Market data • Credit ratings Drill down to detail Discrete Reporting Operational Systems Integrated Data Store Translation & Mapping • Power trading • Gas trading Integrated Reporting Transaction detail Web based report viewer Business Support Systems Analytical results Calculation Engines Blended Reporting • Payroll • Benefits Summarization & Posting • Detailed financial postings • Business events • Reference data Non-Automatic Inputs Ad hoc Reporting • Manual entries Algorithmics Profit Analyzer R.E.A.L.

15. Technology: A convergence of enterprise information systems: • Integration between CRM, SCM, and ERP applications • Coordination of financial flows and value chain flows • Blurring of traditional boundaries between applications for treasury, payments processing, banking and working capital management • Growing importance of technology outsourcing (e.g. ASP market) • Increased leverage of web-based services • Development of standard formats (e.g. XML) and tools that permit interoperability between systems

16. Banking and Payment Services: Strategic Issues for the Banks and Corporates • In-country and cross-border bank pooling and enhanced payment services offer • Progress towards integrated payment systems and standards • Virtual shared service centers for payables/receivables and payments/receipts processing to facilitate central processing and in-country settlements • Shift from paper to electronic payments

17. Leading Practices: • Increased quality of information in a flexible and cost constrained environment • Improved, streamlined and automated treasury business processes • Central treasury team becomes a business partner focusing on monitoring operations and management of strategic activities • Controls become embedded in the systems and processes • Reduced cost of risk management through enterprise-wide-risk management and stream lining review (outsourcing, Application Service Provider)

18. Future market segmentation

19. High-End Market: (Approximately 100 to 500 corporations) • Advanced risk management analysis/reporting • Sophisticated IT requirements integrated with e-business solutions • Outsourcing treasury technology services (ASP) • Leveraging benefits from ERP roll-outs • Multibank and/or monobank cross-border structures • Single bank local banking services • Shared Service Centres and Virtual Shared Service Centres • Automated analysis and decision making • Enhanced security of payments and other electronic communications • Real-time liquidity reporting and forecasting • Integrate treasury with working capital management

20. The Rest: (Approximately 20,000+ corporations) • Basic risk management and reporting capability • Rapid implementation requirements • Simple banking structures (may prefer monobank solution) • Outsourcing treasury technology services (ASP) • Limited IT support capability - simple requirements • Outsourcing treasury processes • Security of payments and other electronic communications • Liquidity forecasting • Working capital management tools (excluding inventory)

21. Key Opportunities • Deliver full suite of risk management and treasury management information requirements • Integrate treasury management applications with core business applications (CRM, ERP) • Applications available through ASP • Support multi-bank and monobank structures • Comply with FAS 133/IAS 39 standards • Integrate treasury management applications with liquidity forecasting and working capital applications • Web enable applications • Rapid implementation times (e.g. standardised approach for low-end market)

22. A Global Solution

23. Short/Medium Term Vision Bank and other service providers accessed through many-to-many connections leveraging existing connectivity and security standards Treasury Workstation Reporting Electronic Banking CashForecasting Payments Collections Applications integrated to meet individual customer needs Finance CRM SCM

24. Long Term Vision Financial service providers accessed through many-to-one-to-many structure (metamediary) ASP Portals Web Native Applications Treasury workstation Electronic banking Reporting Collections Cash forecasting Payments Outsourcing Marketplace Finance CRM SCM

25. What will be the key to your treasury technology?

26. Integrated Performance Measurement: • Improves Decision Making • Access to measures that truly reflect organizational performance and drive SHV • Decision Making based on risk-adjusted profitability - EP as driver for investment/divestment decisions • High-quality information base that enables data-driven decision making • Drives Enabling Technology • Incentives aligned to shareholder value creation and balanced scorecard • Scalable and open system architecture that addresses information needs today and in the future • Systems integration • Enhances Execution • Significant improvements in coordination between functions • Breakdown of ‘functional silos’ that prevented the organization from implementing strategies efficiently

27. IPM Delivering the methodologies and platform to enable integrated and forward-looking decision making that leads to superior performance and increased shareholder value