Global Expansion: A Treasury Road Map Towards Cross-Border Success

Global Expansion

June 3, 2015

A treasury road map towards

cross-border success

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Today’s agenda

• Business at the global inflection point

• The three keys to a plan

– Configuring account structures: Your foundation for growth

– Doing business in the local currency: Gain efficiency and expand markets

while managing exchange rate risk

– Growing cross-border relationships: Manage trade risk and maximize

working capital

• Conversation with iRise Controller Peter Felesina

• Your road map

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Business at the global inflection point

• We see innovation companies going global at an early stage.

• Our clients frequently ask us for advice about this challenging

transition. For some, it’s complex and scary, carrying

commercial, political and currency risks.

• When done right, it can deliver a competitive advantage,

opening new markets, and creating operational efficiencies.

• Today, our panel will show you how to manage those risks

and enhance your chances of success.

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Cross-border momentum

Source: Silicon Valley Bank Innovation Economy Outlook 2015 Survey

Over two-thirds of revenue-generating companies in our latest

Innovation Economy Outlook survey expect to earn revenue

abroad in 2015

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Audience poll

Where are you on the road to becoming a global business?

Pick one:

o I am already active across borders.

o I will start within the next 12 months.

o I haven’t decided when to start.

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Configuring account structures

Anne BacherSenior Advisor, Global Treasury & Payments

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A strategic approach to account structure to support cross-border transactions

• Scalability — Create an account structure that grows

with your business

• Visibility — See where your money is throughout

the business cycle

• Control — Manage risk by separating accounts

and controlling activity from a central banking platform

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Accounts and payments to support international transactions – Initial Stage

Digital banking platform for visibility and control

Activities and flows:

1. International payments are typically

for purchasing parts overseas

or to pay for outsourced work.

2. Receipts consist of investor funds

and distributor payments.

3. U.S. dollar wires for payments

in and out.

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Supporting international transactions as activities expand

Digital banking platform for visibility and control

Activities and flows:

1. International payments are typically

for purchasing parts overseas

or to pay for outsourced work.

2. Receipts consist of investor funds

and distributor payments.

3. U.S. dollar wires for payments

in and out.

4. Add FX wires as demand warrants.

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Supporting international transactions as currency activity grows

Digital banking platform for visibility and control

Activities and flows:

1. International payments are typically

for purchasing parts overseas

or to pay for outsourced work.

2. Receipts consist of investor funds

and distributor payments.

3. U.S. dollar wires for payments

in and out.

4. Add FX wires as demand warrants.

5. Add currency account as volume

in a specific currency grows.

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Supporting international transactions and in-country activity

Activities and flows:

1. International payments are typically

for purchasing parts overseas

or to pay for outsourced work.

2. Receipts consist of investor funds

and distributor payments.

3. U.S. dollar wires for payments

in and out.

4. Add FX wires as demand warrants.

5. Add currency account as volume

in a specific currency grows.

6. Form sales and marketing subsidiary

in Japan. Keep billing and collections

in the US. Open in-country account

with local bank.

• Use SVB Online Banking portal to

gain visibility and transfer funds

to and from in-country accounts.

Digital banking platform for visibility and control

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Doing business

in the local currency

Nate WyneForeign Exchange Advisor

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How foreign exchange can help you build markets and your bottom line

• You can benefit from transacting in the local currency rather

than U.S. dollars, whether you’re funding an international office,

paying vendors or invoicing across borders.

– Expand markets by eliminating currency exchange tasks and costs

for your cross-border business partners.

– Gain additional control, transparency and cost savings for your

international payables and receivables.

– Manage currency volatility risk through commonly used hedging tools.

– Enable accurate financial forecasting for overseas accounts and activity.

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Why the exchange rate today could be different from the rate in this morning’s newspaper

Source: Bloomberg, Japan Yen vs U.S. Dollar

JPY RATE

Because it’s a moving market!

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Managing foreign exchange risk

• Managing FX risk is necessary to mitigate the risk

of currency volatility.

• Ignoring FX risk has several pitfalls:

– U.S. companies with un-hedged foreign currency payables or receivables

may see topline earnings volatility.

– U.S. exporters gain a competitive advantage by invoicing product in foreign

buyers’ home currencies.

– Foreign sellers charge a premium to invoice in U.S. dollars, but hedging

foreign payables through forward contracts involves no fee.

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Misconception: Companies are immune to foreign currency dynamics

• Reality: Pricing and reporting in U.S. dollars does not

mitigate currency risk.

– Example: If the U.S. dollar strengthens, it will cost your customer

more in his or her local currency to pay you.

– This can create business risk for you if the customer defaults or

cancels purchases and goes to another company that prices

in its own currency.

• Outcome: Companies big and small, private and public can

benefit from FX hedging.

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Managing the risk of currency volatility

How direct FX payment can improve transaction efficiency

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Growing cross-border

relationships

Dennis BrownSenior Trade Finance Advisor

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International risks

• Commercial

– Slow payment

– Bankruptcy

– Contract repudiation

– Contract dispute

• Country/Sovereign

– Foreign exchange control

– Payment moratorium

– Civil unrest, war, natural disasters

• Performance

– Quality of goods

– Delivery

– Foreign exchange fluctuation

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Forms of Payment and Risk Hierarchy

• Open account

• Cash in advance

• Documentary Collection

• Letter of Credit

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Questions to ask before selecting method of payment

• What’s our leverage with this buyer or seller?

• Can the business afford the loss if it is not paid or shipped on

time?

• Will the sale still be profitable if we extend credit and wait

several months?

• How will this sale affect my Days Sales Outstanding (DSO)?

• If the shipment is made and not accepted, can an alternative

buyer be found?

• Is the product off the shelf or made to order?

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Gaining assurance: Using a Letter of credit

What it is

– A bank’s irrevocable commitment to pay the beneficiary when documents

are submitted

How it works

– An issuing bank for the buyer substitutes its credit for the buyer’s,

assuring the beneficiary that the bank will pay, provided the terms and

conditions of the LC are met.

Commercial Letter of Credit

• Involves shipment of goods or

performance of services

• Primary payment instrument

Standby Letter of Credit

• Not intended to be drawn upon

• Functions as a guarantee

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To importerTo exporter

Benefits of commercial letter of credit

• Issuing bank’s credit replaces the

buyer’s credit.

• Eliminates foreign bank and country

risk if confirmed by Silicon Valley Bank

or any U.S bank.

• Protects seller against order

cancellation; provides highest degree

of protection short of cash in advance.

• Seller can forecast cash better and

improve Days Sales Outstanding (DSO)

• Provides built-in financing mechanism

that will allow the exporter to have SVB

discount the transaction to receive

payment prior to maturity

• Assures that payment will not be

made until documentation proving

shipment of the merchandise is

submitted to the bank.

• Extended payment terms may be

granted by permitting drafts drawn

under the LC to be payable at

a future date.

• Importer can set up a shipping

schedule to which the seller must

adhere in order to be paid.

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Ensuring commitments

Standby letters of credit

An issuing bank's irrevocable commitment to make good on an agreement if the

applicant fails to fulfill his or her contractual obligation.

How it works

– Supports applicant’s obligation under a contract or agreement by adding bank’s

commitment to make sure terms are met.

– If the applicant fails to comply with the terms of the agreement, the bank must pay

the beneficiary when documents are presented in compliance with the terms and

conditions of the letter of credit.

– Secondary mechanism of payment : The letter of credit should be drawn on only

if the applicant fails to fulfill his or her obligation covered in the underlying contract.

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Standby letters of credit: Frequent uses

• Invoice support/credit limits

• Leases/office or equipment

• Bid bonds

• Advance payment

• Performance bonds

• Surety bonds

• Bank guarantees

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Conversation with iRise

controller Peter Felesina

Peter FelesinaCorporate Controller, iRise

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Your road map

Global expansion can open up new possibilities of growth

for your company. To seize those opportunities while managing

risks, focus on three things:

Configuring account structures for maximum control

– Create an account structure that scales as your business grows.

– Manage risk by separating accounts and managing activity from a central

banking platform.

Do business in the local currency

– Gain efficiency and expand markets by doing business in the local currency.

– Manage exchange rate risk with common hedging tools.

Grow cross-border relationships

– Expand relationships through guarantees and finance options.

– Maximize working capital by extending payments and accelerating revenue.

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Questions?

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Today’s speakers

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Peter Felesina

Corporate Controller, iRise

Peter Felesina is Corporate Controller for

iRise, a global leader in enterprise

visualization and simulation software. He

has previously been a controller for

software companies Apriso Corp., and

Peerless Systems Corp., and held

additional finance roles at other

companies. He earned an MBA in

Finance from San Diego State University

and a bachelor’s degree in accounting

from University of Nevada, Reno.

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Anne Bacher

Senior Advisor, Global Treasury

and Payments, Silicon Valley Bank

[email protected]

650.855.3084

Anne Bacher has more than 20 years of

experience in treasury management as

both a corporate practitioner and an

advisor to bank clients. At SVB, Anne

delivers strategic and tactical guidance on

worldwide account and service solutions

to clients. Previously, as a treasury

manager for several major technology

companies, including Apple and

Electronic Arts, Anne specialized in

treasury operations, treasury systems and

the creation of SOX 404 Controls. She

earned her bachelor’s degree in

economics and in history from UC

Berkeley, and she holds the Association

for Financial Professionals’ Certified

Treasury Professional (CTP) designation.

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Nate Wyne

Foreign Exchange Advisor,

Silicon Valley Bank

[email protected]

818.382.2671

Nate Wyne is the Southern California

foreign exchange advisor for Silicon

Valley Bank. Nate hold a bachelor’s

degree from the University of Utah in

international studies for business. Nate

partners with his clients to create and

implement sound risk-management

practices around foreign exchange and

cash management. After completing his

undergraduate degree, Nate pursued a

career in retail banking before moving to

commercial and eventually corporate

banking. With 13 years of banking

experience across the full gamut of

advisory roles – Nate enjoys helping

growing businesses focus on what they

do best.

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Dennis Brown

Senior Trade Finance Advisor,

Silicon Valley Bank

[email protected]

949.754.0838

Dennis Brown functions as a senior trade

finance advisor in the International Group

responsible for providing guidance as well

as delivering tools to clients as they

venture into cross-border markets. He

focuses on our clients' financial supply

chain and their efforts to improve working

capital metrics and mitigate risks. Dennis

joined Silicon Valley Bank in 2010 after

working with several money-center and

international banks. His 30-plus years’

experience in both trade operations and

business development allows him to act

as a trusted advisor to our clients. Dennis

obtained a Bachelor of Science from the

University of San Francisco.

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About SVB

For more than 30 years, Silicon Valley Bank has helped innovators and

their investors move bold ideas forward, fast. Today, we provide a full

range of banking services to companies of all sizes in innovation centers

around the world.

To learn more, call your relationship manager at 408.654.7400, or visit

our website at www.svb.com.

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Disclaimer

Foreign exchange transactions can be highly risky, and losses may occur in short periods

of time if there is an adverse movement of exchange rates. Exchange rates can be highly

volatile and are impacted by numerous economic, political and social factors, as well as

supply and demand and governmental intervention, control and adjustments. Investments

in financial instruments carry significant risk, including the possible loss of the principal

amount invested. Before entering any foreign exchange transaction, you should obtain

advice from your own tax, financial, legal and other advisors, and only make investment

decisions on the basis of your own objectives, experience and resources. Opinions

expressed are our opinions as of the date of this content only. The material is based upon

information which we consider reliable, but we do not represent that it is accurate or

complete, and it should not be relied upon as such.

©2015 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC

and Federal Reserve System. SVB>, SVB Financial Group, and Silicon Valley Bank are

registered trademarks.

Thank you.

www.svb.com