State-of-the-art solution at Expedia earns Judges’ Choice
The challenges this solution addresses were:
Limited visibility to performance – Expedia previously did not have a comprehensive industry benchmarking process across its 40+ currencies to provide full visibility into how cash/investments were faring. In terms of performance metrics, roughly half of the company’s 600+ bank accounts, term deposits and other money market funds were not effectively measurable by treasury. “We needed to evaluate and benchmark gross yield with confidence, verify investment income and calculate performance including cost/benefit of hedging. This is because treasury actively converts excess cash into and out of USD, invests them, all while hedging exposures to optimise economic returns,” explains Ken Bugayong, CFA, Treasury Manager, Expedia Group.
Data accuracy – details on the company’s yields and rates on its bank accounts were incomplete and subsequent rate changes and back-valuations were not being fully tracked. Data recording practices were sub-optimal and other relevant indicators were not being captured due to spreadsheet limitations.
Accelerating processes and improving speed of decision-making – whilst the company had a treasury workstation, it lacked the bespoke functionality required to perform the rigorous analytics and integration with internal Expedia systems. Tasks were repetitive and data was spread across multiple sources. Excel-based reports meant data stitching from across multiple files. Another challenge was the sheer length of time taken to gather and standardise the information.
Improving resource utilisation and financial results – absent relevant benchmarks, treasury was unable to assess the competitiveness of investment rates by currency. Expedia did not have complete knowledge over whether it was optimising return on its investments. Furthermore, because of the separate systems used for FX hedging, coming up with holistic investment results net of foreign currency hedging costs/benefits was a challenge.
Over the course of more than a year, Bugayong led the creation of a state-of-the-art data warehouse and business intelligence solution. This now provides enhanced analytics and reporting, along with a performance attribution model that explains the key drivers of investment results, allowing the company to uncover new investment opportunities and diagnose areas of underperformance. Performance measurement considers a holistic view of both investment and hedging activities (within the balance sheet hedging programme), as well as market benchmarks (sourced from Bloomberg).
Microsoft’s Power BI is the core of the solution, with Bloomberg providing the required data and market intelligence feeds. Kyriba and Oracle provide the treasury workstation and accounting ERP systems respectively.
“The solution has paved the way to over a million dollars in productivity benefits and value-adding investment decisions/strategies. It provided the team better visibility to cash and investment performance, uncovering US$14m in benchmark outperformance over the past two years,” explains Bugayong.
Best practice and innovation
From a technological standpoint, an entire data warehouse was deployed and implemented, converting existing spreadsheets into structured and cohesive relational databases. FX trades and hedging data were modelled intensively and incorporated in the benchmarking process. This underlying schema incorporates the complex relationships across various data sets, encompassing accounting entries, workstation trades, and key indices/benchmarks. This allowed Expedia to introduce a new framework for comparing interest income data and accounting journal entries on investments.
The company also introduced periodic investment meetings to systematically evaluate performance by currency and bank, both on a hedged and unhedged basis, and assess how the portfolio was performing against a benchmark. This process offered the opportunity to arrive at better informed decisions on whether to convert a currency into USD or to invest in the currency concerned.
Improved decision-making through benchmarking; increase in income; integrated FX hedging programme and enhanced productivity.
“The project has uncovered new insights, elevated the speed and quality of decision making, and enhanced intelligence in investment and liquidity management,” concludes Bugayong.
Expedia Group Inc. is the world’s largest diversified travel platform with an unmatched portfolio of leading travel brands, including but not limited to Brand Expedia, Hotels.com, Egencia, Vrbo, Trivago, Orbitz, Wotif, Travelocity and Hotwire.