Special Report | Treasury Outsourcing
THINKING THE UNTHINKABLE
The continuing focus on cost reduction and greater efficiency is prompting some to look at outsourcing not for its possible risks but for its benefits.
Chris Jameson, head of GTS corporate sales, Central Europe and EMEA, BofA Merrill Lynch, says the bank’s MTLS solution is seeing renewed interest from corporate clients. “Companies have generally had streamlined treasury teams, but even more so today,” he says. “With the continuing attention on cost savings, treasury teams are thinner—and they are also becoming more strategic in their focus.”
Another driver is the falling cost of technology. “Cloud computing offers a different level of flexibility,” says Dhillon. “If you want more data, we can quickly go and buy it, rather than having to buy a server and install it in the data room.”
So how are companies approaching treasury outsourcing today? “Some people just want a straightforward transactional solution, while others are looking for a deep-rooted relationship, which will keep treasury at the heart of the business,” says Dhillon. He adds that, although a lot of companies are aware that outsourcing is an option, many don’t know how to approach it. “Moving your treasury operations requires a lot of thought: If you have people already working in treasury, you need to set up a project team in order to make sure that activities are migrated across in a very controlled manner.”
Not everything is suitable for outsourcing, however. Group treasurers usually retain strategic decision-making and determine group policies. “For example, if the company wanted to do an FX trade, we [the outsourcing company] would not decide which banks we would reach out to,” he adds. “The company would decide which banks to include, and we would then connect with each of those, based on the company’s instructions.”
While some companies adopt outsourcing as a longer-term solution, others are using it as a means of fulfilling their short-term requirements. “If you have a client who is moving into a new region where they do not have a treasury function, they may outsource in the initial stage as they put a team together,” says Suzanne Janse van Rensburg, regional head of liquidity and investments, global transaction services, EMEA, at BofA Merrill Lynch. “Or if a company is engaging in mergers and acquisitions, they can effectively ‘lift and shift’ a treasury function and then mold it into the shape they want, before taking it in-house.”
The rise of hosted technology solutions, such as Cloud-based treasury management systems and SWIFT service bureaus, means that many companies are now outsourcing treasury activities at one level or another.
Enrico Camerinelli, senior analyst at Aite Group, says that where traditional outsourcing is concerned, treasury management system vendors such as SunGard are increasingly offering not only to run applications on their hosted systems but also to run certain operations on behalf of their corporate clients.
The past few years have shown that companies can outsource treasury operations in a number of different ways. As a result, the concept of outsourcing in one form or another has become increasingly mainstream, which can only be a positive development for outsourcing providers across the board. n