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Is treasury destined to be outsourced in future?

One former corporate treasurer with a strong background working in IT believes that technology is strategically changing how treasury departments work. Is the end game total outsourcing?

In an interview published by Kantox, Patrick Verspecht, the former global treasurer at General Electrics (GE) Measurement & Controls and a member of the board of the Belgian Association of Corporate Treasurers, outlines his vision of the future of treasury. The role of corporate treasurer and the treasury department could look very different in 10 years time and most of that change will be driven by technological innovation. It's feasible that we'll be seeing a very slimmed-down version of the current treasury set-up and the treasury team of 2027 could consist of far fewer professionals using outsourced functions for many of the activities currently considered to be key treasury processes.

More treasury responsibilities could be outsourced

Outsourcing payments and other back-office activities to shared service centres (SSCs) has been a common tendency among multinationals for many years. Verspecht names Boeing, IBM and GE among some of the corporates that have moved their low-value, high-volume accounts payable (AP) into payments factories and shared service centres. But the trend to centralise AP is now also being applied to other functions and Verspecht gives the examples of “non-back-office-related activities, like banking relationships, FX risk management and to some extent, trade finance.”

He argues that this migration of traditional treasury activities to an SSC will have implications for the role of corporate treasurer, either adding to or removing some responsibilities. And one scenario is that the whole of treasury, as a non-operational function, could be outsourced either to a SSC or even to a third-party service provider. This is driven by the unrelenting corporate push for cutting cost and simplifying processes. The former treasurer states: “In my view, almost any corporate functions will be 'at risk' of being outsourced, whether internally (SSC) or externally. For example, we are starting to see part of the tax functions being outsourced to external firms, such as indirect tax activities (VAT, Customs…). Basically, you would keep the full ownership of your core business activities, letting you separate the operational from the non-operational.”

Smaller treasury teams in future

Verspecht's envisages the treasury of the future as being a small team of high-calibre professionals using resources from SSCs, but remaining in control of fraud, risk management and compliance.

This vision seems like a very likely scenario as increasingly sophisticated treasury managements systems and ERPs will enable many financial processes to be automated or to be outsourced (internally or externally), also enabling a small group of treasury professionals to maintain controls and monitor cash flows and payables. Treasury professionals will have to revise their skill sets (perhaps focusing more on IT skills and knowledge of compliance, fraud and risk) to remain competitive in the future treasury jobs market.


CTMfile take: What's your opinion on this? Do you feel like your treasury role could be outsourced? What are you doing to keep your skill set relevent?


This item appears in the following sections:
Operations
Outsourcing Cash & Treasury Management Operations
Shared Service Centre Operations

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Comments

By MW on 16th Jun 2017:

Reading the article, I believe the first question you need to ask is: how do you actually define “treasury”. And I am, sure, if you ask 20 treasurers across the globe you will get at least 21 different answers.
Purely looking at bigger corporations (at SMEs the title “treasurer” is probably often just a shiny business card “goodie” for the person that is responsible for doing accounting and AP (including keying the 5 payments a week into the EB system)), while financing is still handled by the owner or company manager)

“Treasury” at many companies is already (and has been for many years, often from the first installment of a dedicated treasury team) the core team that manages the more complex parts of a company’s finances.
Operational “mass” activities like AP/AR, which the author has identified as a core example for “outsourcing” to an SSC, at such companies have never been the responsibility of the actual treasury team (except probably some “oversight” functions and obviously the responsibility for managing the resulting funding / cash flows).
Actually, if you look at historical developments, the “treasury” functionality as a separate team was often installed as a split off from the accounting and / or AP/AR departments of a company.
So talking about an outsourcing of “treasury” in that context is likely not correct for many companies.
Installation of SSCs, while more a centralisation rather than an outsourcing (SSCs are usually still owned by the group), is something that affects AP/AR teams, which were often distributed across countries and individual entities.

Still, “outsourcing” of treasury activities happens, often driven by IT developments and external providers, and does usually result in staff reductions. TMS become more powerful supporting management of risk, FX is done online through electronic systems rather than calling five different traders to get the best rate - or, especially for smaller transactions, processed STP through the platforms of core banks or sometimes “fintech” providers (this part would actually qualify for being called “outsourcing”.
But even here some will argue that all this outsourcing simply enables the treasurer (and his team) to focus on their main tasks - managing the relationships to their bank, securing the funding of the company and support strategic moves like M&A.

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