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The beginning of the end of treasury?

by Katrina Rollinson

Published: 18 August 2017

I don’t know about you, but if I were asked to map the core processes for which my department was responsible so that they could be outsourced, I’d be worried. If even I could describe that process as “breaking down and redesigning existing onshore jobs” for the purpose of “migrating work from OpCos to SSCs”, I would start to wonder where this was all going.

These are quotes from a senior treasury staffer at a global multinational and they raise an obvious question: can you not see what is happening here?

This treasury started off “migrating the ‘typical’ SSC treasury processes”, bank reconciliations and bank account management, followed by cash forecasting and bank guarantee management. “Over the years since, more and more has moved out,” he says.

The past decade of developments in treasury paint a consistent picture: a relentless drive to increase efficiency through technology, constant pressure to do more with fewer staff, a migration of jobs and processes to offshore processing factories with a combination of lower staff costs and technology.

The constant drive for treasury efficiency is a drive for connectivity, straight-through processing and automation. These changes bring visibility, the possibility of real-time analytics and better security and risk management through easier process monitoring. But they also remove the need for human beings.

Add robotic process automation, the next generation of centralised SSCs and Big Data, which increasingly requires AI-driven tools to analyse it. Add an increasingly cashless society which should eliminate most if not all of the paper and egregious reconciliation problems of the present. What’s left for treasury?

A common response is that by removing the tedious, low value-added activities from treasury, senior treasury staff are freed up to focus on delivering strategic insights, but is this likely? Just as in the consumer domain, where people prefer to use search engines and other forms of analytics to gather their own data and insights, it could be that in time CFOs will access analysis directly from smart systems. Also, as, PwC finds in its 2017 Global Treasury Benchmarking Survey, “Virtualisation is prevalent in treasury and will shape treasury probably even more than other business functions. Already two thirds of staff involved in treasury processes are not reporting directly or even indirectly to the treasurer.” In most organisations, if you lose reports, you face being squeezed out.

That trend reveals at least one thing for treasurers to do: “A number of treasurers have outsourced their back office and payment factory processes to shared services and exposure reporting increasingly involves local finance. These treasurers are more concerned about effective Key Performance Indicators (KPIs) and effective Service Level Agreements (SLAs) for these functions rather than their day to day management.”

More optimistically, it is clear that CFOs still want a treasury function. “CFOs expect treasurers to take responsibility for enterprise wide liquidity and financial/commodity risks. They urge treasurers to identify exposures proactively and manage liquidity actively.” In addition, treasurers themselves report that they are increasingly being used in a cross-business unit collaboration and consultancy role outside of their direct reporting chain. In this sense, treasury has indeed the chance to become the strategic business enabler we’ve all been talking about.