Sibos 2012: Outsourcing treasury function does not guarantee cost efficiency

Corporate treasurers are advised to think carefully about outsourcing parts of their treasury function as it might not lead to effective cost savings.

  • 01 Nov 2012
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Companies need to carefully weigh the benefits between operating parts of their treasury function in-house or to outsource to service bureaus. If done too hastily, the company might find out that a decision to outsource has not brought any benefits.

There is one rule that a corporate needs to understand before outsourcing: make sure that your processes are properly in place, say speakers at a Sibos panel discussion entitled ‘Shared service centres. A global trend? For all customers?’ in Osaka on October 31.

“First of all it is very important to look at the underlying functions that you need to outsource,” said Jolly Hubert, global head of channel and enterprise services for Citi. “Corporates that do that function really well and reengineer all their data process, I think it would be worth looking at outsourcing as long as they think about ‘What am I outsourcing? What is my intellectual property? What is my underlying information that they are going to touch?

“Outsourcing is a significant effort that needs to be thought through otherwise it’s not going to give you the efficiency that you are looking for,” he added.

Shunsuke Araki, general manager of global cash management services department, e-business division for Mizuho Corporate Bank, notes that the sharing of highly confidential information should be handled by a company’s in-house treasury operation and cannot be outsourced.

“If the operation seems to be continuing without any default, then the company will be very conservative and will not outsource anything,” he said.

Some considerations that corporates need to look at include the location of the vendor and the underlying quality of people that work for the vendor. Ideally, the vendor needs to be located in the same timezone as the corporate to ensure timeliness of processing, highlight speakers.

Sharon Petrey, assistant treasurer for The Coca-Cola Company, says companies should have the right processes in place before outsourcing.

“It’s important to think about it very deeply before you outsource because your outsource vendor is just really following your directions and not necessarily going to improve it,” she said on the panel.

Additionally, some corporates with complex business models might find it difficult to outsource and can only rely on their in-house functions. The same goes for a company that is in the middle of standardising their processes and until that is completed, it might consider outsourcing.

Treasury functions that, however, can be outsourced by a corporate are usually those with limited in-house skills sets. One example is the Swift function, which is the ability to send and receive financial messages effectively and the transportation of files on a timely basis.

“From a treasury perspective, at the moment the part that we have outsourced is the Swift bit, where we have actually engaged with a service bureau,” said Lee Thong Tan, general manager group finance for International SOS, a company that provides medical assistance, international healthcare and security services. “The reason being is that in Singapore, not many corporates are on Swift yet and therefore, to find this kind of expertise is very difficult. I don’t think at the moment is cost efficient to maintain one person in the company just to maintain the system.”

“At the same time, in terms of implementation, the service bureau will be able to assist to do all the connectivity, technical part with CMS [content management system], with IT (information technology), with banks and takes away a lot of loan from the treasury people,” he added.

Companies should speak to their trusted providers, including banks, fellow corporates, both technology and outsourcing vendors to gain knowledge into whether outsourcing is beneficial for them, says the panel.

  • 01 Nov 2012

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