‘treasury transformation’ trend has been sweeping global corporate treasuries in
recent years and there has been an elite group of multinational corporations
(MNCs) that pursue increased efficiency, enhanced visibility and reduced cost on
a grand scale in their respective finance and treasury organisations.
Triggers for Treasury Transformation
Why does a treasury department need
to transform? In the life of any organisation there comes a point where it is
necessary to take stock of where it is coming from, how it has grown and above
all where it wants to be in the future.
Corporates have grown by various
methods; through the launch of new products, entering into new markets, making
acquisitions and developing strong pipelines. However, to sustain further growth
they needed to reinforce the foundations and transform themselves into stronger,
leaner, better organisations for the future.
What triggers a treasury
organisation to transform? Before defining the transformation process, it is
interesting to look at the drivers behind a treasury transformation. A number of
triggers can typically be seen, as outlined below in Figure 1:
Triggers for Treasury Transformation.
Organic growth of
the organisation: Growth can lead to new requirements. As a result of
successive growth the as-is treasury infrastructure might simply not suffice
anymore, requiring changes in policies, systems and controls.
Desire to be
innovative and best-in-class: A common driver behind treasury
transformation projects is the basic human desire to be best-in-class and
continuously improve treasury processes. This is especially the case with the
development of new technology and/or treasury concepts.
Event-driven: Examples of corporate events triggering the need for a redesign of the
treasury organisation include mergers, acquisitions, spin-offs and
restructurings. For example, in the case of a divestiture a new treasury
organisation may need to be established. On the other hand, in the instance of a
merger, two completely different treasury origins – each with their own systems,
processes and people – will need to find a new shape as a newly combined entity.
External factors: The changing regulatory environment and increased
volatility in financial markets have been major drivers behind treasury
transformation in recent years. Corporate treasurers need to have a tighter
grasp on enterprise risks and quicker access to information.
role of corporate treasury: Finally, the changing role of corporate
treasury itself is a driver behind transformation projects. The scope of the
treasury organisation is expanding into the financial supply chain (FSC) and
consequently the relationship between the chief financial officer (CFO) and the
corporate treasurer is growing stronger. This raises new expectations and
demands of treasury technology and organisation.
A typical treasury transformation programme focuses on
treasury organisation, the banking landscape, system infrastructure and treasury
workflows and processes. Figure 2 below below highlights typical trends seen
in MNCs as they strive for simplified and effective treasury organisations.
Figure 2: Strategic Opportunities for Simplification.
From these trends we can see many state of the art treasuries strive to:
- Be centralised.
- ‘Outsource’ routine tasks and activities into a
finance shared service centre (FSSC).
- Have a clear bank relationship
management strategy and also a balanced banking wallet.
- Maintain a simple
and transparent bank account structure with automatic cash concentration
- Be bank-agnostic as regards bank connectivity and formats in
- Operate a fully integrated system landscape.
of a Structured Approach
There are many internal and external factors
that require treasury organisations to increase efficiency, effectiveness and
control. In order to achieve these goals for each of the treasury activities of
treasury management, risk management and corporate finance, it is important to
take a holistic approach, covering the organisational structure and strategy,
the banking landscape, the systems infrastructure and the treasury workflows and
A structured approach should start with an in-depth analysis of
the current state of the treasury organisation, identifying both its
shortcomings and key improvement areas. After that the future state and
future-proof treasury organisation can be designed and the realisation of this
project planned against a multi-year roadmap. After getting the required
business cases in place and performing the necessary selection processes, the
future-proof treasury department is realised.
Zanders applies a seven-step
approach to treasury transformation at its clients, as follows:
- Solution Design.
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