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AFP Releases New CTC Guide on Global Treasury Structures

  • By Ira Apfel
  • Published: 2012-11-08

Market volatility, overseas growth and the emergence of more sophisticated technology tools are driving many treasurers to rethink their organizational structures to better support their changing business requirements. That’s why the new CTC Guide on Global Treasury Structures is so timely, said author Nilly Essaides.
 
“People are rethinking organizational structure because of two very dynamic trends,” said Essaides, a veteran treasury journalist. “As we saw with the recent string of dismal earnings reports for Q3, slow growth in the U.S. and negative growth in Europe is pushing companies to look for profits overseas in general and in emerging markets more specifically. This is putting new strains on treasuries at both large and midsize companies. They need to support business expansion sometimes in difficult markets, and they need to do it efficiently.”

New technology also is driving organizational re-structuring, Essaides said. “Over the past three to five years we’ve seen a big shift in how vendors deliver technology. The emergence of cloud computing means even smaller companies can get global solutions so technology makes it possible to communicate effectively, globally,” she explained. “It also makes it possible to institute global processes for things like cash forecasting and cash management.

“These two trends are totally interrelated. One drives the other and they feed off each other.”

With analysis by Essaides and four case studies of corporate treasury organizations grappling with the new realities of working globally, the CTC Guide on Global Treasury Structures will give readers a sense of how treasuries are revising their organizational structures and are evolving their processes, technology and people to better align them with their broader corporate mission. “A lot of people are thinking about changing, or are in the process and looking to see where other companies have gone,” said Essaides. “This is very helpful when trying to figure their own path.”

Most important, Essaides said, readers can see what the end result can look like. “It may not be feasible or viable for them at this stage but it’s very important that when you start changing things that you have a vision of where you might end up so you don’t start putting obstacles in your way then you don’t have to come back five years later and changes things up,” she said.

“For years it’s been centralize, centralize, centralize,” said Craig Martin, executive director of the CTC. “Today, it’s about having really intelligent people who are experts and not just about location.”

What’s new

After interviewing multiple experts and several North American treasurers for the guide, Essaides found two new developments at large multinationals. The first is the ability to push decision making to the regions. “Complete centralization used to be the holy grail of treasury organization but there are smart people running regional centers and at local markets. U.S. headquarters is delegating decision making to these people, using technology to make sure everyone is on the same page,” she said.

One company she interviewed has cash management reporting into Europe and is considering moving FX to Asia. “So people report in to a leader in another region,” she said. “They’re totally virtual. Even in the U.S. most of the staff works from home half the time.”

The other big change Essaides found is a move to co-locate financial and business flows. “In the past, the treasury organization was an over-layer, trying to bridge disparate business flows with cash trapped in multiple locations  and intercompany A/P and A/R moving all over the place,” she said. Today, “using trading companies and global purchasing, and using re-invoicing centers, companies are marrying the flow of physical exposures with treasury structures like an in-house bank. This creates new efficiencies and lines of sight into exposures. This is only going to get more pronounced as companies build up their Latin American and Asian presence.”

The biggest mistake treasurers make is to overlook the importance of people in change management, said Essaides. “Someone I interviewed for the guide said you can’t support the world with five people in the U.S., even if they’re the best trained ones. I agree with that. I think treasurers need to learn more about process management and change management,” she said.

One company that underwent a major technology overhaul and put a lot of effort into managing the soft aspects of change worked with a consultant to create new job descriptions, created skills lists, and identified for each person what they know and what they need to learn and have them sign off on it. “The idea was to involve them in the process to get them comfortable,” said Essaides.

What’s ahead

Essaides said technology will drive even greater structural change in the future. “The latest research shows fifty percent of companies still operate on spreadsheets. That’s going to change,” she said. “In five to 10 years treasury professionals will approve payments on their smartphones and tablets. New, younger professionals grew up with these tools. They will enter the job market and expect the same technology in their work.”

To download a copy of the CTC Guide: Global Treasury Structures click here.

Copyright © 2014 Association for Financial Professionals, Inc.
All rights reserved.

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