Global Treasury Management – is this our new mantra?
You cannot go to a treasury conference these days without being bombarded by talk of global treasury management. This seems to be becoming the fashionable catch-phrase in treasury circles. Not surprisingly the banks with global capabilities are keen to encourage such talk and the consultants are not far behind as they explain that the benefits of ‘getting to global’ are difficult to attain without the appropriate expertise.
So is global treasury management the next major trend – our new mantra for the end of the noughties? Most major multinationals would claim to be managing globally already, or at least getting there, if the presentations are to be believed. Certainly some have closed or downscaled regional treasury centres in favour of global treasury centres.
Should we all follow by centralising treasury management to one central location? This sounds like very good news for treasurers working in Europe with a working day that connects East and West. The European working day is, for example, already the time frame used by CLS for realtime settlement of FX trades in the world’s major currencies.
Seasoned observers are agreed that centralisation is still a major trend, facilitated by technology that now makes it possible to get much better management information and communicate easily regardless of distance and time zone. But as Naveed Sultan from Citi says in this month’s Bank Interview, there is a possibility that some treasury centralisation might actually go in the other direction. Technology might facilitate the decentralisation of some functions to regain some of the benefits of local knowledge.
Meanwhile, the centralisation and global management of some functions will not necessarily lead to Europe. Sultan points out that global treasury management might ‘deconstruct an organisation and put the pieces in the most appropriate location’. Each unit would specialise in and manage a different treasury or finance function – each one a centre of excellence in a different part of the world.
And who runs these units? Does the company have to retain control? If the function can be centralised, can it be outsourced? Many industry experts seem to think so. So treasury outsourcing may be far from dead. Agency treasury may have never gained much traction but the idea of centralising and then outsourcing a treasury function to more cost effective units is gaining momentum. And those units may not be run by the company, nor have any great reason to be in Europe.
Not such good news for treasurers in Europe.