Heinz Bahni, Group Treasurer, SGS Group Management:

Everything that is of an executional and repetitive nature in treasury can be outsourced. Aspects of treasury which should definitely not be outsourced include strategy, bank relationships, pricing discussions and treasury controlling – all of these services should remain under the purview of the treasury department, not an outsourcing provider.

If you are thinking about outsourcing, it is important to have your own house in order in terms of processes. I do not think that by outsourcing a treasury service you can solve your internal problems. For example if you are considering outsourcing your exposure reporting because your accounting system doesn’t allow you, for some reason, to get regular information about your exposure, then outsourcing is not going to help resolve the problem. Before outsourcing, treasury must first correct issues such as these.

The second pitfall could be communication between the company and the outsourcer, such as a bank. In my experience, there can be discrepancies between language spoken by corporate treasury versus language used by the banks.

I think treasurers themselves see less of the value in outsourcing and more of the risks involved – and this could explain why outsourcing is not used more often in corporate treasury.

Eddie Fogarty, Managing Director, FTI Treasury:

If you are outsourcing a manufacturing process you would specify the end result and, whatever the product, you would hope to have returned an exact quantity to match that specification. The difference in the treasury world is that treasury is a process that must be integrated with the core business. That is why in our business we tend to speak more of ‘managed treasury’ as opposed to outsourcing, so as to differentiate from activity that can be contracted out to third parties.

Without overstating it, I think most or nearly all treasury processes are open to outsourcing. The key issue is: how is that done? When a core treasury process is ‘outsourced’, it has to stay integrated with the rest of the business. So, while I can certainly say that cash management, inter-company lending, netting, even operational foreign exchange (FX) management and transactions can all be outsourced, I would not suggest that those processes are lifted out of the enterprise and managed remotely by the service provider.

One of the greatest challenges is at the very outset with the decision itself. In my experience, some enterprises are comfortable with the concept but others see risk in going down that route. Clearly it is a significant decision. Everyone realises that treasury is an area of high risk, yet there are benefits to the business if outsourcing is done the right way.

Developing the correct analysis of what is proposed, what is envisaged and how it can be structured so that those risks are taken out of the equation is one of the biggest challenges. In our experience at FTI Treasury, the clients that work with us often say that they don’t know why many other companies don’t do it when they see how it runs in practice.

Having taken the decision, there will be further challenges but those can be dealt with by ongoing management. If a large US multinational company (MNC) is looking to set up a treasury centre in Europe – for example in Dublin or Brussels – then they are going to recruit people and acquire systems. In a sense, doing that through a managed treasury is not vastly different than doing it ‘in-house’. The key difference is that the staff, in that example, are on the payroll of the company itself. But the start-up process itself can be quicker, and you have an easier wind-down option, if necessary.

However, fundamentally the business is going to be conducted in a broadly similar way, albeit with stiffer terms and conditions, and stronger reporting, more contact points, more reviews, reporting and so on. Fundamentally, the management task from a treasurer or CFO perspective is not hugely different in a treasury operation run at a distance from that of one managed on an outsourced basis.

The treasurer has to engage with the service provider and the service provider will have to customise the solution. As each company is different, off-the-shelf products have limited appeal in this area. If the solution is developed properly, it will enable the level of confidence to be built that will allow the decision to go ahead.

At FTI Treasury, we think it is essential that we engage strongly with the parent treasury – that is good for the relationship, it is good for the business and it is good for risk management on both sides. Also, it is important to remember that it is never a question of ‘out of sight, out of mind’. The problems are not off your desk if you are the treasurer; all of the same issues are there – the only difference is the work is being done on your behalf by other people.

Brad Maclean, Vice President, Business Development, SunGard AvantGard:

The most frequently cited reasons to outsource include cost savings, technology changes, flexibility of operations, access to skilled talent and scalability of operations especially for growth organisations. The pitfalls and potential dangers are harder to quantify, but from our experience they are centred around several core challenges including loss of control, layers of communication, lack of support from the wider organisation and over-dependence on providers.

Expectations also trip up many major initiatives, with some of the best and brightest firms setting themselves up to fail by building unrealistic expectations.

In making the decision to outsource, key issues include:

• Be specific.

  Understand your exact needs by creating a balanced value/risk proposition mapping out your strengths and weaknesses across the treasury operations. Don’t limit the scope of this analysis as this will limit the scope of your perspective – most see outsourcing only for low value transactional operations, but many banks and advisors also provide higher-value services.

• Set expectations.

  Be realistic and set them early on in the planning process. Revisit them often.

• Be critical and merciless in managing your timelines.

  The smallest glitches can have wide-reaching knock-on effects.

• Set KPIs and measure them religiously.

  Continue to refine them throughout the year.

• Consider the alternatives, including shared services.

• Know your exit strategy.

  Failure to thoroughly plan your exit leaves you open to being held hostage by your providers.

Outsourcing is really a build or buy choice and, as with any organisational restructure, policy and planning will be crucial but the only opinion that matters is yours. While vendors and advisors will provide countless estimates and ROIs on the value/risk benefits, if you don’t consider all of the options fully, mistakes could prove to be costly, if not catastrophic, in the future.