Treasury Transformation: Sometimes You Have to Leave It Behind
Transforming treasury sometimes means making like the Beatles: follow the sun.
Treasury transformation is all about keeping up with the pace of rapid change. And many corporate treasuries are contending with the transformational changes within treasury departments that are fueled by big shifts in business models and technology that threaten traditional treasury roles and functions. As a result, many look at HQ and changes there. However, another approach to transforming the department is perhaps to break it up. That is move parts around.
At a recent NeuGroup Treasurers’ Group of Mega-Caps (tMega) meeting, members explored the viability of relocating to low-cost locations as a start. This would include moving nonstrategic treasury operations to lower-cost parts of the US (especially if they’re currently in California), which can save a ton of money. Florida is a popular destination because it gives treasury an East Coast time zone presence at as much as 70% of a cost reduction to HQ (lower real estate prices, no state income tax, etc.). What’s more, talent also seems to be there. Moves like this are often coupled with shifting treasury roles to “global business services” or “business services centers.” In this way, treasury can follow the sun. Read more here.
Also this week, a look at pensions. A recent increase in treasury rates has given a slight boost to both corporate and public-sector pension plans in the last month. Nonetheless, there are many US pensions still struggling or facing shortfalls over the next few years. This is why some countries are adopting hybrid pension plans that are more sustainable and often offer better returns. The new schemes mimic the better parts of old-fashioned defined benefits (DB) plans and mixes in a little defined contribution seen in 401(k)s. The new pension is called “collective defined contribution” (CDC), and also known as “defined ambition.” Read more here.
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