Treasury at one company is migrating some processes to a COE in India, part of a larger transformation.
The increasingly popular move among multinationals to establish a treasury center of excellence (COE) in a low-cost country or region is a multifaceted endeavor that for one NeuGroup member company included thoroughly assessing processes to determine which ones remain in corporate treasury or regional treasury centers, which go to a managed service provider (MSP) and which belong in the COE.
- Members of NeuGroup for Mega-Cap Assistant Treasurers heard a firsthand account of the company’s journey to complete a treasury process realignment by mid-2024 that includes a COE in Bangalore, India. The treasury team’s director of global operations described the steps taken so far, lessons learned and the treasury COE’s relationship with the corporate’s global business services (GBS) organization.
Big picture. The development and expansion of that GBS organization and the more recent establishment of COEs are part of a transformation designed to limit transaction processing and provide deeper business insights to senior leadership throughout the enterprise, the member explained. This will be achieved in part through standardization and simplification of processes, and reducing work through automation and rationalization.
- When asked by a peer about compensation cost savings, the member said there is value to realize in India. However, she made it clear that eliminating jobs is not the point of the COE. She expects treasury’s size to change over time, but more as a result of attrition, moving jobs and not backfilling positions. And in response to another member’s question, she said treasury is describing the movement of processes to the COE as a potential opportunity.
- “We’re saying your job will look different in the future. Today you may be spending your time on operations. Tomorrow, we hope you’re spending your time providing insights to our organization. That’s how we’ve framed it and that’s been beneficial.”
COEs, SSCs and MSPs. As NeuGroup Insights noted earlier this year, the subject of COEs often prompts a debate about how they differ from shared services centers (SSCs) used by many corporates—a distinction that matters. The presenting member said, “We view COEs as more of a center of expertise where we can pull in higher-value, operational processes that introduce more risk; I think of SSCs as performing very rules-based, prescriptive processes.”
- For many non-treasury functions, this company is pushing repetitive, transactional, rules-based processes out of corporate teams to a third-party MSP, not an SSC, as part of a realignment overseen by the GBS organization. But only 5% of treasury processes will be performed by the MSP, including global bank account reconciliation.
- “Our MSP doesn’t have the expertise to support all the transactional processes” for treasury, the member said. “There are and will be cases where our COE is supporting both transactional and value-add processes.”
- The scope of a COE may change over time. One member quoted in our earlier story said, “When we started our COE five years ago, it performed pretty simple work, like data aggregation and first-line analysis. Now we are using it to concentrate high-caliber talent who can develop advanced models, which serve finance in executing sophisticated analytics.”
Building the COE. Treasury designed a global standard taxonomy that involved documenting all its processes, requiring all treasury teams to allocate their work using the taxonomy. Workshopping sessions classified every process as either transactional, value-add or strategic. The final stage of the process is deploying structured, repeatable standard processes, tools and functional roles.
- As a result of the assessment, treasury is moving these areas to the COE:
- Manual treasury payments.
- Treasury closing processes.
- Back-office functions for derivatives.
- Treasury system (tech) support.
- Treasury reporting.
- To run the COE organization, the member hired a senior manager with extensive treasury experience who is already based in India and works for the company. He will oversee treasury operations (payments, closing and back office) as well as treasury technology, which will handle tasks including level one and level two help-desk ticket support for activities including bank account management.
- The senior manager will report to the member, who reports to an assistant treasurer. The COE reports to corporate and reports indirectly via a dotted line to the GBS organization. (Corporate treasury will manage governance, strategy and policies.)
Lessons learned. The experience of the GBS organization demonstrated for treasury the downside of lifting and shifting processes from corporate or business teams to a COE, MSP or SSC. “Ideally you would standardize and automate before you shift work to a managed service provider if at all possible,” the member said. “We are putting those standardizations and automations in place before we move forward to establish our center of excellence.”
- Hiring in India is hard. “The sooner you can start, the better,” the member said. The challenge reflects intense competition for talent and the need to find people with very specific skill sets. Another issue: finding people willing to work North American hours. “No one wants the night shift: that’s where we lose people.”
- To train new employees, the member is overseeing corporate and regional teams that are documenting “as-is processes” using process maps and detailed desktop procedures. “We want enough details in those desktop procedures so that when we transfer it, theoretically someone could perform the process by just having a desktop procedure in front of them.”
- The team is also mapping what it sees as the standardized, global approach to the process it hopes to achieve in the future. “What will a global standard process look like when we realign it into the COE?”
Looking ahead. The AT from another company going through the COE process asked if the member, like him, was already facing questions from senior leaders about expanding the scope of the activities done by the COE. “It’s ‘why can’t you do your FX there, why can’t you issue CP out of there?’ The bar keeps getting raised as you start building out your capability,” he said.
- The member envisions her company going through an optimization. “This is the beginning for us. But then we’ll review that taxonomy again. It will look different now that we’re evolving our organization; so we’ll take another review and see if there are any other opportunities. I think first, the leadership team wants to see this be successful. So we’re starting here, but I really do envision that evolving over the course of the next few years.”
- Part of that process, she said, will be the establishment of metrics. “It’s going to be really important to manage our metrics so we’re working with the corporate team and regional treasury centers to develop service level agreements and KPIs and have those in place so that we’re really managing how the team is performing as we move forward.”
