Question

What is your understanding on Outsource treasury function. What are necessary conditions for outsourcing treasury functions of a corporation?

Answer 1

Treasury outsourcing is the outsourcing of all or part of the treasury function to a third-party outsourcing provider, or shared service centre.

Almost any aspect of the corporate treasury function can be outsourced including:

• operation of netting systems
• cash flow forecasting
• liquidity management
• management of intra-group and external loans
• external funding management
• Forex dealing and exposure management
• interest rate, credit and commodity risk management

Conditions for outsourcing treasury function:

(A) The outsourcing of the treasury function(s) do not mean that the corporate treasurer's work has finished. The outsourcing arrangement still has to be managed, the main elements for managing an outsourced treasury solution include detailed service level agreements, budgets and business plans, regular reporting and progress meetings, agreed contacts and problem resolution procedures.

This can be a time-consuming process and is often undertaken by a specialist third party

(B) Ensuring the service provider has no access to the funds of the company;

C) setting up clear policy and authorities, limiting funds transfers and bank mandates to accounts in the name of the company;

D) ensuring segregation of treasury duties and responsibilities