Building for Recovery: Tomorrow’s SSCs
by Hugh Davies, EMEA Corporate Cash Management Sales Head, Global Transaction Services, Citi, and Ebru Pakcan, EMEA Payments Head, Treasury and Trade Solutions, Global Transaction Services, Citi
Over the past twenty years, shared service centres (SSCs) have grown in importance as a means of standardising financial processes such as payments, creating economies of scale and lowering costs. Initially, SSCs were established by large multinational corporations, but a wide spectrum of organisations that seek to establish central visibility and control over financial processes are realising the benefits of a shared services environment. With many companies now operating mature and efficient SSCs, this article looks at how leading corporations are addressing today’s business challenges and leveraging new opportunities in their SSCs, creating greater value for the business.
Citi has been a pioneer in providing the tools, services and expertise to help finance managers maximise the value of their SSCs for many years. In December 2009, we hosted a SSC Forum in Dublin, attended by senior managers from some of the world’s leading SSCs. This event was intended to facilitate dialogue on trends, challenges and amongst SSCs and to forge the way ahead in establishing and implementing best practices. Inevitably, a business process that is used successfully in one organisation cannot simply be replicated in another, but there is considerable value in understanding what has worked well and how business processes have been implemented most effectively.
Drivers for SSC development
Centralising payments processing through SSCs or payment factories has been one of the great successes of recent years. Based on our experience of providing transaction services to over 500 SSC clients, we see around 85% of regional SSCs taking responsibility for payments processing (figure 1). Having centralised this activity with demonstrable success, there is increasingly pressure on SSC managers to create further value. There are a variety of reasons for this, such as:
- The global economic slowdown has concentrated senior management focus on controlling costs and managing risk. SSCs have an important role to play in delivering these objectives, such as: centralising and rationalising processes; leveraging technology investment; reducing the risk of error and fraud; and increasing visibility of information. This gives the company greater control of cash flow and the key drivers of working capital and liquidity management.
- While capital preservation was the primary objective whilst the markets were in the eye of the financial storm, treasurers’ and finance managers’ attention has now turned to investment in the business and positioning for growth. Visibility of cash is crucial to any liquidity optimisation strategy, and centralising processes and information through an SSC is a vital first step in achieving this.
- Banking relationships have become key as credit availability has declined, while counterparty risk has remained a priority. Therefore, it is increasingly important for companies both to co-ordinate their activity with relationship banks across the business, and to understand their risk to each financial counterparty.
- As the regulatory environment becomes increasingly complex and demanding, SSCs are critical in delivering transparent, consistent, auditable processes and reliable information across the company.