Treasury Centres in Ireland & IACT, with Aimee Cullen
In this insightful article, we explore the critical role of treasury centres in today’s complex financial landscape, focusing on Aimee Cullen’s leadership within the Irish Association of Corporate Treasurers (IACT).
This article covers essential aspects of treasury centres, including their purpose, functions, digitalisation impact, and governance. Additionally, it emphasises IACT’s ongoing efforts to promote best practices, professional development, and networking opportunities for treasury professionals.
Keep reading for the key takeaways from the episode, or 🎧 listen to the full podcast here.
Aimee Cullen and the IACT: An Overview of Treasury Centres
Aimee Cullen is a seasoned treasury professional with an impressive background in both corporate and banking environments. As the current president of the Irish Association of Corporate Treasurers (IACT), she champions best practices and knowledge-sharing within the industry. The IACT is a professional organisation that supports corporate treasurers in Ireland by providing networking, professional development, and advocacy for best practices in treasury management.
Treasury centres are specialised units in companies that centralise essential treasury tasks like cash management, risk management, corporate finance, and intercompany funding, leading to better efficiency, decision-making, and risk control. Regional treasury centres are strategically located in Ireland, Belgium, Switzerland, Singapore, China, Brazil, and Miami, considering factors like skilled workforce availability, business-friendly environments, and tax benefits.
Treasury Center vs Shared Service Center
Treasury centres focus on managing and coordinating treasury activities. In contrast, shared service centres support a more comprehensive range of administrative and operational functions, such as human resources, finance, and IT. The primary focus of a treasury centre is financial risk management and cash flow optimisation, whereas shared service centres are more concerned with cost reduction and operational efficiency.
Treasury centres manage and optimise financial resources, while shared service centres aim to streamline and centralise various organisational administrative and operational functions. Both types of centres contribute to a company’s overall efficiency and effectiveness.
Treasury Center Functions: Activities, Expertise, and Governance
Treasury centres perform various activities, including cash management, risk management, corporate finance, intercompany funding, liquidity management, and support for mergers and acquisitions. These functions help optimise a company’s financial resources, manage financial risks, and support strategic initiatives.
Expertise in treasury centres varies depending on the company size and complexity of operations. Larger companies often require more specialised skills and resources, while smaller companies may need less expertise. Risk management and hedging programs are particularly crucial, as they are critical in ensuring the company’s financial stability.
Governance is another essential aspect of treasury centres, including defining processes and policies, ensuring adherence to these policies, and maintaining a balance between centralisation and regional management. Regional treasury managers provide valuable insight into local market conditions and regulations, helping to optimise overall treasury strategy.
Establishing Treasury Centres: Advantages, Requirements, and Challenges
To establish a thriving treasury centre, specific requirements must be met. These include investing in adequate infrastructure and technology, such as treasury management systems and enterprise resource planning systems, to facilitate efficient and effective treasury operations.
Companies must also have access to skilled professionals with expertise in various financial areas and ensure a solid regulatory and legal framework to maintain compliance. Additionally, a favourable business environment with government support, such as tax incentives and investment support, can make a location more attractive for establishing a treasury centre.
Setting up a treasury centre offers numerous advantages, such as:
- Enhanced visibility
- Improved cash and liquidity management
- Centralised expertise and decision-making
- Better risk management and hedging strategies
These benefits contribute to more efficient and effective financial management for companies, ultimately leading to better financial performance and stability.
However, there are challenges in implementing a treasury centre, such as:
- Aligning operations and processes across regions,
- Adapting to different regulatory environments, and
- Maintaining effective communication and collaboration between teams.
Addressing these challenges is essential to ensure a treasury centre’s smooth operation and success. Companies must be willing to invest in resources, training, and technology to overcome these obstacles and fully capitalise on the benefits of centralising their treasury functions.
Common Locations and Considerations for Treasury Centres: Ireland as a Prime Example
Several factors can influence the choice of location for a treasury centre, such as access to skilled professionals, robust regulatory and legal frameworks, favourable business environments, government support, and tax incentives.
Ireland has become a popular location for treasury centres due to its skilled workforce, strategic timezone, English-speaking population, attractive tax regime, robust banking framework, and access to the Single Euro Payments Area (SEPA). Ireland’s standard legal system also aligns with the UK, making it an ideal bridge between the UK and mainland Europe.
Treasury centres must be able to support the company’s operations across various time zones, ensuring efficient and effective management of financial resources and risk exposures around the clock. Ireland’s strategic timezone allows for overlap with North American and Asian markets, making it an attractive hub for treasury centres.
Companies should weigh tax and legal aspects when choosing locations for treasury centres, balancing tax benefits and business environments with compliance requirements. The location should also cater to the company’s global and regional needs, supporting financial operations across different time zones and regions.
Popular locations for regional treasury centres include Ireland, Belgium, Switzerland, Singapore, China, Brazil, and Miami. Factors such as access to skilled talent, favourable tax regimes, robust business infrastructure, and strategic timezone positioning contribute to the attractiveness of these locations. Ireland, in particular, has a long history of attracting banks and businesses through its International Financial Services Centers (IFSCs), offering a range of benefits to companies that choose to locate their treasury operations there.
The Future of Treasury Centres: Navigating a Digital Landscape, Tax and Legal Implications, and the Impact of COVID-19
Navigating a Digital Landscape
Treasury centres must adapt to an evolving business landscape, embracing new technologies, such as artificial intelligence, machine learning, and automation, to enhance their operations and decision-making capabilities. This may include greater integration with shared service centres and increased use of automation to streamline processes, improve efficiency, and reduce operational costs.
Tax and Legal Implications
Tax treaties and intercompany interests play a significant role in determining the location and structure of treasury centres. Companies seek to optimise their tax positions and minimise overall tax liabilities. Effective collaboration between tax, treasury, and legal teams is essential in managing the complex tax and legal implications associated with treasury centre operations, ensuring compliance with local and international regulations, and optimising the company’s overall tax position.
Compliance with the central bank and government regulations is crucial for treasury centres operating in different jurisdictions. This requires close cooperation between tax, treasury, and legal teams to maintain compliance and stay informed about any regulation changes that may impact treasury centre operations.
Impact of COVID-19
The COVID-19 pandemic has influenced how treasury centres operate, accelerating the adoption of remote work, which may have potential tax implications. Companies must understand these complexities to ensure compliance and avoid potential tax liabilities. The pandemic has also forced treasury centres to adapt to new ways of working, including increased reliance on digital tools and communication platforms, highlighting the importance of robust IT infrastructure and cybersecurity measures to protect sensitive financial information.
The Hub and Spoke Model in Treasury Management: Systems, Structures, and Banking Relationships
The hub and spoke model in treasury management connects the corporate treasury function with regional treasury centres, balancing the benefits of centralisation with the need for local knowledge and expertise.
Treasury management systems (TMS) and enterprise resource planning (ERP) systems are often built around the hub and spoke model, enabling efficient coordination and management of financial operations across regions and time zones. Companies may require different TMS and ERP implementations to meet their regional treasury centres’ unique needs, including customised workflows, reporting structures, access controls, and integration with local banking systems and regulatory requirements.
Larger companies often adopt a centralised approach to TMS and ERP systems for more efficient management of financial operations, developing consistent processes, controls, and IT infrastructure. This approach ensures consistency across regional treasury centres, making managing global financial risks and activities easier.
In the hub and spoke model, treasurers often aim to rationalise and minimise the number of banking relationships to simplify operations and reduce costs. Building strong banking relationships is vital for corporate treasurers, as banks can provide valuable insights into market developments and trends and information on industry peers. These relationships help facilitate efficient and effective management of the company’s financial risks and activities, ensuring that the company is well-positioned to navigate the complex and ever-changing economic landscape.
Managing Cash Flow and Nurturing Banking Relationships for Effective Treasury Operations
For companies that rely on revolving credit facilities or need to borrow from banks, nurturing strong banking relationships is crucial in securing the necessary funding to support operations and growth. A company’s banking relationships may vary depending on its cash flow position, with positive cash flow companies focusing on optimising investments and liquidity management. In contrast, negative cash flow companies prioritise securing funding and managing debt. Treasurers must stay close to their banking partners to manage their company’s funding risks effectively and ensure they can access financial resources to support their business objectives.
When selecting banking partners, it’s essential to consider the bank’s geographical footprint and its alignment with the company’s international presence. A bank with a robust global network and local presence can support a multinational company’s financial operations more effectively, facilitate cross-border transactions, manage currency risk, and ensure compliance with local regulations. The location of a bank’s headquarters may be less critical than its global reach and local branches when selecting a banking partner.
Unified Treasury Management and Collaboration for Effective Financial Operations
Corporate treasury departments are crucial in setting policies and processes that regional treasury teams must follow while maintaining regular communication to ensure coordinated financial activities. Understanding local regulations, cultures, and ways of working is essential for navigating complex economic landscapes and maintaining compliance. Building relationships between treasury and other corporate functions can be challenging due to time zone differences and geographical distance.
Still, regional treasury structures and employee rotations between functions can facilitate better communication and understanding of business dynamics. A deep understanding of cash flow drivers and potential risks is crucial for effective collaboration between treasury and other corporate functions.
Even in small companies, separating treasury functions from accounting activities under the CFO is essential, as treasurers and accountants have different perspectives on cash management and financial risk. This separation allows for more precise insights and a balanced approach to managing the company’s economic activities.
Optimising Treasury Operations: In-House Banks, Best-in-Class Treasury Centres, and Technology Integration
In-house banks represent the ultimate optimisation in treasury management, serving as a centralised financial hub for all legal entities within the company, reducing the need for third-party banking relationships and local bank accounts. Implementing an in-house bank requires a centralised Treasury system and IT support for effective transaction management. Best-in-class treasury centres typically feature a high degree of centralisation, automation, and centralisation of investments and active management of currency exposures for efficient trading. Technology integration, such as fully optimised TMS and payment hubs, is crucial in streamlining and automating financial processes.
Cost efficiency in best-in-class treasury centres is achieved by reducing transaction costs, bank account fees, and funding expenses, centralising operations, and investing in IT infrastructure to reduce team size. These centres often shift their focus towards an advisory function, adding value through governance, risk management, and funding optimisation. Ireland’s skilled workforce, strategic timezone, robust banking framework, common law legal framework, and support from international law firms, tax advisors, and accountancy bodies make it an attractive location for establishing treasury centres, acting as a bridge between the UK and mainland Europe.
The Irish Association of Corporate Treasurers: Supporting and Promoting the Treasury Profession in Ireland
The Irish Association of Corporate Treasurers (IACT) plays a crucial role in the treasury industry, supporting professional development, networking, and advocating for best practices in treasury management. As a professional organisation, IACT is dedicated to promoting the treasury profession in Ireland through facilitating peer-to-peer networking, sharing best practices, providing educational opportunities, and advocating on behalf of corporate treasurers.
Like other national treasury associations, such as the European Association of Corporate Treasurers (EACT), the UK Association of Corporate Treasurers (ACT), and the North America Treasury Association, the IACT promotes the interests of its members and supports the development of the treasury profession.
Structure of the IACT
The IACT is governed by a voluntary committee of treasury professionals who hold various roles, such as President, Treasurer, and other positions. The Executive Committee plays a crucial role in guiding the direction and activities of the IACT. It is essential to achieve a balanced representation in terms of gender, industry background, and experience to ensure that the organisation addresses the diverse needs of its members.
The IACT is committed to growing its membership and focusing on inclusion by attracting treasury professionals from different backgrounds, industries, and experience levels. Initiatives like the Young Treasurer program help to engage early-career professionals, while efforts to address the gender gap within the IACT promote a more diverse and inclusive organisation.
By fostering a culture of treasury centres in Ireland, the IACT is essential in promoting the country’s talent, working closely with other organisations like the ACC and ITA, and focusing on education, inclusion, and talent development. Through initiatives like the ICT Awards, the IACT helps to raise the profile of Irish treasury professionals and encourage the growth of treasury centres in the country.
Promoting Treasury Excellence: Work-Life Balance, International Cooperation, and Future Goals
Treasury management and work-life balance are essential components of an organisation’s success. Efficient cash management and effective communication across time zones contribute to the smooth functioning of treasury centres while promoting work-life balance helps attract and retain top talent. The International Financial Services Center (IFSC) in Ireland supports treasury and financial services by providing a favourable business environment, a lower corporate tax rate, and access to a skilled workforce.
Collaboration with other treasury associations, such as those in Europe and the US, enables the IACT to stay informed about global trends, share ideas, and expand its interaction with emerging markets. The IACT’s future goals and priorities include prioritising diversity and inclusion, expanding its reach to other regions and industries, and strengthening relationships with universities and professional bodies, all of which contribute to the continuous growth and development of Ireland’s treasury profession.
Conclusion
In conclusion, the diverse aspects of treasury management, from banking relationships and company culture to technological advancements and cost efficiency, are crucial for the success of any organisation. Work-life balance and attracting top talent in treasury centres are essential in fostering a positive work environment. The International Financial Services Center (IFSC) has successfully attracted global financial services companies, contributing to the growth of Ireland’s financial services industry.
The IACT’s collaboration with international treasury associations and its focus on diversity, inclusion, and expanding its reach further strengthen the treasury profession in Ireland. By staying informed about global trends, promoting treasury careers, and fostering a strong community, the IACT ensures that Ireland remains an attractive location for treasury centres and a competitive player in the global financial landscape.
