Those who have been following the BELLIN YouTube Channel already know that #TreasurySnippets Season 1 is now complete. This season we focused on the concept of Load Balanced Treasury, and how it can bring a benefit to your treasury.
In the videos below Martin Bellin highlights three key elements of Load Balanced Treasury.
What is Load Balanced Treasury?
In this video Martin discusses Load Balanced Treasury in general terms, starting with the computing concept of “load balancing.”
"Load balancing" is when you distribute workloads across multiple resources in order to optimize throughput and response time, and to avoid overloading your resources. A lot of large multinationals are pushing a centralized treasury model in an attempt to harmonize the functions of their treasury, and in so doing, create a situation in which their treasury departments are getting overloaded, and are often left doing local market work that – quite frankly – they are not experts in. Others are using a decentralized model, leaving the work up to their local subsidiaries, which have the expertise in their local markets, but they’re not getting that centralized harmonization. Load Balanced Treasury sits between these two models and emphasizes reduction of work by balancing expertise and control through centralized systems.
With Load Balanced Treasury, we transfer some responsibility to the subsidiaries – to the extent that it’s helpful – while maintaining central control. We let them do all of those tasks that they need to do to operate locally, as well as the tasks that they are experts in (such as region specific decisions). We also have the central treasury to organize and participate in the overall process. We look at the overall organization and decide what tasks, what processes, have been performed better on site, and which by the central treasury. With Load Balanced Treasury we can use decentralized capacities with centralized control because we are working from a single data source in a central platform.
How does Load Balanced Treasury facilitate data collection?
In this video, Martin explains how centralized approaches can sometimes hinder data collection, and how Load Balanced Treasury uses subsidiary focused functionality to produce more accurate, more reliable information.
Usually, centralized approaches require people to fill in spreadsheets or to manually key in data required for central treasury’s efforts. This kind of work does not add value to the subsidiary and that's a problem. Because it’s not in their interest to do more, they are often going to fill in data to a level of accuracy and completeness that just satisfies the central treasury. Data may not be reliable or complete, and the reports often require interpretation to understand.
So how are we able to get hold of all the data from the subsidiaries without additional reporting? The idea is very simple: we apply Load Balanced Treasury and provide all subsidiaries with a common platform. They’re going to use this platform for their local benefit – to support their day-to-day business. They're going to use the platform for their own purposes – for their own benefit. Now data is being automatically recorded into a single database, and it’s that data that you call upon when you conduct analyses.
Meanwhile, since the subsidiaries are using this platform for their own work, data will always be (at least mostly) correct and up to date.
How can you achieve group-wide visibility?
In this video, Martin explains how the Load Balanced Treasury model increases group-wide visibility by building functional treasury systems for subsidiaries – not just central treasury. Treasury needs to collect data globally in order to know exactly what's going on at a financial level, throughout the entire group. Visibility is key, but how do we achieve it?
We achieve visibility by building one platform for data management, collection, and the support of daily processes for both the central treasury and the decentralized business units. Once we have that data available in one spot we have global visibility.
To gather that data we can send around Excel spreadsheets and subsidiaries fill out their balances on current accounts, their signing authorities, their loans outstanding, their facilities, whatever we need to know. We will get back just the minimum effort needed to complete this task.
Instead, we grant all subsidiaries access to this centralized tool and give them functionalities that help them with their job. For example, maybe we integrate the BELLIN SWIFT Service, and now they can access all of the statements collected from their banks, enabling them to save time and effort logging into local electronic banking systems. These functionalities save the members of the subsidiary so much time that of course they are going to use it to do their banking - and since it’s their banking, they will verify that the data they have is complete.
Now central treasury has that information, and it’s opened up complete visibility into how those subsidiaries are doing their banking.
This is how we achieve visibility. We use one source, one platform, for data management, data collection, and the support of the daily processes of both the central treasury and subsidiaries.