Where the Money Is

Faster, better, cheaper. The best treasury products aren't just for the biggest companies anymore.

There’s a lot on the agenda at Arcelor Mittal these days. It’s been less than a year since the hotly contested merger of Luxembourg-based Arcelor with Indian-owned Mittal Steel, and now integration programs to join the two former rivals are in full swing.

From the vantage point of Rohit Seksaria, the newly merged firm’s group treasurer, it can be daunting at times. Arcelor Mittal, now the world’s largest steel producer, is aiming to be one day a “benchmark” treasury department and provide world-class services throughout the entire company. But with a number of projects in the pipeline, time isn’t always on Seksaria’s side. As he notes when discussing the expansion of a euro zone “payment factory,” “We have weeks, not months, to get this done.”

Arcelor Mittal’s aspirations don’t end there. Although already large before the merger, the combined treasury now has the clout to explore the products and services that only the largest companies have access to. Along with the payment factory, for example, Arcelor Mittal is expanding its in-house bank. It’s also reviewing the software market to find a “one-stop shop” product to streamline forex and commodity trading. Yet another project involves seeing whether the firm should move its current patchwork of national shared service centers into a regional, or perhaps even a global, model. Ultimately, Seksaria sees a future of more automation, real-time information and streamlined processes that will make “financing the business and protecting the money that the company makes” — the raison d’être of treasury — more efficient than ever.

Other treasurers might be green with envy. After all, what treasurer wouldn’t want all that? But treasurers have long lamented that if a company isn’t among the top league of major multinationals — as Arcelor Mittal now is — access to many products and services is limited, at best. These smaller companies say they have neither the staff nor the budgets to devote to running the full-blown systems being touted by vendors. Furthermore, they complain that banks and other providers don’t give product development or service at the mid-market level the attention they deserve.

Yet there are signs of change. Bankers, technology vendors and treasury consultants all say that a convergence of factors, particularly in Europe’s cash management arena, is shifting the focus from the multinationals to smaller, but no less global, companies.

Moving Targets

The wakeup call for banks came a few years ago, says Celent Communications, a financial-services research firm. In a report published in late 2005, Celent analyst Jacob Jegher observed that “financial institutions are being plagued with a disturbing metric — waning cash management growth. This risk to the bottom line is an indicator that inspirational and innovative new features and functionalities are required in order to differentiate and seek new streams of revenue.”

Whether the financial institutions have found the inspiration and innovation yet is a matter for debate, but they can’t be faulted for a lack of effort. In particular, notes another Celent report published in 2006, banks have been boosting investments in cash management technologies. In Europe, those investments will reach €990 million this year, double the amount spent four years ago.

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