IN THE OLD DAYS, finance and treasury were managed eight hours a day, five days a week from the 40th floor of headquarters–make a left turn down the hall and there was accounts receivable; next door was foreign exchange. Today, AR might be in a shared service center in Asia and FX could be in Europe or Latin America. Companies no longer just sell overseas or even manufacture there–they have become global citizens of the world. Such cross-border complexities can create any number of compliance and operational risk exposures when channeled through an outmoded set of financial systems and processes.

Many companies are still bogged down by a patchwork of add-ons, especially involving technology. "Your treasury model has to be in synch with the business model–not easy when the company has a global footprint," says Robert Baldoni, leader of the the global treasury advisory practice at Ernst & Young. The sad fact is that too often finance systems and processes are not reexamined to the extent that inefficiencies and risk exposures are addressed following each large merger or acquisition.

Once treasury organizations, and entire companies, fragment and internationalize, the need for standardization and integration heightens. "It's not always a given that the same technology is used by all the business units, divisions and groups worldwide," Baldoni says. "If you've been in acquisition mode, you will likely have a variety of different legacy systems. Meanwhile, you have multi-currency inputs, multi-labor challenges and multi-supply chain issues." It's not just fragmented systems that can lead to unwanted risk exposures for a global operation. With business units in different countries, it can make sense, strategically at least, to have smart finance and treasury people nearby to assist with interest rate, FX and commodity hedging, and to work with the units on pricing and financing structures. Cost is a motivating factor for such a set up–someone on the ground in Europe or Asia is closer to the market to negotiate bank account openings and closings, pay bills, move money around and invest dollars, euros or whatever currency is coming in over the transom.

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