| Dublin is a strategic location for treasury operations |
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| Aengus Murphy traces the development of corporate treasury over the past fifteen years drawing on FTI's and the IACT's experience and says that in the future the IFSC needs to move up the value chain. |
I am delighted to contribute to the 15th anniversary edition of Finance.
Corporate treasury management as a corporate function really began in Ireland in the early ’80s. At the time, I was lucky to be involved in ESB’s treasury, which became the premier treasury operation in Ireland for some time. In spring ’88, we set up FTI as a corporate treasury consultancy to advise and assist other companies on treasury management. FTI provided the first and only such service at that time, so there was no competition in Ireland. Nowadays, in the Irish domestic market there is competition from some of the Big 4, from some UK based consultancies and from foreign offices of the Big 4.
In 1989, we moved into the UK market, with the privatisation of the utilities sector there. In the early ’90s, we engaged in the central and eastern European markets, where the competition was the Big 6 and a range of investment banks. Since 1999, we have been very active in the US market, where the competition is mainly the Big 4.
From 1988 onwards, we were very active in the development of corporate treasury management, as one of the key businesses in the IFSC and FTI has grown to be the premier independent provider of outsourced treasury services in Dublin, if not worldwide. In the late ’80s, the competition was from the big global banks - Citi, Chase, ABN-Amro, as well as from some Irish banks - AIB, BOI, Ulster Bank. Today, this competition still remains, but we compete now with other banks operating from outside Ireland and some foreign independent specialists. In the period, FTI also was instrumental in setting up the Dublin/Ireland Regional Group of ACT (UK). It now has some 150 members or associate members, most of them having professionally qualified through ACT’s exam route. It remains a puzzling question as to why the IFSC, with its 11,000 staff, has not caused step change growth in it and the IACT.
The business has progressed very substantially over this period, often in ways that we did not expect:
• FTI is much more an international business than expected, with over 80 per cent of turnover coming from foreign business.
• We started with a focus on the corporate sector. We now do a lot of work in the public sector, having built up a team and expertise in the sovereign/state treasury area and we have also worked for a number of financial institution clients.
IFSC
The major success story of the period in the financial sector, or indeed any sector in Ireland has been the development of international financial services. All expectations, which were ridiculed as ridiculously rosy some 15 years ago, have been well surpassed. It has done wonders for the corporate treasury business in Ireland and put us on the world map, and in turn that has been very positive for FTI’s business.
Euro
A lot of our business was generated from FX risk management and related matters. This risk was set to reduce. However, the introduction of the euro has been positive for the business.
• With the globalisation of business, intra-European FX exposures were replaced with new FX exposures, such as AUD, JPY, many Far East exposures, as well as more extensive USD exposures. And of course, sterling, traditionally a major exposure currency, is still outside the euro.
• As a major positive factor for our business, many multi national corporations, especially US ones, saw the euro introduction as a motivation to review and rationalise their global cash management systems. We have undertaken several major projects with our clients in this area.
IACT
During the last 15 years the Irish Association of Corporate Treasurers was also set up and I was one of the founding fathers. It grew in membership quite rapidly over the first few years to approximately 300, and has now stabilised at around these levels. In the period, it has provided good services to its members, especially in the areas of training and education. It promoted the graduate certificate in corporate treasury with DCU, and of course DCU also runs its own masters in investment and treasury. IACT also offers an excellent forum for members to get together and to exchange information, views and assistance.
Where are the treasury trends of 1987 now?
Those identified in Finance’s first issue were globalisation, technology and skill enhancement - apart from a few missing in hindsight, weren’t they well identified?
• Globalisation has had quite a positive impact - many MNCs who have gone global have required treasury development to parallel globalised structures and this has given opportunity to FTI. Globalisation has also made the treasury management business much more international, interesting and challenging, new problems and issues coming with it.
• Technology has changed radically in the financial sector and in the corporate treasury sector. In the late ’80s, few companies had treasury management systems (TMS)
• Skill enhancement was a major requirement in the late ’80s, to meet the expected needs of IFSC. The sector has been able to deal with this requirement reasonably well, mainly by in-house, on-the-job training and development, supplemented by external training courses as well as professional qualifications.
The future
I would like to see some developments in the corporate treasury business going forward:
• Moving up the value chain in IFSC - from back office to more front office activities, complex transactions and high level risk management, corporate finance.
• Engagement in the technology aspects of corporate treasury. We have great financial and treasury skills and IT skills, yet we do not engage in the treasury technology development to any great extent. Dublin is a major centre for treasury management, but none of the eight or so major international TMS providers, for example, are Dublin based, even do not have a presence here. This would enhance the reputation of Dublin as a treasury centre and again would help move up the value chain.
• Global capability so that the needs of MNCs - the main prospect pool for treasury in Dublin - are met. Dublin based providers need either to set up operations/capability or form alliances, so that the two other main geographic business centres - North America and Far East - can be catered for.
• Realisation that competition is emerging and have a strategy for it. At this time, each provider seems to be operating in isolation, snug in its present comfort zone. But this is under threat. We need a co-ordinated and co-operative approach to position Dublin to compete and survive as the leading centre.
This evolution and development in FTI’s business parallels the development of IFSC and the corporate treasury business in Dublin.
From humble beginnings, to aspirations through to successes. Finance, IACT, IFSC and FTI have a few things in common. All are about 15 years old, all are still alive, all have been very successful and all parallel a period of great progress in corporate treasury management in Ireland. |
Aengus Murphy is chairman of FTI, the IFSC-based treasury services company, specialising in outsourced solutions, systems solutions and expert consulting support.
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| Article appeared in the June 2002 issue.
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