Shared Service Centers: Transforming Treasury and Finance FunctionsINSIGHTS | Corporate Clients

Transaction Services Asia Pacific

As businesses deal with the challengesof globalization, economic uncertaintyand a volatile business environment,many are searching for ways to reducecosts and complexity in their businesses.In order to strengthen existing businessmodels and grow their customer bases,corporate CFOs are increasingly turningto Shared Service Centers (SSCs). SSCscan provide solutions to many of thecomplex issues CFOs and treasurersface today, helping to improve efficiency,cut costs, and deliver more effectivebusiness services. But there are alsochallenges for those using sharedservices for the first time. With theright guidance, however, the rewardsfor CFOs — as demonstrated by theexperience of software market leaderSAP — are significant.

Addressing UncertaintyTo take advantage of opportunities forgrowth throughout the Asia Pacificregion, companies need to protect,scale, and grow their businesses, butare doing so against an uncertaineconomic backdrop. Challengesinclude volatile markets, geo-politicaluncertainty, fluctuating revenues,rapidly evolving business models, theimpact of new technology, and fast-changing regulations - particularly

demanding for CFOs seeking to managerisk and protect business value. Thesolution, for many, is SSCs.

As they transform finance operations,finance chiefs can use SSCs to automateand standardize processes, whetherregionally or at a global level, andimprove the efficiency of many back-office functions — for example paymentprocessing, accounts receivable, orfinancial reporting. In doing so,businesses often find themselves ableto improve working capital and optimizecash flow, support growth with increasedproductivity, and position themselvesto better manage operational risk.

SSCs are an increasingly attractiveproposition for many businesses, andtheir adoption is set to rise. In a recentDeloitte survey1, 66% of respondentssaid that they expect their organizationsto increase the number of geographiesor regions served by SSCs in the nextthree to five years, while 76% alsoexpected SSCs to serve more businessunits.

Transforming Business ServicesShared service organizations benefitfrom a reduced need for transactionaland administrative support, expanding

the range of business services theycan offer and improving customerfocus. By centralizing such functions,businesses also avoid the difficulties ofhaving to replicate the necessaryinfrastructure and skills in each market.

Shared service organizations alsobenefit from technological advances.Effective use of technology canincrease automation and reduce costs,while at the same time multiplying therate of organizational change. Mobilecollection tools such as Citi’s MobileCollect, for example, streamline back-office and reconciliation processes,and aid business growth by acceleratingcollections and optimizing liquidity.Such services also help businesses tobetter manage operational risk — inthis case, the risk associated with cashpayments.

SAP, the market leader in businessmanagement software, discovered thebenefits of SSCs when it began ashared services project in Singaporeten years ago. The resultingimprovements persuaded SAP toexpand its finance SSC throughout theglobe. It now runs SSCs in fourlocations (Singapore, Dublin, Prague,Buenos Aires) under one leadershipacross one single instance SAP ERP

1 2011 Deloitte Global Shared Services Survey

platform to support its global financialorganization, and continues tostandardize operations and improveprocesses as its use of SSCs expands.

Facing the ChallengesOne of the challenges for organizationsoperating SSCs is how to delivercontinued improvements. Typically,businesses enjoy efficiency gains,productivity gains, simplicity andstandardization as well as cost savingswhen an SSC is first set up, but returnsdiminish as it matures. To continue tobenefit, organizations can expand anSSC horizontally, by increasing thenumber of transactional processescarried out, or vertically, helping thebusiness to widen market reach, cutinfrastructure costs, or provide awealth of strategic data it can use insupplier negotiations, expense controland sales attrition analysis.

Another key challenge for sharedservices organizations is operationalrisk. SSCs must have robust businesscontinuity planning measures in placeto ensure they can continue to provideround-the-clock services critical formany global organizations and thatthey maintain the required workingrelationships with in-country operationsto support the significant complexityinvolved in aligning market-specifictax, legal and central bank regulations.

SAP’s Journey to SuccessSAP first explored shared services forits finance operations in Asia Pacific in1998. By continuing to improve andstandardize processes since then, SAPtoday operates a world-class,customer-centric, global sharedservices function. But it faced a rangeof challenges to deliver this model —not least that progress is never complete.

SAP succeeded by viewing the processas an ongoing journey, embracing newtechnologies, and sharing ideas andexpertise from different locations.Several factors contributed to thissuccess: communication and changemanagement to ensure buy-in andtransparency through the process;close collaboration with Citi as a trustedbanking partner in Asia and beyond;and the use of automation and process

optimization to increase effectiveness.SAP also understood the value ofdelivering quick wins to highlightsuccess; relationship and rapportbuilding throughout the business toensure knowledge transfer; an innovativeapproach of continuous redesign andtransformation; and dedicatedteamwork and competency to delivercustomer satisfaction and keepemployees motivated.

SAP’s SSC experience has been one ofcontinuous improvement. Followingthe go-live of its regional Asia PacificSSC in 2003, SAP expanded its scopein 2005 as it implemented CitiDirect,Citi’s web-based banking platform, andCitiConnect, Citi’s settlement andfinancing tool that allows buyers andsellers to complete transactions online.In 2007, it also implemented an HRSSC, and the next year integratedSAP’s Business Objects operation,before beginning the globalization ofits SSC processes in 2009.

In the time since the go-live of the AsiaPacific SSC, SAP has seen in this regiona 40% reduction in costs, while thetotal number of documents processedhas increased by 60%. Productivityincreases mean SAP has also witnesseda threefold increase in the averagenumber of documents processed peremployee in the Asia Pacific region. Inaddition, surveys reflect increasedcustomer satisfaction.

The most recent milestone in SAP’sSSC Journey has been the verticalexpansion from SSC to Global BusinessServices. Delivered through regionalSSCs, SAP uses standardized processesand high levels of automation to deliverglobal F&A processes such as order tocash, procure to pay, record to report,and quality management. Its market-leading position has also seen SAPrecognized with awards including

“Contribution to Shared ServicesThought Leadership” from the SharedServices and Outsourcing Network(SSON), and “Shared Services Leaderof the Year” and “Best New SharedServices Organisation” by IQPC.

Banking Partner CollaborationFor CFOs/Treasurers, a key factor indelivering best-in-class SSC operationsis close collaboration with anexperienced banking partner. This isparticularly true for those expandingSSC operations horizontally, who needguidance on different bankingregulations in each of the markets theSSC will serve. Citi’s SSC Forum allowscompanies to share SSC experiencesand discuss best practices, drawn fromthe more than 1,000 SSCs Citi supportsworldwide. Through a series ofwebinars, consulting sessions, andclient advisory boards, the Forumencourages collaboration andinnovation among shared servicesorganizations.

Sanjeev Chatrath (right) Regional Head, Client Sales Management, Asia Pacific, Treasury and Trade Solutions,Citi Transaction Services and Andrzej Wisniewski, Head of Global Finance Shared Service Organization,Singapore Office, Finance Operations Manager, SAP

Treasurers also need access tobanking tools that will support theirSSC objectives. Citi’s market leadingsolutions can help SSCs transform into‘true business enablers’ covering awide range of business functions suchas receivables, reconciliation, bankguarantee management, procurementand Travel and Entertainment.Customers seeking to enhanceinformation flow, improve operationalefficiency, and monitor customercredit risk, for example, can use Citi’sPayables Vision or Receivables Visiontools to utilize banking data for moreintegrated, efficient processing.Meanwhile, for reduced infrastructurecosts, banks can offer enterpriseresource planning (ERP) to bankintegration solutions that cansignificantly reduce maintenance andtransactional execution costs. Companiescan also leverage Citi’s cloud-basedsolutions such as CitDirect BE Mobile,which allows customers to receivenotifications and authorize paymentsvia their mobile phone.

Citi has also partnered with othermarket leaders in cloud computing. For example, Citi and SAP are working

closely together to develop a cloud-based services platform. The highlyinteroperable, multi-bank platform aimsto seamlessly integrate banks withtheir corporate customers. SAP hasalso introduced HANA, a platform thatallows organizations to access dataand run applications in near real time,and bring the power of analytics tocompanies that have centralized datasuch as that running through SSCs.

Shared Services: Aiming For theNext LevelAs companies increase the scope oftheir shared services operations, animportant step is the shift to verticalexpansion. Traditionally, SSCs havebeen considered administrativesupporters, with their greatest impactseen in areas such as processefficiency, cost reduction, and processquality. But for those ready to expandSSCs vertically, this impact becomesless transactional, and sees them ableto contribute to performance strategy,decision support, and businessstrategy. As a result, the Deloittesurvey reports that some 61% ofrespondents intend to increase the

number of advisory processes in theirSSCs over the next 3 to 5 years. ForSSCs to make this change successfully,businesses must make significantorganizational shifts, and be able toleverage investments in technology so that data analytics can become a reality.

Whatever challenges they face, thebest-prepared companies will continueto transform themselves and areincreasingly turning to SSCs to evolvetheir treasury and finance functions. Inthe process, they can reduce costs,increase automation, and becomemore customer-centric and competitive.To increase their chances of success,treasurers must be prepared toembrace automation and innovation.They should also commit to an ongoingprocess of improvement, and seek outexperienced and collaborative bankingpartners to support them. Approachedcorrectly, SSCs can help CFOs to delivermore effective business servicesthroughout an organization, anddemonstrate real value in the process.While the SSC journey may not alwaysbe a smooth one, the rewards are wellworth it.

Sanjeev Chatrath

Regional HeadClient Sales ManagementAsia Pacific Treasury and Trade SolutionsCiti Transaction Services

Andrzej Wisniewski

Head of Global Finance Shared Service OrganizationSingapore OfficeFinance Operations ManagerSAP

For more information about Citi Transaction Services, please visitwww.transactionservices.citi.com.

Citi Transaction Services Asia Pacific — October 2012© 2012 Citigroup Inc. All rights reserved. Citi and Arc Design and CitiDirect are trademarks and service marks of Citigroup Inc. or its affiliates and areused and registered throughout the world.

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