Recent growth in Reval’s business shows a willingness—but for how long?
Only low-skill activities can be effectively outsourced. Or so runs a growing consensus. Members of The NeuGroup’s treasury peer groups feel most confident handing the reins for basic processes over to outsiders, or to a shared service center. The tougher stuff they typically keep in the family. So it’s a bit surprising that Reval Center reported an 88 percent increase in its business of handling derivatives hedge accounting and valuation last year—two of the arguably highest-skill things treasury is called upon to handle.
There are a number of winds in the New York firm’s sails. The sheer complexity of obtaining accurate valuations and determining whether they qualify for hedge accounting while wrestling with budgetary cutbacks makes handing the whole task to an outside expert look appealing.
Indeed, Reval says this is what’s driving its business. “Treasury and accounting departments at banks and non-financial corporations are severely understaffed,” says Reval CEO and Co-founder Jiro Okochi. “Having the flexibility to outsource sophisticated tasks makes a lot of sense.”
Still, the question for those leaner treasuries is where to put the dollars when it comes to finding a long-term solution. Should treasurers go for the quick-fix software as a service (SaaS) with outsourcing support with the likes of Reval? Or should they push forward with more comprehensive workflow integration and redesign, supported by treasury management systems with wide functionality, or integrated ERP-treasury solutions?
It appears for many the answer now is to go with Reval or similar products, with perhaps the intent of finding a long-term solution later on. With its acquisition of FXpress last August, it may be able to fill this role itself. As it stands, Reval Center is scalable and flexible enough that, as the economy improves and treasury finds itself with a few more dollars and possibly FTEs, it can decide whether it wants to continue to outsource to Reval Center or take the solution in-house.