Five Trends Transforming Global Treasury

For the strategically minded treasurer, the idea of a
truly global treasury function has been a long and dearly
held objective.

After all, the benefits of a globally integrated and controlled
treasury are compelling and well understood. This fundamental
best practice provides visibility to global cash balances
for enhanced control and optimization. Centralization brings
greater control of high-risk treasury activities, such as
derivatives trading, while creating liquidity pools for enhanced
investment yields. It facilitates the appointment of a single
global banking partner, leading to opportunities to net intercompany
payments and foreign exchange-related transactions. Moreover,
with the harmonization of investment, risk management and
cash forecasting strategies around the world comes the opportunity
to reap maximum benefit from costly technology implementations.

While the case for global treasury may be clear and persuasive,
relatively few companies have succeeded in reaching this
ideal state. "Domestically centralized, internationally
decentralized" is an all-too-familiar description used
by corporate practitioners in explaining the structure of
their treasury operation.

One striking indicator of the dispersed nature of the
typical global treasury operation is the relatively low number
of U.S. companies with treasury staff located outside of
the United States. In a recent survey of 405 U.S. corporations,
Treasury Strategies found that a minority of companies, even
among large multinationals, employ treasury staff offshore.
(See Global Treasury: The Exception, Not the Rule.)
The decentralized structure of international treasury is
even more striking among middle-market firms, where over
80 percent of treasury departments are located exclusively
in the United States. For these companies, treasury is typically
the responsibility of subsidiary controllers who perform
cash management functions along with a host of general financial
responsibilities.

A number of factors are to blame for the failure of treasury
departments to globally integrate their treasury function.
International subsidiaries are often reluctant to relinquish
control of their liquidity and banking relationships. At
the same time, the need for global or even regional solutions
has often gone unmet due to a fragmented banking industry,
regulatory restrictions and disconnected technology platforms,
among many other challenges.

However, the advent of the truly global treasury may be
closer than you think. More companies than ever are centralizing
key treasury activities at global and regional centers as
age-old barriers to treasury globalization are falling away.