Treasury: The case for centralization
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Treasury

Treasury: The case for centralization

Corporates are well aware of the benefits of treasury centralization. So why have many eschewed this approach to treasury management?

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Relatively few treasurers can claim to have completed a programme of centralization and fully realised the benefits.

The challenge appears to be most acute among organizations with a decentralized organizational structure, while multiple systems and fragmented data are among the most common impediments.

“Some organizations that have traditionally worked in a decentralized way have perceived that centralizing treasury operations might create conflicts between the corporate headquarters and the subsidiaries,” suggests David Moya, senior manager at treasury management consultancy Zanders.

BEPS

Additionally, centralizing treasury operations involves entering into intercompany relationships such as intercompany loans or cash-pooling structures, which must be priced on an arm’s length basis to comply with the base erosion and profit shifting (BEPS) regulation.

These transfer-pricing calculations are complex and need to be accounted for transparently and properly, which requires extra attention from already overworked treasury and tax teams.

Other reasons why multinational businesses may choose to maintain local operations include local regulations on the flow of capital and taxation.

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Naresh Aggarwal, Association of Corporate Treasurers

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