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Cash management: Centralization, standardization and consolidation

Before corporate treasurers can begin to weigh their investment options, it is essential to create a liquidity management structure that gives both subsidiaries and head office the most advantageous set-up to minimize costs and maximize returns – while leaving sufficient cash where it is needed to pay day-to-day expenses.

Cash management: Safety first in short-term investment

"[Corporates] should recognize that the end investment choice is just one small element of a huge process," says Tristan Attenborough, managing director and regional executive for treasury, liquidity and investment products at JPMorgan in London. "There are so many stages, currencies and transactions before you get to investment and they are often what people need to worry about."

So how can corporates devise the right structure for liquidity management? Clearly, given the multiplicity of markets and countries in which companies operate, no single arrangement can work for all corporates. However, three themes are common to many of the world’s leading firms: centralization of treasury functions, standardization of processes across countries, and consolidation of banking relationships and accounts.

Centralization of treasury functions has been a key theme of many companies’ activities in the past decade. The move towards the use of regional treasury centres – most notably in Europe, where the advent of the euro advanced the process, but also increasingly in Asia, excluding Japan – is driven by two principal goals: increased visibility and control. By bringing treasury functions into the centre, liquidity is automatically concentrated, enabling more effective risk management and short-term investment.

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