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ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals

A group moves its treasury from a profit centre to a cost centre. Which change is most likely to result?

Moving to a cost centre shifts the assessment of treasury towards service quality and cost control, with less incentive to trade for profit. Mark-ups and profit incentives are profit centre features, and dealing policies and limits are still needed.

  1. ASubsidiaries will be charged a mark-up over market rates for treasury services
  2. BTreasury staff will have greater incentive to trade for profit in derivatives
  3. CTreasury performance will be assessed on service quality and cost control, with less emphasis on trading profitCorrect
  4. DThe group will no longer need policies and limits on dealing activity

Explanation

Under a cost centre model, performance is judged on service delivery and budget control, so profit motives fall away. Mark-ups and incentives to trade are profit centre features, and dealing limits and controls remain essential under any model.

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