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

A multinational group is considering centralising its treasury function at head office rather than leaving each subsidiary to run its own treasury. Which of the following is a recognised advantage of centralisation?

The recognised advantage is that surplus cash in one subsidiary can fund deficits in another, reducing external borrowing and bank charges. Pooling is a core benefit of centralised treasury. Local responsiveness, local knowledge and subsidiary autonomy are advantages of decentralised treasury instead.

  1. ASubsidiaries can respond faster to local banking conditions and local currency needs
  2. BSurplus cash in one subsidiary can be used to cover deficits elsewhere, reducing external borrowingCorrect
  3. CTreasury staff gain closer knowledge of each subsidiary's local operating needs
  4. DEach subsidiary is made fully accountable as an independent profit centre for its own financing

Explanation

Centralisation allows pooling of cash, so one subsidiary's surplus can fund another's deficit, cutting external borrowing and interest costs. The other options describe advantages of decentralisation, such as local responsiveness, local knowledge and subsidiary autonomy.

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