ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals
A multinational operates in 30 countries with differing exchange controls, tax regimes and banking systems. Which factor most strongly favours retaining some decentralised treasury activity in this group?
Local regulatory restrictions on moving cash across borders, together with the need for local banking relationships, favour keeping some treasury activity decentralised. A single exposure view, scale economies and fewer bank accounts are all arguments for centralisation, not decentralisation.
- AThe desire for a single group-wide foreign exchange exposure view
- BLocal regulatory restrictions on cross-border cash transfers and the need for local banking relationshipsCorrect
- CThe wish to benefit from economies of scale in borrowing
- DThe aim of reducing the total number of bank accounts held
Explanation
Exchange controls and local regulations may block cash pooling and centralised funding, and local banks and knowledge are needed for local operations. Single exposure view, scale economies and fewer accounts are benefits of centralisation.
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