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

Which of the following is a recognised advantage of a centralised treasury function in a multinational group, rather than a decentralised one?

The recognised advantage of centralised treasury is that pooling cash and borrowings gives greater bargaining power with banks and reduces external borrowing. Local autonomy, motivation and responsiveness are advantages of decentralised treasury, not centralised treasury.

  1. ALocal managers have greater autonomy and better knowledge of local banks and conditions
  2. BLarger pooled cash balances and borrowings give greater bargaining power with banks and reduce the need for external borrowingCorrect
  3. CSubsidiary managers are more motivated because they control their own financing decisions
  4. DDecisions are always faster because each subsidiary deals with its own bankers

Explanation

Centralisation allows pooling of surpluses and deficits, netting of exposures, and larger transactions that give better terms from banks. The other options are advantages of decentralisation, such as local knowledge, autonomy and responsiveness.

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