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Establishing & Structuring Regional Treasury Centers

  • By Andrew Deichler
  • Published: 10/29/2018

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Regional treasury centers enable businesses to connect to customers and banking partners in foreign nations where unique cultures and complex regulations make it essential to employ local staff. While regional treasury centers offer many benefits, there are challenges to operating them too.

In the latest AFP Executive Guide, underwritten by Thomson Reuters, we review the factors that organizations need to consider when establishing and structuring a regional treasury center, as well as best practices to apply once the center is open. We also explore key regions that have emerged as hubs for regional and centralized treasury centers, and the opportunities and challenges they present.

Establishing a Regional Treasury Center

There are many reasons why an organization will establish a regional treasury center (RTC), not the least of which is to gain more control and efficiency in its treasury processes.

As Nick Powell, global head of commercialization, liquidity and investment products for HSBC, explained, companies generally establish RTCs to achieve three main objectives:

  • Generating operational efficiency: By simplifying processing, rationalizing bank accounts and negotiating lower fees, companies can increase productivity and cost efficiency.
  • Managing risks: Companies can reduce their risk profile by standardizing processes and managing FX risk centrally.
  • Concentrating cash: Companies can increase working capital and optimize liquidity and yield through centralized liquidity management.

But even if you operate an RTC, it helps to be as consistent as possible across your entire treasury organization. “What we consistently hear is that the more you centralize, the more you automate, the more you have consistent platforms and processes, the more it frees up the time and resources for the treasury team to focus on the more strategic, value-adding activities,” Powell said. “The days where the most effective treasury teams focus solely upon accounting and financial activities are long gone. Corporate treasurers are playing a more important and influential role in corporate strategy and being the ‘economic advisor’ to the organization rather than just the accountant.”

Structuring a Regional Treasury Center

HSBC identified five key functions that an RTC may include:

  • A payment factory to execute payments or collections
  • A shared service center, which operates as an efficiency structure, a legal entity and even a third-party to service operating or functional units
  • An in-house bank to deliver financial services to subsidiaries and affiliates
  • A netting center that optimizes the company’s ability to offset payments and receipts across subsidiaries or affiliates
  • A re-invoicing center that undertakes all purchases and sales of goods on behalf of subsidiaries and affiliates.

Jimmy Quek, CFO of Singapore-based Anergy and formerly the finance director and APAC treasurer for the Goodyear Tire and Rubber Company, has overseen four regional treasury centers—three in Singapore and one in Tokyo—managing teams ranging from two to 12 people. From the 1990s through the last decade, individuals on Quek’s RTC teams primarily focused on core treasury functions—cash management, FX, compliance and banking relations.

More recently, Quek has structured his treasury centers differently, so that staff members function more like business partners that dig deeper and support the geographical areas that they focus on. “So for example, I have a treasurer who covers China, one who covers [the Association of Southeast Asian Nations (ASEAN)], one covering India and another covering Australia and New Zealand,” he said. “I broke it up this way so that they would become more attached to the operations and can be more of a holistic treasury, handling banking, compliance, working capital management, and even tax advice. They are able work with FP&A, the controller, and the finance director representing that particular cluster.”

However, each of Quek’s treasurers has specific areas of expertise, which enables them to work cross-functionally as needed with other practitioners in the RTC. For example, the treasurer who covers India also is a regional FX specialist. If there is an FX issue in China, the India treasurer has the skills and knowledge to help the China treasurer to resolve the problem.

Quek structures his RTCs this way largely because it benefits his staff members in the long-term. “Through my experience, I found that when I just structured RTCs around core competencies, over time, each treasury individual’s scope becomes very narrow,” he said. “It’s very hard for them to move on to operational finance, or take up any role outside of treasury.”

Given that Quek has ascended from treasury to the CFO role, he has observed firsthand how challenging it can be for treasurers to join the C-suite. Typically treasurers face stiff competition from individuals in FP&A, commercial finance, etc.—many of whom may be operationally stronger and have a broader finance experience. “I want to make sure that those who are reporting to me have an extensive lifespan in finance, and not just in treasury,” he said. “My treasurers have become sought after by the business because they have various financial experience within the organization and even externally. They are very marketable and eligible for any finance director position because of the exposure they’ve gone through.”

Download the AFP Guide to Operating Regional Treasury Centers here.

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