The participants came from a wide range of companies, with approaches which covered more or less the complete spectrum, from a highly centralised in-house bank doing all execution of transactions on behalf of local subsidiaries, to a completely decentralised operation which has a treasury presence in each entity. As always, there is no single correct answer. Common themes:
Nearly everyone has some form of regional presence with the goal of centralising cash into a pool.
The same countries pose the same problems: it is very difficult to include India, Thailand, Malaysia and Vietnam into a cash pool, while most other countries have no exchange controls and can be freely included. China remains a special case, but most companies have some form of cash pooling. Japan was mentioned as being difficult, mostly due to the way the banking system works, while Australia often has its own approach.
Most companies do their pooling using international banks. It is generally difficult to include local banks in these structures. HSBC received many favourable comments: this has not always been the case on our calls.
In countries with exchange controls, the common approach was to have the central team execute trades from the treasury centre, in the name of the local entity. So most structures are hybrids: physical pooling where permitted, with local bank accounts being managed from the centre where it is not.
There was a lot of discussion about the difficulty of implementing centralised cash management, given resistance from local teams and the eternal challenge of obtaining budgets. The consensus was that, while support from senior management is very helpful, it is best to work with the local teams to get them to appreciate the value added. A common issue was getting the local teams to accept the view that cash is a corporate asset, and does not belong to the local entity.
There was relatively little discussion about the best place to locate the treasury centre. Apart from the usual suspects of Singapore and Hong Kong, one participant is successfully running the RTC from China.
Bottom line: generally, we are dealing with relatively mature RTC structures, where people have adopted what works for them in an environment which remains difficult, but where it is quite possible to work effectively.
CompleXCountries Treasury Peer Calls are expert-lead confidential peer group calls in which a small group of expert treasurers compare their approaches to specialist treasury challenges, answer each others’ questions and combine knowledge. If you would like to know more about what we do, or to receive our Global Treasury Intelligence reports, please get in touch.