The distance between profits and cash management is growing ever longer. That’s because companies are becoming more complex and global in their businesses, with foreign operations a more significant portion of the company’s profits. This has meant that the ability of corporate treasury to effectively manage details and even strategies in Asia, Europe and Latin America has become strained.
Enter the regional treasury center or RTC. A recent meeting of The NeuGroup’s Assistant Treasurers’ Group of Thirty fleshed out some of the challenges in managing RTCs as well as treasuries that are, in general, far afield.
One area of tension: the human resource management piece. Managing RTCs can get tricky, as many members noted. And further complications arise when staff is shared. One member of the group explained that his team has an “ongoing challenge with the reporting structure” as RTC personnel in Asia and in Europe report into the division and not to treasury headquarters in the US. And local management looks at treasury staff as “accounts payable clerks” and paid as such. A related issue is local management pushing RTC staff into non-treasury activities. Another member shared that his RTC staff sit at and report to the SSC with a dotted line
An additional challenge: functions performed at RTCs are not standardized across locations. At one point, these functions worked well in serving the needs of local challenges. But after a while, they can drift too far from the needs of the company as a whole. This patchwork of treasury functions then becomes ever more unwieldy to operate. An added problem is that often dictating the work performed regionally (as compared to centrally at treasury’s main site) is the amount of hand-holding and control required. The standardization of these functions can create significant savings in time and money.
Managing regionally yet at a central location works for some corporate treasuries but not for others. An alternate solution is to staff more central sites that are outside of the region but have them responsible for specific regional activities.
Effectively managing treasury in multiple regions takes coordination and staff know-how. This is true whether it is performed in one central location or at decentralized sites closer to local business operations. While the location of an RTC is often a tax-driven decision, it is the quality of the regional staff, their specialized knowledge and the trust that HQ has in their performance that often dictates the amount of control and type of treasury activity the RTC is delegated. And while aligning your RTC with an SSC may make sense on the surface, that alignment can create a new set of personnel issues with competing loyalties.