Centralising your treasury function: How HSBC can help

Treasury centralisation: how the right bank can be key to success

According to HSBC’s 2021 Corporate Risk Management Survey, 87% of CFOs in larger businesses say their treasury plays a key role in strategic decision-making. Perhaps more importantly, 58% have complete confidence that their treasury has the skills necessary to play that role. These findings neatly encompass the shift in the role of the treasury today, from a tangential, siloed department into a strategic voice at the heart of business decision-making. Where once the treasury would have been preoccupied mainly with cashflow and capital allocation, now it is increasingly clear that the remit continues to expand, and treasuries must evolve to meet it.

For multinationals, the desire to expand and enter new markets puts new demands on the treasury team. Companies need to be able to navigate local policies, culture, regulations and language in their new jurisdiction, they must have adequate visibility of cashflows in each region, be able to monitor and hedge FX and see the opportunities in each market.

To achieve all this, many multinationals embrace treasury centralisation, consolidating financial processes and automating where possible. centralisation delivers a number of significant advantages, including increased efficiency and control, cost-cuts and better risk management. But perhaps most importantly, a centralized treasury has visibility and control of cashflow globally, allowing for better decision-making and avoiding substandard investment returns or unnecessary borrowing costs.

Ingredients for success

There are various structures for centralisation, but a popular strategy for large multinationals is to take maximum advantage of all timezones by establishing regional treasury centres (RTCs) in Europe, North American and Asia. The exact country is usually chosen by assessing tax and government incentives, skilled workforces and other criteria detailed in our article on How to structure a centralised treasury system.

Europe is generally highly supportive of treasury centralisation, with standards such as SEPA and ISO 20022. In addition, regulation – such as Open Banking and GDPR – are effectively enforcing more consistent standards for making payments and storing data.

In North America, the US's exchange, currency and banking restrictions/regulations usually make it a more popular location for shared service centres, another element in a centralisation structure. But the opportunity to centralise certain functions, such as liquidity, is still used. Both Singapore and Hong Kong in Asia are popular for RTCs, or Regional HQs as they are more commonly known there. These regions are attractive for their tax incentives and skilled workers.

In each location, the bank must have considerable local knowledge, not only of banking policies, but regulations, business practices and local payment systems. It’s also highly important that the bank can be flexible in its services, as centralisation is not a linear process, but a journey that evolves with the company.

How HSBC supports treasury centralisation

It is theoretically possible to create a centralized treasury that interacts with multiple local banks and bank accounts. But it can be impractical and goes against the spirit of a centralisation mission to remove complexity and maximize efficiency. It makes a lot more sense to choose a global bank that has a key presence in a large number of regions and a tradition and heritage as a strong business partner.

We believe we have a unique ability to help companies structure and launch centralised regional treasury models and then optimise and evolve them as the needs of your business develop. Even if you have already started your centralisation journey, our expertise can make it more efficient for you. Our significant international footprint gives you the reassurance of one partner with a presence in all key markets around the globe and the ability to combine local, on-the-ground expertise with a single coordinating point of contact for your treasury leadership.

Over the years, HSBC has provided continuous support to corporates in their centralisation journey. Our products and services play an important role in facilitating the treasury centralisation process and we have relationships with companies at every stage of the journey.

We provide an appropriate peer-to-peer point of contact for all major stakeholders in the centralisation decision-making and implementation process to ensure that your team have access to the information they need, as they need it. Working closely with you, we use our extensive experience to help you establish the right solution for your individual business, ensuring the right level of complexity and scale for your needs.

With a presence in 64 countries and territories across the globe, we are embedded in local markets. Our team of on-the-ground experts know how to navigate the complexities of banking in different regions, with specialised knowledge and skills in your geography of choice. We can help you bank like a local and find the hidden opportunities that each market offers. Treasury centralisation is often a question of timing – and we’re ready when you are.

Further insights