Recently, experts from the Middle East and Africa (MEA) region were brought together to discuss the pros and cons of centralized versus decentralized treasury functions. The dialogue revealed various perspectives and experiences, highlighting the complexity of deciding on the optimal approach for each individual organization’s treasury and cash management.

A common theme running through all the comments was how much influence geography had on their decision. Adapting the company’s treasury structure according to its industry, geographical presence and specific business needs is important.

Dr. Nesrine Abdine explained that the responsibilities are divided into treasury and cash management across different regions, and while cash management is decentralized — to allow each country to manage its own entities and banks — treasury functions are centralized. In detailing the process of building their department, which started a year and a half ago, she said it came together via levels ranging from junior to senior management.

Hisham Abouldahad shared that his organization's structure includes both onshore and offshore operations, with Egypt being their largest market. He highlighted the need for a centralized approach for better control and a macro perspective, noting that their African subsidiaries report daily to the central team in Dubai. Overall, he is greatly in favor of centralization in corporate finance and cash forecasting, but acknowledged the necessity of some decentralized aspects of cash management.

It was pointed out that centralization offers better control and cost efficiency, which is especially beneficial to those handling operational tasks such as transfers and letters of credit. Further, the challenges posed by different cultures and languages in various regions suggest that local personnel are essential for facilitating communication and overcoming barriers.

Ahmad Makhlouf favors centralized management for better control and audit capabilities but recognizes the necessity of decentralization for addressing specific local challenges. His recommendation is for the centralization of routine business activities and a combined structure to tackle unique challenges.

For an organization that is comprised of six companies, the decentralization of operations is critical. Decentralization, this expert stated, offers flexibility and local expertise, while centralization can lead to slower decision-making and regulatory challenges.

Mohammed S Al Eld emphasized the strategic functions treasury provides and argued that treasury should be viewed as an enabler rather than just a service provider. He supports centralization for leveraging systems and maintaining unified processes, which enhances bargaining power with banks, and cautioned that decentralization could lead to the loss of negotiation power and process inconsistencies.

It was concluded that there is no one-size-fits-all approach to treasury structure. The decision between centralization and decentralization depends on the company's industry, geographical presence and specific business needs. While centralization offers control and cost efficiency, decentralization provides flexibility and local responsiveness. Participants underscored the importance of adapting the structure to fit the company's unique circumstances and challenges.

Register for the AFP webinar, “Navigating Risk: Treasury and FP&A as Co-Pilots,” October 9, 2 - 3 PM UTC, to hear from top CFOs in the Middle East and Africa.