Setting up a regional treasury center can be a complicated process, but it’s often worth the effort when operating in a region where you need boots on the ground. AFP’s Asia-Pacific Treasury Management Handbook, sponsored by Kyriba, explores the structures of these centers and the unique challenges they face in the APAC region.

RTC STRUCTURES

Regional (or international) treasury centers (RTCs) are increasingly being adopted by larger and more complex organizations to provide for localized controls, as well as management of cash and financing activities aiding corporate centralized strategies related to hedging of foreign exchange and interest rate risks. RTCs typically focus on reporting to group headquarters on local decision-making and enforcing controls as set by approved internal policies. 

A company with sufficient complexity, geographic scope and volume of operations to establish one or more regional treasury centers is likely to have a variation on the following structure. The group treasury may be located in or close to the corporate headquarters and will be responsible for establishing treasury policy and for governance.

RTCs will be located in other time zones, such that, for example, a U.S.-based multinational might have its corporate headquarters (and therefore the bulk of corporate treasury professionals) in the United States, an RTC in Europe to cover operations in EMEA, and an RTC in Singapore to cover operations in APAC.

The precise number and location of RTCs will depend on the company’s geographic locations. Their emergence reflects the fact that it has become easier to manage cash on a regional, rather than on an in-country, basis, as governments have removed exchange controls and other barriers. A number of countries (including Qatar and Singapore) offer incentives as a location for treasury centers. The division of activity between group treasury and the RTCs will vary.

Some companies operate a single global treasury organization, with team members located centrally and in one or more RTCs, with the result that the regional centers are formally part of the group treasury.

Others have a more tiered structure, in which RTCs are subordinate to group treasury. In the subordinate structure, an RTC might be responsible for core treasury activities, including local cash management, regional liquidity management (via the operation of one or more cash pools) and working capital management. They may also manage any short-term investment of surplus cash in the cash pool and implement the hedging strategy on a regional basis.

RTC Advantages

RTCs have become incredibly popular throughout APAC because it's very difficult to move money out of the region, noted Dory Malouf, Senior Principal Value Engineer for Kyriba. “There are tax implications, and there are government regulations and restrictions,” he said. “And what that leads to is needing some boots on the ground trying to give you some insight. Some intel on what is going on in that region.”

Malouf, a former treasury practitioner, sees RTCs as the best option for maintaining control over your operations in the region. “When I set my RTCs up back in practice, it was for controls and visibility,” he said. “I had strict policies on reporting guidelines—when things were due.”

Additionally, there are obvious cost savings in operating an RTC. “The overhead tends to be significantly less expensive than trying to do something different here,” Malouf added. “If you were to get somebody to manage treasury from the U.S. for APAC and just have them work really odd shifts, it would be significantly more expensive than just having somebody there giving you real-time reporting on the data that you need.”

Furthermore, in the current environment, RTCs may see an expansion because there is even less dependency on having treasury employees who are located close to the corporate headquarters. With so many companies rethinking their need to have employees into the office, they may see value in adding more staff to their RTCs.

“If I'm a corporation, the talent pool just opened up for me,” Malouf said. “I no longer have to worry about someone needing to be within 50 to 30 miles of my office. “The talent pool just opened up for jobs in finance and accounting where you're not necessarily required to touch and feel anything. Organizations have learned that, okay, we have connections at home. We're able to function just fine in those particular areas with you providing us information from right where you are.”

For more insights, download AFP’s Asia-Pacific Treasury Management Handbook, sponsored by Kyriba.