Centralize treasury management to reduce risk, increase control.

• Author: Struzenski, Jeffery
• Position: Treasury

Multinational corporations currently face huge challenges in managing transactions across multiple locations and time zones while working with many outside banks. The greater the geographic reach of a company, the more difficult it is to access and track accurate and timely cash flow information. At the same time, mid-cap companies that are growing in value and size must decide how to implement the right solution for managing an increasing volume of transactions.

Treasurers have pushed to gain more visibility and control over cash management by using technology tools that allow them to overcome the obstacles of time zones and geographical distance. These tools have helped to automate many processes, deliver cost reductions and facilitate 24/7 availability of information.

With the advent of Sarbanes-Oxley, companies now need technologies that provide not only visibility and control, but also regulatory reassurance. And, since the CEO and CFO must now sign off on quarterly financial statements, in order to trust the numbers they sign off on, they require instant and centralized visibility of their organization's cash position.

Thus, while it might have been optional in the past, in order to meet today's compliance requirements companies must now centralize cash management. A closer look at the pros and cons will help to illustrate the importance of centralizing treasury and cash management, and the steps to take to make it happen.

Sarbanes-Oxley is a primary consideration when making the move, but even without the Act a centralized approach to a treasury management system is still essential. Quite simply, centralization helps reduce costs and improve risk management by giving a better view of short-term assets and liabilities, and by providing an instant dashboard of cash positions across the business.

In 2004, Lucent Technologies adopted a centralized system and created an in-house bank. From a treasury perspective, the consolidation of individual businesses' exposures and cash flows has dramatically reduced its volume of transactions. Consolidated hedging capabilities have resulted in considerable cost savings and improved decision-making. This consolidation also resulted in a 25 percent decrease in the volume of external deals entered by the in-house banking group.

Managing foreign exchange across multiple locations is another advantage. With a single view of transactions in New York, Tokyo and London, multinationals can take advantage of...