Question

Discuss the pros and cons of a MNC having a centralized cash manager handle all investment and borrowing for all affiliates of the MNC versus each affiliate having a local manager who performs the cash management activities of the affiliate.

Answer 1

If the cash management is Centralized, then disbursement of cash among all the branches becomes a big issue as all the branches would be overly dependent on the Central Unit for all their cash needs. On account of this, productivity of the branches would be impacted. Apart from that, a lot of time would get wasted on account of follow up for cash needs. Also if the cash manager suspects that cash is not managed properly, then it is followed by endless justification of the cash spent by the branches.

But it has certain advantages as well :

Centralization of Cash ensures better control of cash.

Centralized Cash Manager is in the know of how money is being spent across all the branches.

Cash Manager can definitely conceive a better plan of inflow and outflow of funds in near future on account of his continuous dealing in cash on a larger platform.

It can be concluded by saying that Centralized cash management has both pros & cons but a balance needs to be struck between the two to ensure productivity of work and eradication of time hassles in funds management.