Question

Centralized _________ __________ (two words) allows the international company to reduce transaction costs and foreign currency costs. It may be seen as a way to begin to standardize the financial management function.

Answer 1

1) Centralized treasury management allows the international company to reduce transaction costs and foreign currency costs. It may be seen as a way to begin to standardize the financial management function.

Centralization of treasury management allows firms to optimize their efficiencies and transparency. Having a centralized treasury management department allows an international firm the ability to base their operations in a location which offers favourable terms such as low corporate tax. Instead of having each department of an international company have their own foreign currency traders, having a centralized team can streamline foreign exchange decisions and reduce costs, while speeding up the decision making process and improves governance, as well as allowing access to real time zones. This method allows international companies to reduce their bank charges while improving their ability to deal higher volumes and negotiate better terms with remaining banks.