Question

The international finance function can be carried out in a centralised or a decentralised fashion. What are the advantages and disadvantages of each way of operating and what can be done to mitigate the disadvantages of each of these ways of organising?

Answer 1

The international finance function can be carried out in Centralised or in decentralized manner.

Centralised management is when the organisation structure is comprised of a small handful of individual who make the most of the decisions in a company regarding international financing.

Decentralized management is the management by a participatory approach in which some of the decision-making process are transferred to the lower levels and even to the individual employees

Advantages of centralised management and as follows-

A. It helps the upper management to have a complete control over the the various methods of international Financing

B. Centralised management style has the potential to improve the organisation as a whole instead of the smaller branch at a time.

C. Centralisation also helps in standardization of product and material which will speed up the preparation and procurement of various material company

Disadvantages of Centralised management are as follows-

A.it limit the creativity to the top management that make the majority of the decision.

B.this can lead to problems for company which is trying to adapt to changing market.

Advantages of decentralized management are as follows-

A. This helps in broader participation of the entire organisation in decision making process

B. This can give more efficient managerial decision because lower level manager have more direct control over day to day tasks .

C. It also helps in rewarding other employees as and when needed and have a clear view of the performance related result.

Disadvantages of decentralized management are as follows-

A. If some of the lower level employees lack the training and the required expertise, then it can damage the organisation as a whole

B. It can also lead to no proper allocation of duties and it may result into loss of control from the hands of top management.

C. Different units of organisation may start working as autonomous units working in their own interest rather than working in the overall interest of organisation.

There need to be a proper coordinated approach in order to deal with decision making process so that there should be an equal participation of various level of employees in effective decision making and the responsibility should also be fixed so that it helps in maximization of the overall returns to the company while investing into finances internationally.