Corporate Treasury Management: A Survey

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In an online survey conducted by SurveyGizmo on centralization of corporate treasury management at European multinational corporations, there were several significant findings. About 67.4% of the multinational corporations were found to be in five industries namely: industrial, energy, technology, basic materials, and consumer cyclical.

The leading industry was industrial with 19 of the 49 participants responding in favor. Other significant industries included consumer non-cyclical, diversified, financial, and utilities. However, no participant represented a corporation in the communication industry. Despite most of the corporations actively pursuing business in more than nine countries, approximately 55.1% of them are headquartered either in Germany, Switzerland, or Great Britain. Germany is on the lead with 30.6% of the corporation with their headquarters in the country.

The participants did not mention that any of the corporations is headquartered in Belgium, Denmark and Luxembourg. Most of the corporations are large companies with about 80% of them having operations over nine different countries. Therefore, it is beneficial to have a broader view of the corporate treasury management of these corporations.

The current set-up of corporate treasury management

Centralization of treasury management is a way of managing transactions from a single location while working with a single bank. Indeed, it is challenging to manage transactions across many locations and time zones while operating with multiple outside banks. In that understanding, centralization of treasury management will require the adoption of a single currency as well as a single accounting standard.

With most of the European multinational corporations having their operations in the European continent, 72% of them use International Accounting Standard (IAS) while 19% use local GAAP. The key currencies used by these firms are Euro, US Dollar, GBP and CHF. This is attributed to the fact that the aforementioned currencies have gained higher global recognition.

The adoption of centralization of corporate treasury management began with shared service centers and as many as 67.4% of the European corporations have their corporate treasuries defined by the service center. This significant portion could be attributed to the fact that a shared service center combines many tasks, processes and information technology infrastructure in a single location. About 11% and 3% of the corporate treasuries are defined by cost center and profit center, respectively.

This may be attributed to the diversity of the industries in which the companies operate which require varying approaches towards cash and risk management. In addition, the inclusion of participants from small and some medium-sized companies may have contributed to the profit center description because most of them pursue business for profit.

The fact Because many of the European corporations under the study were a large corporation with most of their operations located in different parts of the world and turnover generated from different countries, their corporate treasury managements require high centralization. From the participants, 61.9% of the corporations were highly centralized at their headquarters or group treasury levels. Another important description of corporate treasury management set-up is main centralization or centralization according to the business unit group and comprises of 11% of the companies.

In 78% of these companies, up to 20 people work at the headquarters in their corporate treasury management departments. In 58.9% of the companies, up to 20 people work in the corporate treasury management area throughout the corporation. These findings are important because one of the objectives of centralized treasury management is to minimize costs of the whole administration of finances through technology integration and risk reductions. With few people working in treasury management, it is an indication that technology is in use and risks therein are reduced.

The need seen to centralize

Like in all other multinational corporations being challenged by globalization and internationalization, centralization of treasury management is important in order to have the capacity to achieve higher efficiencies, greater transparencies and access to immediate information across multiple zones, a broad geographical region and many entities.

All participants representing European countries suggested centralization of treasury management as either absolute must, very important or important. This was also reflected in their responses on the importance of centralizing the different duties of corporate treasury management.

However, there were significant variations among the various tasks in what the participants considered important. It can be argued that the descriptions of both corporate treasury and corporate treasury management had a significant influence on what the participant considered important. In addition, all corporations do not perform all treasury tasks. In fact, accounts receivable management and accounts payable management are performed by just 4.7% of the companies.

Tasks which are commonly performed include cash management and pooling, liquidity planning, funding-bank loans, funding-credit loans, funding-capital markets, reporting, foreign exchange risk management and bank relation management. Hence, these variations also reflect what respective corporations consider important.

Generally, over 80% of the corporations performing specific task consider the task to be important to their business with an exception of payments and factoring. About the two exceptions, a significant number of the participants were not sure whether the tasks were important or not. Indeed, one of the participants had indicated that centralization of payments was a future target. Others also considered certain tasks as to require more business participation and should be the major treasury functions that must be centralized.

Therefore, payments and other functions such as liquidity planning, investing-short term, investing-medium term, funding-bank loans, factoring, working capital management, trade finance, and treasury management system need more centralization. The reason is that they apply to the differences between the current set up and the “ideal world” set up, yet a significant portion of the participants did not recognize their importance. This reflects the overall perception of the company towards these functions.

Apparently, centralization of treasury management at most of the European companies is defined at service and group levels, thus, the tasks that have greater influence on the business are also considered most important.

As in any other corporation, where factors influencing business activities lie, so do the factors that apply to the frameworks put in place such as treasury management. Therefore, not a single treasury function can be considered unimportant. Additionally, the changing business environment of the companies requires timely adjustments of the frameworks to increase efficiencies sort.

Factors influencing the centralization

The three major factors that influence centralization of corporate treasury management as identified by the participants are tax implications, legal implications and business requirements. As expected, the companies are susceptible to tax implications due to its relationship with finance administration as well as its variations across countries. Different tax regulations have direct influences on treasury management tasks such as payment, cash management and pooling, investing, equity transactions and leasing.

The reason is that the aforementioned functions are involved with the management of cash flows which are liable to varying taxation laws. For instance, the payment of employee salary or payment of exported materials must reflect different taxes imposed by different governments. Therefore, it becomes difficult to standardize functions that are affected by these varying taxation laws. Other tasks are also indirectly related to tax laws as they involve the activities delivered to maintain appropriate financing.

Legal implications impact on multinational business directly since the company must operate in accordance with the legal requirements of each country. Corporate treasury management is a core framework in a company and its functions are also affected by legal implications. Payments and cash management must reflect what the specific law requires from the firm.

Likewise, intercompany netting, insurance, investing and funding require adherence to specific regulations. Therefore, for the reason of regional diversity of multinational companies, the differing laws are a challenge to the standardization of the corporate treasury management.

Business requirements as another key factor that influences centralization, applies directly to European multinational corporations. Whatever a company should do to succeed in a particular region differ from what it should do in another. As a result, various entities in one corporation are compelled to respond to different business requirements.

Moreover, the expectations of stakeholders in different countries vary and hence the need for the entity to align with the norms in place. Therefore, these implications affect the development of a common corporate treasury management framework. Apparently, a number of functions cannot be centralized where business requirements differ. Nonetheless, centralization of corporate treasury management has far reaching benefits to European corporations.

The main reasons/benefits for/of centralization

Ranking the advantages the participants thought to attain from a centralized corporate treasury management system according to popularity, we have: concentration of specialized knowledge and skills, better risk management, better access to liquidity, improved financial control, improved governance and compliance, economies of scale, strategic benefits, higher transparency, cost savings, and high process efficiency.

It can be argued that these benefits revolve around the core objective of centralizing treasury functions; to gain the ability to attain higher efficiencies, greater transparency and access to immediate information across many regions of operations and numerous entities.

With the service center defining the majority of corporate treasury at many European companies, there are many benefits gained. A shared service center combines many activities, process and information technology infrastructures in a single central location. The major advantage here is the capacity to deliver quantifiable, automated, unified, efficient, and transparent processes.

In addition, this centralization collects qualified individuals, their knowhow and skills into a single center that permits the management to develop and watch treasury activities quickly and proficiently. Therefore, the many benefits identified by the participant are largely due to the focus on a shared service center.


Centralization of corporate treasury management at European corporation is real and in existence. It is defined largely by shared service center though cost center and profit center form some part of the definition.

There is still the need to centralize more on liquidity planning, investing, funding-bank loans, factoring, working capital management, trade finance, and treasury management system. But, factors such as tax implications, legal implications and business requirements continue to influence centralization. The benefits gained from centralization are numerous especially to organizations which define their systems through service center.

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BusinessEssay. "Corporate Treasury Management: A Survey." April 30, 2022.