The amount of time that U.S.-based finance executives devote to international affairs continues to increase. According to the Bank of America Merrill Lynch 2015 CFO Outlook, 54 percent of companies have some involvement in foreign markets and 75 percent are operating in two or more regions. The top geographic destinations for new operations are Latin America, Asia, and Europe, in nearly equal numbers.

However, despite the number of organizations moving overseas, establishing overseas operations is not, by and large, a simple proposition. As companies expand abroad, finance executives find themselves managing entirely new challenges and risks that come from exposure to new markets, while they must continue to successfully execute their business strategy. To mitigate some of these challenges, finance executives need new strategies for treasury management, strategies that encompass major operational risks from exchange rate volatility to payment preferences of customers.

Even though every company’s situation is different, best practices in building a truly global treasury organization include the following:


Evaluate the policy directives for each market.  As a first step, treasurers must undertake a thorough review of the challenges involved in running a treasury function in each market. The review should evaluate, in detail, the situation on the ground for foreign exchange (FX) risk, liquidity management, and intracompany activity.

It should come as no surprise that foreign exchange risk is a key issue for finance executives in globally expanding businesses. Globalization usually requires a company to spend more money in foreign currencies for activities such as hiring staff members, setting up joint-operating agreements with partners, and building new facilities. As a result, executives should consider the following local regulations before deciding on any treasury policies:

  • Is the exchange rate in the market fixed, floating, or pegged?
  • What capital controls are in place?
  • Are there any specific administrative requirements around currency conversion, such as supporting documentation?
  • And, from a business perspective, are there business advantages to billing in the local currency rather than dollars?

"Many finance decisions have real-life implications. When it comes to payments in other countries, even the seemingly innocuous decision of where payments should be sent can have serious repercussions."Regulations may also complicate liquidity, or the ability of an organization to pay its debts, in certain markets. For instance, some currencies—like the Chinese renminbi—are not fully convertible. Other countries, such as Brazil, limit the movement of funds in and out of the country. It’s also worth noting that Brazil has a three-tiered tax system, with federal, state, and municipal taxes as well as a financial transaction tax that affects transactions such as FX, loans, and investments. This complex tax system can impact a foreign company’s ability to repatriate any profits earned in Brazil.

In order to develop comprehensive liquidity management structures, companies must understand all the rules that affect the movement of cash, including the ability to reinvest the money, with an emphasis on:

  • Local and regional tax liabilities;
  • Repatriation rules—some countries, for instance, require funds to be repatriated as dividends, which can take significant time;
  • Investment product options—for example, money market funds are not as well-established in Asia as in the U.S. and U.K., and Latin American countries including Chile and Peru have placed restrictions on money market funds.

Regulations around intracompany activity can also be difficult to navigate, in particular rules around intracompany loans. This may be an important consideration for companies that want to fund a new location or joint venture, depending on how the new operation is being funded. In general, China and India have very strict rules on moving money within an organization, and companies launching a new project must dedicate adequate time to navigating their options.


Consider customer and employee expectations.  Many finance decisions have real-life implications, and this is certainly true when reaching new customers and hiring new employees. When it comes to payments in other countries, even the seemingly innocuous decision of where payments should be sent can have serious repercussions. Will your customers object to sending a check to the United States? If you encourage credit card payments, will enough of your customers have a credit card account?

"International enterprises need to know where their capital is at all times. Finance executives whose business is expanding abroad need to determine the timeliness of the information in all the company's treasury-related systems."When it comes to moving into new markets, companies must talk to customers and consider how they want to pay their bills. For example, in Europe, checks are less popular than they are in the United States. In addition, Switzerland and Brazil use payment instruments that are unique to just those countries. As a result, U.S. companies must be sure to use the payment structures that are most common to, and preferred by, their customers, vendors, and partners.

At the same time, companies doing business abroad must consider the cost of different payment methods. U.S. businesses may find that they are paying up to $20 per cross-border wire payment, while they could reduce costs by using local options. By considering the needs and desires of customers first, and then adding the business rationale, finance executives can ensure that the payments environment works for everyone.

In the same way that companies need to think about their new customers, they must also think about their new employees in each market. One of the first decisions that must be made is how to manage local cash payments. Even though “petty cash” accounts are not popular in the U.S. anymore, many foreign offices expect them, and in some countries (such as China) they are required for regulatory reasons. But these types of accounts make it harder for a company to maintain full control over its cash.

As a result, companies looking to expand overseas must be sure to consider a centralized, versus decentralized, system for managing corporate bank accounts, payments and receivables, and cash around the world. In general, the best practice is to keep most of the control at headquarters, while delegating some processes to local offices in a deliberate and strategic way. Local subsidiaries may be given some independence to make decisions and manage jobs, but the global treasurer should indicate, at the start, the primary technology tools that all global treasury teams are expected to use. These should include a dedicated workstation or banking system that gives corporate treasury visibility over all accounts.

By providing this oversight, the global treasurer can work more effectively with local controllers on issues such as repatriating cash throughout the enterprise, which requires the input of people across the network. Open communication between local controllers and headquarters is essential in building long-lasting relationships.


Evaluate future needs.  In general, setting up strong, rigorous policies at the beginning will enable a company to adapt to any situation. But when it comes to treasury, some decisions last longer than others. Consider the choice of the banking model: Companies may opt to use regional banks, a single global bank, or a hybrid solution. For instance, a company with a large and complicated foreign footprint may decide that the ability of an international bank to manage foreign exchange rates makes it the logical choice of banking partner. But at the same time, global banks may not be able to offer certain payments products at the local level. Companies need to understand how they will manage these structures. Changing the corporate banking model once global operations are functioning can be very complicated, so companies should consider their future needs before settling on an option.

Another consideration is whether outsourcing some treasury functions would provide the company with more flexibility and expertise than managing processes internally. The areas in which outsourcing often seems like a good choice include back-office accounting, local FX management, and payment processing. Back-office accounting, in particular, is often provided by third parties, so many companies have experience working with vendors in that area. When it comes to currency management and payment processing, a third-party vendor that has a deep understanding of the local market may be the right choice because it may have enhanced experience with the myriad local rules and regulations around those activities.

Reconsider the company’s entire treasury technology infrastructure.  International enterprises need to know where their capital is at all times, in order to maximize investment and debt opportunities. Thus, finance executives whose business is expanding abroad need to determine the timeliness of the information in all the company’s treasury-related systems, and whether each local system is compatible with the corporate treasury technology platform.

Note that when making decisions related to IT requirements, it is best to take a five-year view, rather than a short-term view of six or 12 months. To that end, global organizations should be wary of systems with a local focus, as well as home-grown systems.

New technologies can streamline and simplify cross-border treasury management. As a first step in determining whether they need a new treasury management system, finance executives should ask the following questions:

  • "In an international operation, the challenges inherent in treasury management are amplified. By setting up strong protocols and policies, global organizations will be better prepared to execute on overseas strategy."How “global” is the company’s current banking platform? Does it allow for input from other countries, and not just the one in which the transaction originated?
  • Can the centralized corporate treasury function remotely access the accounts receivable, accounts payable, and treasury management systems of the company’s subsidiaries abroad?
  • How easily can treasury add new entities, accounts, and reports in each of these technology platforms?
  • How accurate are the cash position reporting and cash forecasting for each geographic region? Are finance executives able to easily review the most pertinent information, such as via corporate reports or dashboards?

Modern treasury technology platforms usually help companies establish a disciplined approach for reporting between headquarters and subsidiaries, which can make the process as automated as possible—and can help identify risks in the system.

As an example, Bank of America Merrill Lynch worked with a large, private U.S.-based university that purchased a campus in Italy and increased its program in London. In addition to ensuring that the funds for both projects were available and secure, the university’s senior finance leaders wanted to track expenditures in real time and offer employees convenience in making routine purchases. Bank of America Merrill Lynch was able to provide purchase cards, equipped with chip and pin technology for greater security, allowing the enterprise to monitor the cards via terminals in the United States. This is just one example of how technologies can provide convenience and security.  


Going Forward

In an international operation, the challenges inherent in treasury management are amplified because of distance and cultural differences. While it is impossible to develop one strategy for consistent operations everywhere, it is possible to develop one framework for continuity, to allow the company and the treasury function to grow organically, in an organized way.

As companies continue to expand into new markets, a deep understanding of treasury needs is crucial. By setting up strong protocols and policies between headquarters and other offices, along with using new technologies and treasury platforms, global organizations will be better prepared to execute on their overseas strategy.



Lesley White is the head of Global Commercial Banking International for Bank of America Merrill Lynch, where she provides a single point of management across the full spectrum of solutions that the bank offers subsidiaries of its U.S. Commercial Banking clients. In addition, she helps coordinate the teams in treasury solutions, credit products, and client coverage to best serve the needs of the bank’s middle-market clients globally.