Understanding a Regional Treasury Center

Many global organizations are faced with the challenge of managing and maintaining standard operating procedures across their subsidiaries due to the complex rules and regulations of each area they operate out of. By investing in a Regional Treasury Center (RTC), organizations are able to more easily take control of their treasury operations and connect their customers with banking partners within these foreign nations.

What is an RTC and how does it work?

Regional treasury centers allow organizations to connect to customers and banking partners in foreign nations where unique cultures and complex regulations make it essential to employ people locally. While regional treasury centers offer many benefits, there are also challenges in operating them too including 

A Regional Treasury Center (RTC) is a centralized location that a corporation sets up in order to house all of its treasury operations. They also reduce your risk profile through process standardization and centralization of FX risk management. Centralizing treasury operations through an RTC can also increase working capital while optimizing your organization’s liquidity and yield through centralized liquidity management. RTCs are increasingly popular because the more that centralized and automated a treasury operation is, the more time and resources are freed up for the treasury team to focus on value-adding activities. This enables treasurers to shift from the role of being an accountant to being an economic advisor for your organization.

Why are RTC’s trending?

Regional treasury centers offer a number of key benefits, making them an attractive option and increasingly popular. These include:

  • Centralized liquidity (cash pooling)
  • Reduced counterpart exposure
  • Capital optimization via reducing operating cash needs
  • Lower negotiated transactional fees
  • Increased tax efficiency
  • Rationalized banking account relationships
  • Cash visibility, forecasting, and investment
  • Improved risk management
  • Centralized positions and operations across participating entities

Considerations for Investment/Location Selection

The selection process for where to implement a Regional Treasury Center is something that needs a high level of consideration and oversight. Ideally, companies should try to choose an area geographically close to a region in which they have major operations. However, this location might not always be the best option because of various other factors that may come into play such as cost and local laws/regulations. Since costs play a big role in any potential new company endeavors, it is important to realize that it’s not only what an organization’s treasury department will spend through opening an RTC, but how much potential there is to save. The governments of some countries offer tax incentives for companies to open and operate an RTC within their borders. It’s worth considering that not every company will be able to reap the savings of an RTC though, so it is important to go over the projections thoroughly.

For more information on how to optimize and streamline your treasury operations, connect with Elire’s Treasury Advisory Services team.