Preparing for a Regional Treasury Center

Preparing for a Regional Treasury Center

Regional Treasury Centers (RTCs) 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.** But once you’ve come to understand all the benefits an RTC has to offer, what are the next steps and considerations for an RTC implementation and how can you prepare for this massive undertaking?  

Locational Incentives  

Ideally, companies should focus on finding locations that are geographically close to regions they have major operations in. This will likely be the most cost-effective location and provide an easier, smoother transition. However, it is important to make sure to thoroughly vet a location as there may be outside factors that could hinder treasury operations in the long run, such as regional regulations and taxes. 

Some countries offer tax incentives for opening and operating an RTC, while others may increase taxes or tag on additional fees and costs. Companies should conduct a cost/benefit analysis to determine not only what they will spend opening an RTC, but how much they look to save in the long run.  

Banking  

Since a Regional Treasury Center consolidates a company’s bank accounts, careful consideration should be given when choosing regional banking partners. Companies should make sure that banks in the region meet operational needs and have local banking contacts available for assistance.  

Companies should ensure that the region’s banking partners have a globally consistent product offering that is designed to work across borders. It is also important to make sure the region’s banking partners have experience in supporting RTCs so that treasury teams are able to properly standardize and streamline treasury operations across connected locations.  

Technology  

Regional Treasury Centers are inherently technology-focused, requiring a dedicated onsite IT team for whenever a problem occurs. This onsite team can be replaced with the installation of a cloud-based Treasury Management System (TMS) that connects directly to a company’s headquarters from any connected location.  

When considering technology, companies should also look into the region itself. Is the region supported by fundamental facilities and infrastructures like air and shipping ports, telecommunications, and power generation and transmission? Are general utilities in place that will maintain the economic and social standards of society, like educational programs, emergency services and law enforcement agencies? All these considerations boil down to making sure that the region has both economic and political stability.  

Operational Support  

When selecting an RTC location, companies should focus on finding business-friendly environments that are supported by sound infrastructure, the availability of general banking services, a large labor pool, and relevant experts. Additionally, a company’s current footprint should be taken into consideration, as well as their future short-term and long-term objectives and expansion plans. Conducting a thorough qualitative and quantitative assessment of how an RTC would affect operations will help determine if it is a worthwhile investment.  

Qualitative Assessment  

RTCs open the door to some of the Treasury Management best practices such as In-house Banking, Multi-lateral Netting, Payment on Behalf of (POBO), and Receipts on Behalf of (ROBO). When conducting a qualitative assessment, some key factors to analyze include foreign exchange convertibility, the ease of cross-border fund movements, human resource availability and reliable technological infrastructure. Other qualitative factors include determining what the capabilities of the banks in the regional market are and if they meet your company’s requirements, as well as any additional company-specific factors.  

Quantitative Assessment  

A quantitative analysis should focus on factors like tax profiles and the existence of double tax treaty networks, which refers to an agreement made between countries to resolve issues involving double taxation on both passive and active income. It should also consider foreign tax credit, any thin capitalization rules that are in place, and any other company-specific qualitative factors that might be important for consideration.  

By carefully assessing these areas, you’re giving your organization the best chance of success if you decide that implementing an RTC is right for your organization; but you don’t need to make this decision alone. Elire’s team of treasury experts is here to advise. Reach out to [email protected] to set up a time to discuss your RTC aspirations, and in the meantime check out Elire’s Treasury Blog here. 

**We’ve defined what a regional treasury center (RTC) is and how to effectively utilize an RTC in our previous post “Understanding a Regional Treasury Center.”