The Benefits of Centralising Treasury

We were delighted to be joined by Manish Kohli, Global Head of Payments Solutions (GPS) at HSBC, who shared with the gathering of regional corporate treasurers the conversations he had been having during the recent period of market volatility with clients around the world.

Manish spoke about the three priorities that he is hearing in conversations with these treasurers.

The first priority that treasurers report is cash centralisation. Specifically treasurers need to be in a position to give an accurate and granular report to the CFO, CEO and the board on how much cash is on hand at any given point in time. They must also have full transparency on where that cash is located.

The second is how treasurers are offsetting the operating margin compression that is being caused by tariffs by improving their financial returns, especially from cash balances in a higher-for-longer interest rate environment.

The third main point of discussion with treasurers is how to build resilient treasuries. This involves accessing emerging and available technologies that can help build smarter treasuries. This will future proof the treasury function in the face of rapid change.

Treasury centralisation was the focal point of the wider discussion between the Treasurers in the Hangout, which commenced immediately after the opening address by Manish Kohli. A key point emerged is that treasury centralisation is a journey with varying degrees of implementation, rather than a binary state. The discussion aimed to explore the nuances and decisions involved in this process, and the potential end states.

Reasons for Treasury Centralisation

The discussion began with an exploration of the reasons behind companies’ decisions to centralise their treasury functions. We began by asking the participants in a real time survey what were the key drivers behind their push to centralise their treasuries. The survey results indicated the following:

What are the key drivers of treasury centralisation in 2025:

• Maximising returns on capital and cash balances – 50%
• Consolidating and controlling banking mandates and relationships – 25%
• Increasing visibility on regional cash balances – 20%
• Increasing control over payments and receivables – 5%

This finding shows that treasurers are reacting to the negative impact of tariffs on operating margins, by looking to receive higher rates of interest on centralised cash balances. This evidences treasurers increasingly important role as drivers of business performance – and corroborated the third priority that was outlined by Manish Kohli.

The participants identified several benefits of treasury centralisation. These broadly included: increased visibility of cash and improved control over cash flows; greater efficiency in managing liquidity and reduced FX exposures; and stronger relationships with banks and optimised returns on cash.

"One of the benefits of our ongoing centralisation programme is that we are transitioning to a centralised ERP system...a cloud system...which will strengthen us by bringing nineteen different treasury offices together in one system. This will give us a centralised view of our treasury and allow us to maximise the cash balances that we have. It is a very positive trend."

Centralisation as Part of a Wider Transformation

Several participants emphasised that treasury centralisation was often part of a broader company-wide transformation. These transformations typically involved harmonising business processes, integrating systems, and shifting from a startup approach to a more corporate approach. One participant, who is working for a company that has grown through mergers and acquisitions, explained:

“Our centralisation journey was based on our decision to harmonise all our businesses into one. We have just started that journey moving away from our startup mentality into a corporate mentality. It is a long process and it will take us years to get to where we want to get to.”

Another participant noted how treasury centralisation forms part of a wider corporate transformation: “We want to centralise not only our treasury but to have complete visibility in terms of liquidity – where the funds are and how much they are. We have businesses in Asia, Africa and GCC. The idea is that over the next 18 months we will partner with global banks such as HSBC, while also looking at whether we need to enhance our ERP system, and look at various ways to leverage virtual accounts and notional pooling. We want to get better at working as a group and not as individual entities.”

Another participant noted that: “We have had a globally centralised treasury for a long time – especially on the funding and liquidity side. But a few years ago we decided to set up a regional treasury centre so that we could become closer to the business. It has had a huge impact. We have learnt that while it is important to centralise, it is also important to stay close to the business.”

Sequencing of Centralisation

To delve deeper into the journey of centralisation, the discussion then moved on to the sequencing of treasury centralisation, specifically which functions companies prioritise. To find out more, we asked the participant to take a real-time survey to find out which functions should come first when undertaking a treasury centralisation journey. The results from the survey indicated the following:

If you were to sequence the centralisation of your overall treasury function which function would you try to centralise first?

• Liquidity - 43%
• Bank relationships - 33%
• Funding - 19%
• Receivables - 5%
• Payments - 0%

"We started our journey by centralising cash balances. We spoke to our bankers and asked them to give us daily and weekly visibility on our cash. From that we were able to start on notional pooling. We are also now trying to centralise our [banking] relationships, so we do not have to keep talking to multiple banks and spreading ourselves too thin. That is the mandate from our board."

Challenges of Centralisation

Despite the benefits, participants also acknowledged the challenges associated with treasury centralisation. By common consent, integrating different systems across different countries provided the biggest challenge. Specifically, several participants discussed the implementation of SAP’s S4/Hana ERP system within the context of their centralisation journey. This was identified as a significant undertaking for many companies, whether it was as part of a global or a regional centralisation programme.

Several participants discussed the challenges of managing treasury functions across different countries. These challenges included difficulties in moving cash in and out of certain regions, and the complexities of dealing with varying local regulations.

"We operate in over 100 countries and we have over 4,000 separate bank accounts in the region. For many reasons we could not reduce the number of banks we work with, so we have to set up automatic pooling of our local cash balances to a regional cash concentration. Then we can decide if we want to deploy that cash in the region or send it up to head office. Four years ago we had USD1.8 billion in what we called fragmented cash. Now that figure has fallen to USD400 million."

To identify other challenges in the centralisation journey we asked the participants to take a real-time survey. The results from the survey indicated the following:

What are the biggest challenges you face when undertaking a programme of treasury centralisation?

• Systems and technology integration - 57%
• Compliance with local regulations - 24%
• Internal business push back - 19%
• Local funding considerations - 0%

The Role of Banks

The importance of having the right banking partner in the centralisation process was emphasised. Banks can provide valuable expertise, support with technology integration, and help companies navigate complex regulatory environments. Several participants praised HSBC for its capabilities and support in their centralisation journeys. One noted:

“I have interacted throughout my career with HSBC, and I know the capabilities that they bring to the table, and in terms of providing solutions. They take your feedback to heart, and they make sure that they come back with something when required.”

Another noted the importance of being able to use their banking partners’ technology. "We operate in numerous countries in the region and centralisation has always been key for us. Our primary focus is having visibility over our cash because we have a very short working capital cycle. We rely heavily on our banks’ technology such as APIs to help us with that and to do central pooling of our cash."

Digital Currencies

The discussion touched on the topic of digital currencies, stablecoins, and central bank digital currencies (CBDCs) and how these might come to help centralisation programmes. Participants acknowledged the growing interest in this area, particularly in Asia, and the potential for these technologies to transform payments and treasury management. However, they also noted that the regulatory landscape was still evolving. HSBC will host a Treasury Hangout later in the year specifically on this topic.

Conclusion

The roundtable discussion provided valuable insights into the complexities and nuances of treasury centralisation. Participants shared their experiences, challenges, and best practices, highlighting the importance of careful planning, the right technology, and strong banking partnerships. The discussion also underscored that treasury centralisation is not a one-size-fits-all approach and that the optimal strategy depends on a company's specific circumstances, industry, and geographic footprint.

The Treasury Hangout Series will continue in June, with the next session dedicated to automation and the role of AI in Treasury.