ABSTRACT
At the international level, treasury issues - and cash management in particular - introduce degrees of complexity beyond those experienced in a single country. While the fundamentals of cash management are the same, environmental factors such as taxation, exchange controls, currency risk, interest rate risk, country risk, and statutory accounting/reporting requirements add new dimensions to the problems. There are also tactical problems such as country differences in collections, time delays and inconsistent accounting standards which make credit risk evaluation difficult and introduce nonuniform contract and legal recourse avenues and significantly higher transaction cost elements. From a multinational company's perspective, clear objectives must be stated by senior management so as to provide the treasury function with a clear set of guidelines. For most corporations, the principal objects of the international treasury activity should be to:
protect the corporation's liquid assets, principally cash, until they are required for re-investment in the business operations or for pay-out to the stakeholders in the company;
maximize the use of cash and debt commensurate with the company's operating environment. Provide the business operations in each country with sufficient liquidity and credit to deliver on its business objectives;
carefully manage all financial risks confronting the company, keeping in mind that all risk is symmetrical. Risk can be positive and negative. Financial risks are additional factors of production which must also be managed and to ignore them is to speculate. The object is to reduce factors of volatility which can prove detrimental to the concern; and
consistently provide the lowest after-tax fully-hedged capital available to the company. Take advantage of the corporation's collective international businesses to create economies of scale and to reduce transaction costs.
In order to fulfil these goals, the company must provide for professional treasury skills with adequate systems and other resources. The international treasury activity must be in touch with the line operations of the company so as to anticipate issues and communicate actions.