Multinationals stand to gain substantially from a reorganization of their treasuries to a regional structure and a rationalization of the number of cash management relationships. A regional structure allows for substantial cost reductions through better liquidity management, reduced treasury teams, and lower network maintenance costs. These benefits are big: according to a recent survey by PricewaterhouseCoopers, a 1% improvement in liquidity management could improve a corporate's share price by 120 basis points.
The strategy is not without drawbacks, as Pieter ten Bosch, cash management development manager at Shell, says: "You gain a better picture of cash movements for the region, but you inevitably lose out on local expertise. The best solution for the region might not necessarily be the best for each individual country."
Benefits of consolidation
Cutting back on the cash management providers used in a region also generates big benefits. It gives the corporate strengthened bargaining power, more consolidated information, and fewer bank relationships and interfaces to maintain. It also gives large corporates more power in their relationship with their cash management providers, enabling them to demand more than ever before.
Shell's recent move to tender extensive multi-country mandates in Europe and the Middle East and Asia is a case in point.