Chapter 8Multinational Treasury Management

When I look back on all these worries I remember the story of the old man who said on his deathbed that he had had a lot of trouble in his life, most of which never happened.

— Winston Churchill

As a corporation grows beyond its domestic market and becomes multinational in scope, it must develop a financial control system capable of managing the international transactions and currency risk exposures of its operating units and of the corporation as a whole. The treasury of the multinational corporation fulfills this role, serving as a corporate bank that manages cash flows within the corporation and between the corporation and its external partners.

The treasury performs several functions pertinent to international operations:

  • Determine the MNC's overall financial goals and financial strategy.
  • Manage domestic and international trade.
  • Finance domestic and international trade.
  • Consolidate and manage the financial flows of the firm.
  • Identify, measure, and manage the firm's exposures to financial price risks, particularly its currency risk exposures.

Treasury must establish policies and procedures for how the operating divisions of the firm are to interact with one another. Treasury also must coordinate the firm's interactions with its customers, suppliers, investors, and host governments. This chapter introduces each of these functions of the modern treasury.

8.1 Determining Financial Goals and Strategies

The competitive global marketplace ...

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