AFM syllabus

Answer

1. Local Operational Needs

   If operational needs in particular countries are complicated as regards cash or funds management, there is likely to be sufficient work for a local treasury function. 

   It may be able to operate more efficiently and at a lower cost than a central function whendealing with local matters. 

   A local function may be able to respond quickly to urgent operational needs, because, for example, it is located in the same time zone. 

   If the local economic and finance environment is dynamic, a local function may respondto environmental changes more quickly. 

   If local operational management has been given significant autonomy over financingand risk management decisions, a local function would be best placed to implement local management’s decisions

2. Financing Requirements

   Staff in a local treasury function may have better ideas of local finance opportunities. 

   This will be particularly important ifthe treasury function needs to act quickly when investing short-term funds or seeking short-term borrowings. 

   A local functionmay be better able to identify opportunities for internal hedging if that is regarded as an important technique, for example, identifying opportunities to match assets held locally with local debt

3. Regulatory and Tax Conditions

   Local experts may have better knowledge of local legislation and taxes, and the local political and legal environment. 

   This may be particularly important if the foreign parent company is being pressurised by the local government or legal authorities, or if local regulations are significantly different from those of the parent company’s home country. 

   If local capital markets arewell-developed, local staff may have a better understanding of the factors affecting investor views