What is treasury management? Find out in this helpful guide to companies trading overseas.
If your company trades internationally, then you need to know about international treasury management. It’s essential for optimising global cash flow management and minimising the risks associated with foreign currency transactions.
In this guide for UK organisations, we’ll be taking a closer look at international treasury management. This includes info on what it is, what activities it encompasses and which companies need to make global treasury management a priority.
We’ll also show you another valuable tool - the Wise Business account, ideal for UK companies looking to manage finances across multiple currencies.
International treasury management (TM) is the control of global payment processes, cash flow, financing and banking. It’s a key part of managing trade between global third parties, and is an important component of general treasury management plans and processes.
One of the main activities involved in TM is foreign exchange (FX) risk management
. FX risk occurs when global companies do business in multiple currencies, where exchange rate fluctuations can potentially lead to significant losses.
For example, an organisation may buy goods and supplies from one country, while having its products manufactured in another part of the world. The finished products are then sold to clients in a different part of the world, or perhaps in several different global markets.
Each part of this complex process will involve transactions in different currencies. The organisation needs to make sure it is getting the most favourable exchange rate for every transaction, which can require intensive management.
One way this can be simplified is with a multi-currency solution, such as the Wise Business account. With guaranteed mid-market exchange rate, low fees and a wide range of tools for managing finances in 40+ currencies, Wise can make international treasury management easier.
Any business which buys, sells or otherwise trades internationally will need to implement global treasury management processes.
Here are just a few examples:
- Import/export businesses
- International retailers and wholesalers
- Travel companies
- Businesses with offshore holdings
- International joint ventures
- Foreign direct investors
- Multinational businesses.
Each organisation will need to take a customised approach to international treasury management, to develop solutions that meet their needs.
But there are a number of activities and practices that most global companies will need to pay attention to, such as:
- Choosing the right treasury and automated payments software
- Selecting cost-effective payment methods outside of the expensive SWIFT network
- Closely monitoring real-time exchange rates to find cost-competitive rates for transactions involving currency conversions
- Identify and mitigate risks related to FX and trading with global partners
- Reducing the need for multiple foreign regional bank accounts (many global organisations aim to use virtual currency accounts instead)
- Use multilateral netting between companies - this is a payment arrangement which aims to more effectively manage cross-border payments together, rather than settling them individually.
- Hedge transactions to lock in rates for foreign currency payments
- Cash flow forecasting.
If your business trades in global markets, it’s well worth checking out the Wise Business account. This powerful online account is a hugely useful tool for companies that trade internationally, buy goods or employ people from other countries.
Wise aims to make business banking and international treasury management simpler, with features such as:
- Hold and manage money in 40+ currencies
- Local account details for 9 major currencies
- International payments to 160+ countries for low fees and mid-market exchange rate
- Employee expense cards - with no foreign transaction fees for spending in 150+ countries, plus spending limit controls and 0.5% cashback
- API integration with business and accounting tools
- Earn a return on the money you hold on GBP, EUR and USD balances¹
- Bulk payments - batch pay up to 1,000 people at once
- Bespoke permission levels to control team access.
Wise Business is fully regulated in the UK, and uses sophisticated security measures to keep your business data and finances safe.
After reading this guide, you should have a better idea of what international treasury management is and why it’s so important for companies with a global reach.
We’ve looked at the main activities, processes and best practices involved in global treasury management. But each organisation will need to develop a bespoke solution to meet its own particular needs.
- With Wise Interest, you can get a 4.82% variable rate on your GBP balance held in your Wise Business multi-currency account. Capital at risk. Current rates do not guarantee future growth.Variable rate is based on 7 day performance as of 10 Aug 2023. This fund has returned an 0.93% annual average over the last 5 years, excluding Wise and fund manager fees. See full 5 year past performance of funds
Sources last checked on date: 20-Aug-2023
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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