What are Corporate Credit Cards? – Different Types of Cards
February 12, 2025
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The role of commercial banks is to act as trusted partners to their corporate associates. Over the years, the degree of trust has been steadily increasing. As a result, many corporations across the world are outsourcing critical parts of their business to banks. In the previous articles, we have already seen how certain payment functions are being outsourced to banks.
It is one thing to outsource a non-critical function such as payment processing to commercial banks. However, the treasury department is at the heart of any business. Most chief financial officers are not comfortable allowing third parties to have access to the core of their financial operations. Hence, it is a remarkable feat by commercial banks that they have been able to convince corporations to outsource their treasury function to the bank.
In this article, we will have a closer look at what are the treasury management services which are offered by commercial banks to their corporate clients and what are the benefits of having such services.
Treasury management services are a group of financial services which have a very wide scope. They can be defined as making decisions that allow for the management of assets and liabilities of the firm.
Treasury decisions include decisions regarding the type of funding, the interest rate to be paid, forex operations, payments netting, receivables trade, etc. There is no exact definition of treasury management. However, it needs to be understood that treasury refers to all the financial resources which are available to a firm.
Treasury management is about taking a bird’s eye view of the finances of the firm and making effective decisions in order to maximize the value of the firm. It is also important to note that treasury management encompasses activities across the front, middle and back offices of the firm.
There are two main approaches that are followed in the market regarding treasury management services. They are as follows:
Instead, the corporations make their own financial decisions without any advice from the commercial bank. However, the bank takes care of the transaction processing and other operational details. This model is generally followed by companies where the chief financial officer is skeptical about outsourcing critical functions.
The commercial bank is privy to decision-making corporations and is expected to provide advice that enables decision-making. The operational aspects of transaction processing are also included in this model. Such a model is followed in companies wherein the management believes that they can benefit from the experience of the commercial bank in treasury management functions.
Over the years, the number of corporations opting to outsource their treasury management services to commercial banks is increasing. This is because of the following benefits which accrue to the customer.
Hence, many corporations decide to outsource their treasury tasks to the bank in order to take advantage of this expertise that the bank possesses. At the same time, banks can generate additional revenue by utilizing their core competence.
The fact of the matter is that treasury management services are slowly becoming an important part of the entire value stream which is offered by commercial banks to their customers.
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