Finance

By definition, Multinational entities (MNEs) are entities that produce in more then one country. This normally involves a direct presence in a country outside the country of origin which may take the shape of either a subsidiary or a joint venture. HSBC is an example of a multinational corporation with headquarters in London and Hong Kong and a presence in over 85 countries with 9500 offices providing financial services to a wide spectrum of clients in Europe, the Asia Pacific Region, and the Middle East  Africa.

The vast nature of global operations with a local focus in the financial services industry makes it necessary for this company to have a strong local as well as central treasury function as the same is required to
Local Cash Management Needs Banks are always dealing in cash and hence the treasury function has to be alert on how everyday requirements on the asset and liability side can be met, that is, asset and liability mismatches do not occur in the short and long term. This also has implications for the statutory requirements on Cash Reserve Requirement (CRR) and Statutory Liquid Reserve (SLR) in the different economies that HSBC operates in as the local treasury function in each country has to ensure compliance with relevant regulatory requirements on these and other requirements on deposits that the respective central bank may impose. Failure to meet these requirements leads to penalization while an asset liability mismatch can cause a severe dent in profitability and reputation (BPP, 2009). 
Liquidity Management From a local and international perspective, respective treasuries of the group will have to collude to ensure that liquidity concerns within the group are addressed. Often we see that different economies will have varying levels of liquidity and investment opportunities. The trick from a group perspective is to use excess liquidity where available and invest in opportunities wherever they might be. This ultimately leads to value creation (FTC, 2007).
Exchange Rate Risk Management The treasury function, by nature of the operating core of the business, is heavily involved in mitigating transaction exposure for clients and for the company itself when intra group transactions take place for example, when remitting dividends back to head office or head office grants being received. Similarly, regional treasury functions, for example of HSBC Middle East, are looking at mitigating the effect of potential translation exposure through hedging derivatives. These risk management exercises ensure that value of the business is preserved and that uncertainty is removed in own and client transactions. (Schweser, 2009).
Interest Rate Risk Management  Treasuries also act as signals to the business generation function of a bank on a local as well a central level on the deposit intake that should be undertaken and the cost that should accompany the deposit given the opportunities for higher spread lending to corporate, SME and consumer clients and the expectations from the treasury function to place any excess funds in money market instruments. At the same time, adverse interest rate movement coverage may be sought by the local treasury to cover any exposure to interest volatility on funds borrowed from other members of the group treasury or from head office  or even from clients through investing appropriately and seeking out coverage where necessary to preserve value and reduce uncertainty (CFA Institute, 2008).

In essence, for HSBC to be a successful enterprise, a good treasury function will be required to adequately manage cash that is generated each day across 86 countries with a local cash management and regulatory focus as well as and a group liquidity focus. At the same time, exchange rate risk management and interest rate risk management on every level of the treasury function preserves value for clients and the company itself. Essentially, the treasury function is the back bone of any Bank and when you talk about a bank the size of HSBC, the role of the treasury function in managing hundreds of billions of dollars of cash in different currencies and in different regulatory and market environments, not to mention the ease or lack of it by which funds can invested  divested locally or internationally is in essence a formidable task on which the smooth operation, value preservation and value creation of the whole bank is dependent.