Question

Give five differences between centralized versus decentralized cash management

Answer 1

Centralized cash management:

1. It is the action which helps in bringing all activities occur in an organization to a specific location.
2. It is a centralized system.
3. Its best example is Egypt. In Egypt, power remains in hand of army rulers.
4. In this system, power is reserved.
5. Its main advantage is properly understood the people.

Decentralized cash management:

1. It is the action which helps in bringing all activities from a specific location to different locations.
2. It is a decentralized system.
3. Its best example is the United States. In this president and Senate take decisions.
4. In this system, power is dispersed.
5. Its main advantage is to share power and burden between people.

Answer 2

Centralized cash management implies that receipts and payments in currencies are manged by one single central body which is generally the head office of MNC. This approach is more effective as it involves calculation of the corporate position in each currency by adding position of the subsidiary and currency diversification.
Decentralized Cash management implies that these receipts and payments are manged locally by the subsidiaries. This approach is useful when delays are expected.