CPP Treasury & Cash Management in Payments Flashcards
6 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPP Treasury & Cash Management in Payments flashcards as text
What is a 'payment factory' in corporate treasury?
Answer: A centralized payment processing hub that handles all outbound payments for a multinational company
A payment factory centralizes and standardizes outbound payment execution across subsidiaries of a multinational, reducing banking relationships, costs, and operational risk while improving control.
What is 'Herstatt risk' in international payments?
Answer: The risk that one party delivers the currency sold but the counterparty fails to deliver the currency bought
Herstatt risk (principal risk in FX) is the danger that after one party delivers funds in one currency, the counterparty defaults before delivering the other currency, named after Bankhaus Herstatt's 1974 failure.
What is the role of a 'correspondent bank' in international wire transfers?
Answer: An intermediary bank with accounts in the destination country that facilitates fund delivery on behalf of the sending bank
When a sending bank lacks a direct relationship in the recipient's country, it routes the payment through a correspondent bank that holds accounts or relationships there, enabling delivery of funds.
What does 'net settlement' mean in a payment clearing system?
Answer: At the end of a settlement cycle, only the net difference between all participants' obligations is transferred, rather than each transaction individually
Net settlement aggregates all debits and credits across participants over a period and settles only the net position, dramatically reducing the volume and value of actual fund transfers needed.
What is 'working capital optimization' in the context of a payments-focused treasury function?
Answer: Managing payment timing and cash conversion to minimize cash tied up in the business cycle
Working capital optimization involves accelerating receivables collection, managing payables timing, and reducing float to minimize the cash required to fund day-to-day business operations.
In payment processing, what does 'batch settlement' mean?
Answer: Transactions accumulated throughout the day are submitted to the processor as a single group at end of day for clearing
Batch settlement consolidates all of a merchant's daily authorized transactions into a single submission to the processor at day's end, triggering the clearing and funding cycle.