Why centralize FX exposure management at group treasury, and how does exposure netting reduce hedging cost?

Decentralized FX management means each entity hedges its own exposures, often hedging offsetting positions across the group — one subsidiary buying USD while another sells it — paying spreads twice on risk that nets to little. Centralizing at group treasury lets you net exposures across entities and currencies first, so you only hedge the residual net position externally, cutting transaction costs and giving banks larger, better-priced tickets. It also enforces consistent policy, improves visibility and control, and concentrates expertise. The mechanism is often an in-house bank or netting center where intercompany exposures are matched internally. The trade-off is the need for reliable, timely exposure data from the businesses — netting only works if forecasts and balances are accurate and submitted on time.