Balancing Digital Aspirations While Addressing Risk Management Fundamentals: Observations From Citi Treasury Diagnostics

19 TREASURY POLICY: INTERCOMPANY LENDING 28% of companies surveyed have no intercompany lending process in place. 25% of companies surveyed indicate there is no policy but local discretion is allowed in borrowing currency selection with 60% always borrowing in local currency to avoid introducing currency exposure locally. In determining when a subsidiary will borrow intercompany as opposed to a local third-party bank, multiple factors are considered. Policy Governing Intercompany Lending Activities Yes No 72% 28% Policy Governing the Borrowing Currency of Subsidiaries 75% Yes, always in parent functional currency Yes, always in local functional currency No, local discretion allowed 60% 15% 25% Factors Determining When a Subsidiary Will Borrow Intercompany as Opposed to a Local Third-Party Bank 74% 65% 63% 60% 44% 24% 6% Cost of local financing vs. cost of global financing Tax considerations Availability of local currency financing Local regulations (e.g. thin capitalization etc.) that drive a local benefit Mitigation of cross-currency risk Mobilizing incremental credit capacity beyond group/ parent credit capacity Other