EXECUTIVE SUMMARY The growing importance of Asia in the world economy makes centralization and process standardization crucial Growth markets and growing revenues mean that many companies in Asia can afford to be conservative when it comes to short term investments The financial crisis and subsequent reduced access to funding prompted growing interest in supply-chain financing Relationships with banks have been rationalized Local-currency investment options are comprehensive in only a few markets The liberalization of the renminbi is beginning to transform the terms of trade
Cash management debate: Learn more about the panelists
Euromoney What are the demands from corporate clients in Asia and to what extent do they reflect increased sophistication and centralization?
The growing importance of Asia in the world economy makes centralization and process standardization crucial
Growth markets and growing revenues mean that many companies in Asia can afford to be conservative when it comes to short term investments
The financial crisis and subsequent reduced access to funding prompted growing interest in supply-chain financing
Relationships with banks have been rationalized
Local-currency investment options are comprehensive in only a few markets
The liberalization of the renminbi is beginning to transform the terms of trade
MT, HSBC Centralization and process standardization remain important. At the same time, Asia, particularly India and China, is becoming more important to companies growth plans and companies are adjusting their liquidity management structures accordingly by extending further into the supply chain and financing suppliers, or helping customers buy more product. With Asia now so important there is a need to do more than just get the processes right. Its no longer appropriate to continue to operate in a decentralized manner. A further theme is an emphasis on avoiding trapped cash by setting up appropriate structures or potentially re-architecting and considering re-invoicing centres, for example.
HL, JPMorgan The key is to recognize and package the right solutions for different client pain points. Our corporate clients come in many shapes and forms and its about the structures that work for them and where they need to be in their businesss development rather than any cookie-cutter definition of their level of sophistication. If clients are decentralized, JPMorgan brings to the table best practice on setting up shared service centres or regional treasury centres. Alternatively, there might be a focus on yield optimization. Once liquidity structures have been optimized, the next step might be to centralize receivables or collections. Clients who have done all of these things are efficient and generate excess cash, so the focus might shift to upstreaming cash for debt repayment or optimizing yield on trapped balances in such places as China or India via a programme that rewards them with higher yields in another, less-regulated location.
Euromoney In Europe, there remains a focus on counterparty risk. Is there a more optimistic outlook among Asian clients?
MT, HSBC In Europe, corporates have large cash surpluses or flows that need to be risk mitigated or counterparty protected and there are many credible providers of services. In Asia, there are a handful of large banks that provide services across multiple countries and lots of local banks. Consequently, there are fewer counterparties to diversify away from in Asia than in Europe. Equally, if youre a large local corporate in the Philippines, you tend to be comfortable with your bank.
Euromoney What do clients in China want?
LH, BOC In recent years, China has had strong economic growth: last year it was 10.3%. More large Chinese enterprises are looking abroad for business opportunities, they have been starting their business in the fields of energy, telecommunications, manufacture, construction of infrastructure. Meanwhile, many foreign enterprises are expanding to China. Lots of Chinas domestic corporates have been established by reorganization and restructuring. These companies need greater control over their subsidiaries and branches business by obtaining daily transaction information and centralizing their fund management.
Euromoney What has been the corporate experience in recent years?
TLT, ISOS We have more than 150 legal entities in over 70 countries, 28 alarm centres and use more than 20 currencies. We have cash collection in one currency and service delivery elsewhere in the world in another currency. From a treasury standpoint, the challenge is to move cash in an efficient manner, remove FX issues and optimize interest income and expenses. On top of that, accounting issues must be addressed: FRS39 in particular. Transfer pricing is another consideration: every time you use an inter-company loan you need to consider interest and withholding tax, for example.
About two years ago when I added treasury to my roles, banks without knowing my challenges suggested a multi-currency notional pooling solution with interest optimization as the main draw. We have operation activities between alarm centres everyone can service anyone else. For example, we evacuated about 800 members from Egypt for various corporate clients based in multiple countries. To do that, cashflow is required to get planes off the ground while clients are billed in multiple locations. How can these operational issues be matched with a central corporate treasury mechanism? In the past, subsidiaries sent cash to the corporate treasury but it was challenging they needed to hold cash to ensure they could respond to emergencies. Another problem is the FX risk that all this entails.
Multi-currency pooling fulfils all of these requirements. All the major subsidiaries open a multi-currency account with the bank in Singapore with corporate treasury as the header account. Instead of getting cash from corporate treasury, or vice-versa, they draw down or put excess cash into the pool. There is no inter-company loan or transfer pricing issue and FX is addressed because subsidiaries draw down or put in the currency of their choice, based on their balance-sheet currency exposure.
At group level, we extract currency exposures from the balances of the subsidiaries accounting systems, understand their imbalances and draw down or put in the right amount, in the right currency. Before month-end we attempt to square off all positions without using hedging. As a solution, it addresses our challenges.
In March, we are launching an automated netting system that pools all inter-company transactions and nets off balances every month. Of course, netting is not possible in some countries, especially in Asia. Nevertheless, its a good start. Instead of thousands of transactions, there will only be 80 transactions (80 of the 150 legal entities are included), significantly reducing transaction costs. However, the system creates another challenge: when we ran a simulation, we needed to fund the netting with huge amounts of cash, which defeats the purpose because cash gets out from the corporate treasury. So we expanded the cash pool to include as many entities as possible: we started with five of them and now have 16. We only picked the main cash generators and those with deficits. Consequently, the netting system sits on top of the cash pool and the pool funds itself with the netting centre in the middle. There are still some leakages but we knew 100% was impossible: 80% is what were aiming for.
The final consideration is risk management. Setting up multi-currency pooling expands the number of accounts rather than reducing them, which creates a risk management issue. Although the accounts are centralized to an extent, account management necessarily becomes more challenging. The next goal is to introduce a treasury management system to consolidate control at corporate treasury: we work with four banks, which use different systems, and at the moment it is difficult to have one view in terms of information.
CCC, StarHub Centralization of processes and liquidity in one location is key to liquidity management. About eight years ago, we acquired a company with debt and its own pooling structure; in consolidating and centralizing the group treasury function at StarHub we had to re-rationalize our own centralized pooling as well as our relationship with our parent company ST Telemedia (STT), which has its own pooling group.
Once the debt arrangements were unravelled, the next process was standardizing collections and payments, which were still doing. The key is forecasting: where is the collection coming from and when? And when is the payment going out? Day to day, the finance departments focus is simply issuing payments and administering collections they have no visibility of when cash is coming. We are implementing a centralized forecasting process that considers the timing of these processes, so that we can take full advantage of centralized finance.
One challenge regarding the netting mechanism is that STT is not listed but StarHub is: audit committees on the board need to know what interest is being earned when it is placed with the parent company and at what rate lending or borrowing is taking place. Consequently, we have come out of the parent company netting system. Instead, we maintain a separate bank account and manually pool into a central operating bank account held at group level.
Euromoney How have AkzoNobels structures and processes changed in recent years?
SP, AkzoNobel We are in 80 countries and look at treasury function by regions. Until three years ago the group was quite decentralized. Then a new treasurer was appointed and a new vision of centralizing, visibility, control and optimization was put in place. That was the beginning of a sizeable project to revamp our cash management structure. We wanted to be smarter in our cash management processes so we talked to corporate peers and went through an aggressive RFP [requests for proposal] process to choose partner banks region by region. Last November, we completed all four regions, with Asia being the last.
One of our group agendas is focused on sustainable and accelerated growth, with a focus on high-growth markets. Consequently, a greater quantity of cash will be generated in restricted markets, such as China or India, and we need to look at our currency-risk profile differently. Meanwhile, as the business is growing, strategic suppliers have approached us seeking financing partnerships.
Another aspect of our business that affects our risk profile is our use of joint ventures especially in entering emerging high-growth markets which adds complexity to our solutions.
Euromoney Whats happening in supply-chain financing in Asia?
HL, JPMorgan Its important to differentiate between the supply-chain process and supply-chain financing. Before the crisis, business growth meant that funding wasnt a problem. But during the crisis it was impossible to issue commercial paper or bonds and there was a growth in interest in generating cash from the supply-chain process. Clearly, a large amount of cash can be generated by reducing days sales outstanding (DSO) from 90 days to 45 days.
The second aspect is financial. The crisis affected suppliers, and with only so much a buyer can do using its balance sheet, banks have to step in and provide financing for the supply chain.
MT, HSBC Financing is a key component of the supply chain and a conversation topic with any client. You have to get deep into the weeds to figure out which model works. Is it merely a rate arbitrage between a strong buyer and some weaker suppliers or a way to finance further sales of supplies into a decentralized customer base? Similarly, who are the likely providers of credit: local banks with strong SME relationships or is it based on a large corporate relationship where you can use the groups credit and balance sheet, risk appetite and pricing power to finance the other side?
LH, BOC The volume of supply-chain finance is increasing rapidly in China. The central government is encouraging development of small and medium-sized enterprises and this is creating greater loan and credit requirements. Consequently, we are designing more products to satisfy our clients.
Euromoney Is a shock required to prompt interest in supply-chain finance or can it grow organically?
MT, HSBC A shock certainly stimulates interest. High commodity prices not just oil but palm oil, silver, steel and many others are forcing corporates in some sectors to look at supply-chain financing again because they dont have enough working capital or available bank lines.
TLT, ISOS The financial crisis made us recognize that we could not take the supply chain for granted. We are a service company so we dont have a big trade-financing requirement. But we do challenge ourselves to have a good DPO [days payable outstanding] and DSO balance and these key performance indicators [KPIs] are driven and tracked monthly.
MT, HSBC Who do you benchmark to?
TLT, ISOS A good benchmark company would be challenging because of our specialised business. Internally, we set and measure KPIs by country, region and product segment. We constantly challenge ourselves to do better both on an annual and monthly basis. We are not an advocate of paying providers late and have a good team that works with the providers for the right business terms. The standardization and centralization of payments via the shared service environment does enhance the AP [accounts payable] cycle.
Euromoney What are the views of the other corporates here on supply-chain financing?
SP, AkzoNobel We have aggressive ambitions for working capital. Consequently, managers may want ways of potentially offering discounts for early payment, for example, to customers. The question is whether it benefits the company. Some external suppliers are strategic to us, so if they cant operate and run into problems, we would have a bottleneck in our supply chain. We need to consider not just the financing perspective but also the strategic view.
CCC, StarHub Our supply chain manifests in a different form because we are a listed company and look at free-cashflow generation as a high priority. In the free-cashflow computation, one component is the working-capital change. Its almost impossible to forecast whether it will be a positive or negative change this or next quarter.
On the DSO side, our customers are the man on the street. Corporates get the luxury of good credit terms but for consumers theres only 14 days credit and then outgoing calls are suspended after a period of non-payment.
The crisis was a wake-up call. Singaporean corporates didnt need to be too concerned about DSO or DPO because they had buffer lines from local banks. When the crisis affected the banks there was an indirect impact on corporates, which started us having to consider all these little details.
Euromoney How have corporates banking relationships and how they manage them changed?
TLT, ISOS We have relationships with four core banks. Each bank has strength in different regions and different products: we look at it from a regional and a solution perspective. We have not encountered a bank that has a solution for everything. There are certain banks that are proactive in terms of offering solutions and there are others that bring experts to you and try to understand your problems: we like that product-independent approach. Theres no obligation and no pressure. Instead, its a conversation about options and best practices. That independence enhances the relationship.
Euromoney If banks propose a great idea, do they get a hearing if theyre not lending you money?
TLT, ISOS A loan facility will definitely be a good entry point into further discussions.
SP, AkzoNobel We had hundreds of relationship banks and our continuing transformation has trimmed that number down we have two banks for cash management in Asia. We look at our wallet-sizing to make it meaningful for our partners.
Euromoney What drove the rationalization: efficiency or the need to reduce counterparty risk?
SP, AkzoNobel It was a whole host of factors. Counterparty risk certainly because of the global crisis, so there was a need to look at who were dealing with and where we place our funds.
MT, HSBC Was that more important in Asia or Europe?
SP, AkzoNobel The two regions are subject to similar objectives, although outcomes may differ.
HL, JPMorgan During the crisis both clients and banks had to consider which counterparties they wanted to deal with. So it allowed them to get closer, or...
MT, HSBC ...say goodbye.
Euromoney How has the Chinese perspective on bank relationships changed as a result of the crisis?
LH, BOC When we choose counterparty banks as correspondents, we consider four points. First, they should be large and with strong reputations. They should also have sufficient products and stable and efficient IT systems. We also require the employees of our correspondent banks overseas to have some understanding of Chinese culture and a strong sense of responsibility. Lastly, the bank should have sound internal controls, covering market, credit and operational risk.
MT, HSBC Lin Hong, as Bank of China expands its international network further, what type of corporates do you want relationships with?
LH, BOC We mainly support outgoing, large-sized enterprises and incoming, foreign, large-sized enterprises.
MT, HSBC Going into China?
LH, BOC Yes, we have a large branch network. We have over 10,000 branches in China and we have nearly 1,000 branches overseas that can satisfy our clients various banking requirements.
Euromoney Companies still have strong local banking relationships: how do you balance that with regional and global needs?
CCC, StarHub Local banks offer local corporates good pricing. Foreign banks have higher costs but offer specialized expertise. So, for example, we are in the telco space and foreign banks might offer suitable project financing, for example. Whereas a local bank will just offer a financing line because we are a Temasek-linked company.
When we evaluate banks, it comes down to cost so local banks will gain business while foreign banks will receive advisory and transaction-based business. We aim to balance everything, so for cash management we work with a foreign bank and a Singapore branch of a foreign bank.
SP, AkzoNobel We use global banks, but there are pockets and products where they partner through local alliances. However, the global bank is always in the lead.
Euromoney Do you judge global banks on the quality of their partners? Or do you not want to know anything apart from whether it works?
SP, AkzoNobel That would be the ideal but we also look behind the scenes because ultimately you are the one at the end of the chain.
MT, HSBC Most companies that decide to standardize to a couple of globals dont look behind the scenes. Its only after theyve been through a few regional procurements that they realize that you need to spend more time behind the scenes.
Euromoney How is the approach taken by banks and corporates to multi-banking changing?
HL, JPMorgan Where there are three or four banks with different strengths, the goal must be to help clients, and were developing multi-bank solutions for this need. Clients can use their local banks but we integrate them with our systems so that in their electronic banking system, or ERP [enterprise resource planning] system, they are effectively only dealing with one bank.
The idea also works in reverse. Chinese clients, for example, will have relationships with local banks that need to be maintained. But local banks are not necessarily able to deliver the full scope of cross-border services to their corporate clients because corporate client growth internationally will tend to outpace that of the local banks. Here is where as a globally active bank were working with local banks to help them serve their corporate clients: they have relationships and credit appetite were helping them address cross-border gaps. Ultimately, large corporates win because they will become more efficient.
MT, HSBC To some extent, people have started to de-emphasize concerns about counterparty risk and refocus again on yield. In Asia, the crisis was relatively brief and people quickly forget about the need to balance risk and return. The emphasis is now largely on return.
Euromoney How comprehensive are the local-currency investment options in Asia?
MT, HSBC Theyre only comprehensive in certain markets.
HL, JPMorgan The goal of yield is certainly there, and part of that relates to notional pooling and improving overall return. But there is also an opportunity for interest optimization considering both trapped cash and cash in fungible currencies and agreeing returns based on both. It might also be possible to invest in a money market fund to gain a bigger return.
Euromoney What interest has there been in the last option?
HL, JPMorgan Local companies are generally more willing to consider it. Often subsidiaries are governed by head office policy and cant make aggressive investments. Instead, their focus is on-balance-sheet products such as deposits, money market, or stable balance programmes where if a balance is a certain level they can get a set rate on a demand deposit account.
MT, HSBC It comes down to the efficiency of a companys liquidity structure and cashflow forecasting model because interest optimization or multi-currency notional pooling open up options for on- or off-balance-sheet investment. If you dont have the ability to bring your currencies into a single position or are not allowed to do inter-company offsets or pledging of positions against inter-group entities, then you cant use pooling. The moneys still in country and its just a pricing and yield game.
CCC, StarHub Given the nature of our cashflow generation and the way that we pay dividends on a quarterly basis one of few stocks that do so our tenor is just three months. Any risky product that enhances yield is a no-no.
TLT, ISOS We do not go into off-balance-sheet investments. We invest in products we understand and recognize the enhancement that cash pooling itself delivers in terms of the interest optimization. Our cashflow requirements are difficult to forecast: you dont know when or where there will be a crisis and what cash will be needed. So we keep cash as liquid as possible. Cash pooling therefore provides a good tool in terms of liquidity optimization and gives us a relatively good return.
Euromoney What options are available to Chinese companies when they have surplus cash that they want to invest for the short term and how is the situation changing?
LH, BOC Short term we provide them with structured deposits, stable return funds and insurance policies. In China, the range of products remains limited. In the future, that might change. However, currently the interest rates liberalization has not been achieved and it will take time for the restrictions to be lifted.
SP, AkzoNobel We consider liquidity and risk before yield. The feasibility of pooling is the first consideration and only then do we consider yield.
Euromoney Does the corporate mindset with regard to earning money on surplus cash differ in Asia from elsewhere?
HL, JPMorgan First, Asia is a growth story so there are often bigger fish to fry than a few extra basis points in yield. In Europe, where margins are thinner, shareholders require a minimum return on investment and that forces corporates to look at other options.
Secondly, the eurozone economy is bigger than Asias and there is a wider range of instruments available as a reflection of that. In Asia, whether its because the market for more varied instruments is nascent or because the regulatory environment is not quite ripe, development and demand will take time.
MT, HSBC When we try to help companies optimize it comes down to navigating the different regulatory barriers and the companys requirements: theres no one-size-fits-all solution and no panacea. However, to the extent you can cross-border sweep end of day then thats pretty efficient. But the point about the growth backdrop is important: the Holy Grail is taking $600 million out of China and investing in your new fabrication plant in Vietnam.
Euromoney How does the challenging foreign exchange environment affect the treasury?
TLT, ISOS Our philosophy is to make sure that we dont have to worry about currency movements tomorrow. At any point in time, the ideal is to have all positions closed. That is not possible but we try to have as much intelligence on our exposure built into the system as possible. Where we cant use the pooling, we use hedging. In certain cases, we may also use forward hedges for cashflow. The aim is to not care how a currency moves.
CCC, StarHub Our view is similar: we dont want foreign-currency exposure, so we hedge about 50% of our committed requirements in foreign currency and the treasurer manages that within 50% of the amount or 50% of the time. We also only deal in foreign currencies where we have a requirement.
One of the tools we use to enhance yield on surplus cash is dual-currency structures. These are dependent on the market but we ensure that the yield enhancement reflects that risk. In that sense, we do a little bit of speculation. The positions we take reflect our hedging requirements but also enhance our yield. We talk to our bankers where the US dollar is going to and that helps us decide whether to lock in longer-term hedging of six or 12 months rather than just three months. As we are a telco we know our US dollar requirement will still be of paramount importance so it makes sense to take a view.
SP, AkzoNobel We are relatively conservative. We look at shorter-term transactional risk. Once the transaction is on the balance sheet then it is hedged forward. Our business is growing in emerging markets but has a more mature asset base in Europe and North America, which creates a different profile in terms of the groups foreign-currency management.
Euromoney How important is the nascent liberalization of the renminbi?
HL, JPMorgan This is significant for the trade business and hedging because a Chinese supplier and a US buyer can deal with dollar/renminbi in Hong Kong now. Renminbi internationalisation should make a big difference and fuel trade.
MT, HSBC By 2015, we expect 30% of the former US dollar flows in Asia will be renminbi-denominated. There are two main benefits to renminbi liberalization. The first is a changing of the terms of trade. If cross-border trade is no longer denominated in dollars the management of FX risk is shifted from onshore to offshore so the regional treasury team, which is probably more skilled in relation to such risk, can manage it. Secondly and this seems to be where much attention is focused there is the ability to profit from appreciation. Although no one wants to say it publicly, many people just want to hold renminbi as long as they can because the dollars going down.
LH, BOC Renminbi internationalization is a gradual process. A free, convertible currency requires a strong economy and a stable political situation. In terms of economic power, Chinas GDP per capita is just over $4,000. And the ratio of research and development to GDP is just under 2%. Our manufacturing industry is still mainly a processing industry.
Consequently, we must go through a trial stage. Cross-border trade settlement is the start of the RMB internationalization that will take time because Chinas economic reform has been achieving great progress but is also creating some instability, with problems such as the widening gap between rich and poor, east and west region, and the unbalanced relationship between economic growth and environment protection. That is why there is no set timetable for RMB internationalization.
MT, HSBC And yet in the past 18 months weve gone from negligible amounts of renminbi liabilities in Hong Kong to around $1.5 billion equivalent. Moreover, the regulations have just changed: service items can now be remitted abroad without prior approval from China; so some kinds of dividends are possible without prior approval.
Euromoney What is the corporate view on renminbi liberalization?
SP, AkzoNobel We are growing in China so liberalization is of natural interest. But for the time being we are waiting to see how these changes translate into process improvements.
MT, HSBC You need to make it real for clients. Its no mean feat to change the terms of invoicing or the trade terms between related parties entities because it has a knock-on impact throughout the rest of the organization. You dont want to do that unless you are quite sure its going to stick. At the moment, the focus is trader-type entities and not big multinationals where change is more complicated.
HL, JPMorgan We are starting to see corporates putting large amounts of cash in renminbi. Its too early to say if this is a signal of true appetite and the start of a trend or just a few corporates experimenting.
Euromoney How is the role of technology changing, both in terms of how clients use technology, how they interact with their banking providers and how banks use technology internally?
CCC, StarHub As our cash management requirement does not include exotic currency management, our step-up is simple: we rely to a large extent on the banks systems. Every morning we call the bank to get updates on foreign currencies and other issues. We still manage the treasury via spreadsheets. We are considering how we could improve forecasting and improve accuracy in payments and collections by using an ERP system.
TLT, ISOS The number of accounts we hold is expanding as we set up our pool. Consequently, our big challenge is visibility: our banks use four platforms so I carry four tokens to do transactions. Despite the internet, information is not instantly available. We need a technology product to bring information together and that is where banks can be of real assistance. In the meantime, we continue to use daily or weekly spreadsheets to analyse where cash is so we can pool it but we are considering a treasury management system for this.
Concurrently, we have two shared service centres (Singapore and Prague) that would enable standardization of processes. We need to find a common platform and Swift is something that we are evaluating. As a start, we are standardizing the format for communication between our payment factories and banks using XML thats why Swift makes sense as we are already using the format.
SP, AkzoNobel Technology is a big part of our transformation. Its the backbone concurrent to our cash management selection process and we have implemented SAP with our in-house bank. Our payment factory would be impossible without a single platform. Similarly, we are increasingly pooling cash into our Dutch head office and that also requires a single platform.
In selecting our banking partners, we look closely at their technology capabilities because banking connectivity is a complex issue. Being a diverse group with many ERP versions, it pays to research the potential challenges.
HL, JPMorgan There are several options in terms of integrating with a bank for clients primarily through ERP platforms, treasury systems and using Swift. The latter remains more prevalent in Europe but the activity of leading corporates could well drive deeper, broader Swift connectivity. There are some markets, such as Japan, where consulting firms develop cash management systems another option for some clients.
A further option is, of course, for corporates to have to do nothing at all and allow the bank to provide its system and a treasury system for forecasting: a clients banks might send their Swift MT940 messages to us and we will then present that to clients in our platform, helping the clients manage multi-bank information and streamline payments.
Regardless of the starting point, its critical that a corporates partner bank has the mindset that the platform is an enabler. Banks need to understand that clients want a bank-agnostic platform because situations change and they need flexibility.
MT, HSBC Before the crisis, some corporates had consolidated to a few global banks and had a wake-up call when they realized they were so tightly integrated with their banks they couldnt break free. Subsequently, in Asia and elsewhere there has been a new wave of multi-year transformation projects such as ERP platform changes or the adoption of agnostic channels such as Swift or formats that are universal.
A large provider has to be able to support many different technical arrangements because companies are all different. We have companies that use Microsoft as an ERP, or QuickBooks, or 18 different versions of Oracle and SAP. The skill as a provider is to weave it together and make it all work simply for the client.
LH, BOC Its important to integrate different banking systems for core services, transaction details and centralized fund management for clients. Most big banks worldwide have their own different IT systems, which can provide efficient service and sufficient products for their clients. The banks in China are making great efforts to integrate different systems. At BOC, there are more than 30 different systems connecting with our cash management platform. So the stable and efficient operation of the platform is a core factor in providing services to clients.
Euromoney To what extent is it up to corporate clients that work with different banks to find solutions or is the onus on banks?
MT, HSBC Its both.
SP, AkzoNobel Id agree with that. As a corporate, one of the things we are conscious of is being independent of banks solutions and designs. Its not that we dont like banks we just need to consider scalability. We dont want to sign up to proprietary systems that are hard to untangle.
TLT, ISOS It takes both sides to come together because everyone, including banks, have particular challenges: its only when clients and banks work together that they find a sweet spot for cooperation on a specific challenge.
HL, JPMorgan Banks do need to learn to work together and accept that clients need to use multiple banks. Acceptance of that fact is more prevalent in Europe where there is agreement on formats. In Asia, the situation remains more fragmented and corporates have a bigger role to play in rallying banks to work together to serve the corporate clients interests.
Euromoney How has the position of the treasury in corporates changed in recent years?
TLT, ISOS Years ago, the treasury in the company might have operated more independently: with the main objectives of centralizing cash and acting as the internal banker for operating and investments needs. Now the treasury needs to understand business requirements from a funding perspective. Important contracts might require a certain kind of funding or you might need to find solutions that reflect working capital requirements and address foreign exchange issues, including hedging and whether funding is local or offshore. The treasury is now part of the business in a way that it wasnt previously. Similarly, with regard to acquisitions, the treasury no longer has to just consider how much is needed and when, but also how foreign exchange and risk mitigation come into play. Whatever you do, theres always a tax implication and accounting considerations.
CCC, StarHub The accounting aspects of the treasury have become a critical consideration in a lot of transactions for corporates. You need to understand the business in the treasury so that you appreciate what risks you are trying to mitigate and what the overall objective is in terms of stability of currency exposures, for example. The difficult part of a treasurers role today is helping management to understand the importance of the treasury function and how it links into availability of cash for dividends, for example, and the implications for P&L.
SP, AkzoNobel We operate across a wide spectrum of activities from consumer to B2B markets, so in treasury we need to be a good business partner and understand what makes each business tick. Is it about working capital or getting better pricing through management of foreign exchange to produce more stable pricing and margins? Sometimes non-treasurers in the businesses dont necessarily relate to our function so we have to make our presence felt and that is the challenge.
HL, JPMorgan The treasurers role is continuously increasing in terms of importance. Years ago if you wanted to talk about supplier finance, for example, it was a procurement issue, or if you were interested in cards, there would be someone responsible for T&E. Now the treasurer is involved in those areas as a partner for business decisions. Similarly, the treasury works more closely with the business: clearly the hedging of currencies affects their P&L.
LH, BOC Treasurers have a more important role in large-sized corporates daily management in China. They have more chances to access top management body for the corporates decision-making by providing them with detailed information analysis about the entirety of corporate operations.