Where there's gold for treasurers
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Where there's gold for treasurers

Regulation, staying on top of cash flows and the importance of agility – our experts from EMEA, Asia Pacific and the US discuss the major issues facing corporate treasurers. By Etienne Bernard, Head of Transaction Services, EMEA, Julian Oldale, Head of ICM International Solutions, Americas, and Manfred Schmoelz, Head of Transaction Services, Asia Pacific.

What do corporate treasurers need to keep front of mind in your region?

Etienne Bernard:
Changing regulation should be at the top of their agendas, particularly the implementation of SEPA (Single Euro Payments Area).

With only a few months to go before it is introduced in February 2014, it’s clear that some corporates might not make the deadline. Those companies have to be very focused on how soon they can deliver, because until they do their competitors will have an advantage.

The risk agenda also needs to be top of mind. We shouldn’t forget that there is still a crisis out there. We may be seeing signs of growth in countries like the UK and Germany, but overall we are still under a lot of pressure from an economic standpoint.

Julian Oldale: Corporate treasurers are getting a firm steer from their boards for greater working capital efficiency, while regulators want corporate headquarters to have greater control over their global businesses. This is driving a need for more visibility of what’s happening across their operations.

Many US companies are also reassessing their global footprint as markets around the world continue to change. We are seeing new areas of growth beyond the BRIC countries (Brazil, Russia, India, China). For example, a rising middle class in Indonesia and Thailand is contributing to growth there.

Manfred Schmoelz: Getting timely information and visibility of their cash positions is key for corporate treasurers in Asia Pacific. Given the diversity of the region, pace of change and sensitivity to global movements, corporate treasurers realise the importance of getting all the financial information they need quickly so they can make appropriate moves swiftly when required.

This is particularly important when you think of all the market volatility that we’re seeing in the region, particularly in China and India.

What are the current key challenges?

EB: Treasury teams have been shrinking over the last 10 years so fewer people are being asked to do more, faster.

They need to access so much information – on third-party risk, currency risk, country risk and so on – and accessing it all quickly is very difficult. Adopting the right technology and using it in the right way to improve efficiency is therefore probably the biggest challenge.

Treasurers need to define their needs and how they are going to structure their operations clearly, and then look at the technology available to help them achieve that. Investing in this technology can cost GBP20-30 million, so it’s vital to get it right.

JO: A big challenge for many US companies is how they can make the most of their cash sitting overseas. They have to think carefully about how they can manage the inherent currency and sovereign risks that come with holding funds in diverse markets.

In some cases they have strong cash positions in Asia and Europe but are not performing as well in the US, so how do they repatriate profits in the most effective way to reward their shareholders?

Also, corporate treasurers are getting much closer to the commercial agenda now. They need to think carefully about how they can help the business grow quickly but securely. This is why tools such as supply chain financing are becoming more popular – bringing commercial benefits and supporting key suppliers while dealing with the risks involved.

MS: We are seeing strong patterns around centralisation, automation and rationalisation in Asia Pacific. Consolidating cash management processes will help a corporate achieve better management of internal cash flows, reduce float and transaction fees, and streamline operating costs. Setting up finance Shared Service Centres will also help lower costs related to accounts payable and receivable.

There is also a drive towards automating payments and collections, which is another big issue for treasurers. And they also have to rationalise their functions because treasuries are no longer mere back office processing hubs, they are critical parts of the business feeding into its strategy while also ensuring it runs smoothly.

We have seen a lot of new regulation this year. How is it affecting your market?

EB: It pushes banks to be more efficient and gives their customers a stronger stance when negotiating pricing. For example, Basel III makes clear how valuable companies’ operational deposits are to banks because of the lower liquidity buffer required for them. This puts the customer in a very strong position.

Greater efficiency is appearing in many different ways. One example is a service we have for clients at RBS which allows them to negotiate certain elements of their loans online. It automates some of the processes involved and keeps an automatic record of who has the relevant signing authority.

JO: Regulation has created a much bigger burden on US companies in terms of the ultimate ownership, control and operation of their subsidiaries around the world.

This is driving a need for them to have greater visibility of all their US people with signatory powers across their bank accounts globally. It puts pressure on them to keep their records up to date. Banks are building more self-service tools like eBAM to manage bank account signatory mandates, and the admin involved, via online portals – giving their clients greater, easier access to the information they need.

US banks are also being asked to start applying capital rules in line with Basel III governance. The value of operational balances will now be more meaningful to them as they look to manage effective returns against their corporate facilities.

MS: The regulatory reforms are heralding a new era for treasury management in Asia. Taking China as an example, the liberalisation of the Renminbi – once seen as a longer-term story – has picked up pace recently. It will be easier for corporates to integrate their China operations with their regional and global treasury structures.

Basel III will also have an impact on corporates in Asia, as indeed it will globally. Banks will have to hold more liquidity and capital against trade products, which means companies will need more sophisticated working relationships with them.

What’s the biggest opportunity for businesses in your part of the world?

EB: Without a doubt, there are huge opportunities for businesses that can become agile and enter the right markets at the right time. Global markets are changing constantly so treasurers need to stay on their toes and anticipate where the next growth area will be. The low interest rate environment created by the crisis actually provides lots of opportunities for smart companies to look at new assets and markets.

If they can achieve this while protecting their company from risks and simplifying their processes, they will be well ahead of their competitors.

JO: The continued demands on US corporates for global visibility and greater efficiency, along with the centralisation of many treasury functions, creates the opportunity for a global disbursements model with a single account, multi-country, low-value settlement capability linked to a market rate-driven FX engine.

This will greatly reduce the cost and administrative burden of managing multiple accounts in multiple jurisdictions and the associated FX booking and hedging. It also allows for effective, low-cost disbursement to vendors across the globe.

MS: Intra-region trade is the real opportunity story for Asia. Trade within Asia Pacific is growing exponentially. According to PricewaterhouseCoopers, it is expected to make up eight of the world’s top 20 trade partnerships and account for USD1.64 trillion by 2030 – up from USD573 billion in 2009. Companies will need to adjust their processes and strategies to make the most of this trend and stay ahead of the curve.


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