Asian companies face up to $2.7 trillion liquidity trap
Asian bank DBS has been at the forefront of helping corporate treasurers in the region enhance their working capital management, part of which includes identifying and improving access to some $2.7 trillion of trapped cash across Asia.
The Singapore-based bank launched a pioneering working-capital advisory programme in March this year to help its corporate clients of all sizes to enhance their understanding and analysis of their physical and financial supply chains, with the ultimate goal of reducing their overall banking costs.
Under the programme, companies have access to a set of DBS's proprietary benchmarking and diagnostic tools that provide them with customised research and insights, enabling treasurers to identify and unlock trapped cash, which the bank estimates to be as much as $2.7 trillion across the Asia region.
“Trapped cash means potential hidden liquidity," says Vivek Batra, head of global transaction services sales at DBS. "Once identified, it drives actions that companies can take to improve their working capital position and generate additional cash from their operations.
During the programme's pilot phase, DBS says participating companies were typically able to identify a 20-30% increase in the cash flow generated from their operations.
“Working capital and cash flow management is the heartbeat of every company," says Batra. "It is fundamental in strengthening our clients’ businesses during low interest rate environments...and it helps them stay ahead in the game.”
Trapped cash is a perennial problem for any company with substantial overseas operations. Asia is one of the worst regions for this. Indeed, China and India were voted the worst offenders for trapping company cash, according to a Euromoney pulse survey in March.
DBS initially launched its programme in Singapore and Hong Kong, but plans to extend it into its other core markets of China, India, Taiwan and Indonesia this year.