Corporate treasurers in Asia have never been under so much pressure as today. The 2008 global financial crisis brought to the fore the importance of a well-functioning treasury management system (TMS), and today many aspects of treasury management now attract boardroom attention.
Since that time, the role of corporate treasury management has been moving away from the traditional – or passive – models of risk management to more active risk management techniques, involving the use of real-time data.
The need for accurate and timely information from treasury functions, as well as the desire for streamlined corporate treasuries, has naturally led to a technological transformation of this business function.
However, Asia trails behind the US and Europe in this transformation. A 2014 PWC survey found that 39% of companies in Asia still use Excel spreadsheets as their main treasury management tool. This figure has not changed dramatically in recent times. The same survey found that more than 50% of respondents did not have a TMS in place, and those that did are only using the basic functions.
There is an added layer of complexity for corporates operating in Asia, when compared to those conducting business in Europe or the US. Asia is not one market – it is a fragmented collection of markets with different currencies, regulators, cultures, rules and regulations.
Despite these challenges, corporate treasury functions must rise to the challenge if they are to achieve the operational and cost efficiencies that lead to greater profitability.
As the PWC survey noted, treasurers in Asia face significant and complex risks across a number of geographical locations. Effective management requires timely, accurate and complete data combined with sophisticated risk analytics analysis and reporting, to enable better decision-making.
While the adoption of treasury technology is at a nascent stage in this region, attitudes are changing and there is evidence of a strong uptick of local corporates looking to adopt some form of TMS in Asia, particularly in small-to-midsize firms.
As local corporates expand cross-border, companies have four options of corporate treasury technology systems. Each system offers different options in terms of managing and monitoring treasury costs. There are also operational and cost efficiency considerations as well. One size does not fit all.
• The first level is an enterprise resource system such as SAP, which offers a fully functioning TMS. Many global corporates in the US and the UK use this type of system with front to back office support.
• The second is the centralised system, where firms have taken their treasury management functions in-house. This option tends to require substantial internal resources.
• The third level is a TMS, based on SWIFT communications from front office tools to trade cash-related transactions. Mid- and smaller-sized Asia corporates tend to favour this option as it is usually more cost-efficient and services their existing needs.
• The fourth option is relying on bank solutions to measure treasury. This tends to be favoured by smaller firms and may not be the most efficient system to manage treasury and cash flow.
There is heightened discussion among a growing number of second and third tier local corporates on incorporating treasury management technology into their business. They are closely looking at treasury management solutions to help with cost efficiency as well as regulatory compliance and risk management.
Over the past year, Broadridge has met with a range of small- to mid-sized companies in Asia to discuss their potential adoption of treasury technology systems. It is evident that these companies are shifting away from relying on banks and looking at resources to build treasury capabilities in-house. Asia-headquartered entities are expanding globally. They see the immediate benefits of treasury management solutions in terms of flexibility and in-house data to be more efficient across geographies and banks.
Many APAC corporates are still in the discovery process, and are working to develop a strategic understanding of – and outlook on – the various options for treasury management technology. It is apparent that Asia today is in a similar situation to Europe several years ago. We expect that within the next three to five years, Asian corporates will fully embrace quality treasury management solutions, and will shift away from the inefficiency of poring over spreadsheets to produce and streamline reports. Spreadsheets, which are prone to error due to manual input, can be risky, time consuming, resource-heavy and costly for any individual organisation.
As Asia local corporates are increasingly expanding cross-border, they will need to ensure there is a system in place to streamline processes to be both cost effective and operationally efficient. Focusing on high value activities should be top priority for corporates to ensure the best outcomes for their business.
This will be a welcome development, particularly in a region where corporate treasurers daily face unique challenges across diverse geographies.
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