AFP Conference 2012 Show Report – Day 2: Geotechnology as Stage Three of Globalisation

A senior fellow of the New America Foundation and co-director of the Hybrid Reality Institute, Parag Khanna is also the author of geopolitical works, including the title ‘How to Run the World’. While many projections of the future range from pessimistic to doom-laden, the general message of this 2011 book is more upbeat, arguing that technological advance can be harnessed to forge new networks among governments, businesses and civic interest groups to both tackle current crises and avert future ones.

Kanna’s presentation, entitled ‘Bold Vision: The Future of the World Economy’, began by noting an increasing scepticism in the US and elsewhere on the future of globalisation. Three specific events; the shock of 9/11, the failure of the lengthy Doha negotiations on the world trade and the world economic malaise of 2007-09 have encouraged the view that the trend towards greater globalisation has halted and is even reversing. “However I believe the contrary, that globalisation is about to enter a new and exciting phase,” said Khanna.

The term itself has only been in common usage for around 50 years and even a decade ago entire continents such as Africa and Latin America were overlooked in any conversations about globalisation. This is no longer the case and the 21st century will have six powerful main players: Europe, North America, Latin America, Africa, Asia and the Middle East. “Latin America should be regarded as the ‘third pillar of the West,” Khanna suggested. “Its population is 900 million and its gross domestic product [GDP] two thirds that of China. Yet it still tends to get ignored, even though its resources are vital to the future of the US.”

He also argued that the US should be stepping up its investment overseas on the basis that infrastructure spending delivers strong and sustained economic growth rates. There was scope for far more infrastructure spending even in major emerging economies such as Brazil and China.

Moving on to his main theme, Khanna said that the shift of power in the world had been initiated by geopolitics, followed by a period of geoeconomics. The next phase, of geotechnology, was already underway and had been the driver of China’s economic growth. It is likely to be marked by what was once the stuff of science fiction becoming fact. He cited recent developments such as South Korea producing robotic teaching assistants; Japan’s pop idol Hatsune Miku, a major star and concert sell-out – although ‘she’ is a hologram – and IBM’s super computer, Watson, which last year soundly trounced human contestants on the TV quiz show ‘Jeopardy’.

More significantly, artificial intelligence once established carries the potential for robots replacing many human workers. “Industrial automation and the loss of jobs is a major threat, but not one that has yet been much discussed,” said Khanna. “How will we compete with one another – and with robots?”
 
“Who will win the race for commercialisation of these products?” he asked his audience. Many of them were invented in the US but its degree of regulatory caution is much greater than that of Asia and it takes much longer to bring these products to market.”

Yet despite what he admits are several “scary scenarios”, Khanna is hopeful that the age of geotechnology will produce multiple centres of activity and excellence, provided that a series of checks and balances are in place to shape future development. “We all have a role in managing this system,” he concluded.

Cash Forecasting and Accuracy

After this vision of the future, it was a return to some of the bread-and-butter issues of the present. One well-attended session was that on cash flow forecasting, hosted by Cindy Gerhard, global product head for liquidity and investments, Citi Transaction Services (CTS). She began by asking how many in the audience had an established cash forecasting process at their company and around nine in ten of the audience raised their hand. This was followed by a request for those who were happy with their existing system to keep them raised. Very few hands remained aloft. It was also evident that only a handful of those present believed that their existing system was provided more 90%-plus accuracy.

“There are always opportunities to improvement and to learn from other practitioners,” noted Gerhard, who commended the many constructive ideas contained in the recently-published ‘AFP Guide to Strategic Global Cash Position Forecasting’ produced in partnership with Reval.

The session offered case studies of changes to cash management strategy at three very different organisations. Mattel’s assistant treasurer, Kabir Bhattia, outlined the challenges faced by one of the world’s largest toy manufacturers with a US$12bn market capitalisation. Not surprisingly, Mattel’s business is highly seasonal with Q411 accounting for more than 50% of annual revenue, while nearly half of sales are derived from outside the US.

Jeff Clennon, director, cash management and funding at Discover Financial Services outlined policy the US’s fourth-largest card issuing company and Belden’s assistant treasurer, Chad Kibler, described how the cable and wire producer has shifted from regional to global forecasting of cash to gain greater consistency. As Gerhard noted, all of the measures involved greater interaction between the treasury department and the rest of the business so that colleagues “understand exactly what cash is about and how to get it forecast more accurately.”

 

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