Cash Visibility: Importance Increasing in Asia

With economic uncertainty and counterparty risk being among the increasing concerns in Asia, corporates want to know now more than ever where their cash is so they can access it when they need it. As JP Morgan Chase and treasurytoday found in their 2011 benchmarking survey, the uncertain economic environment today means that corporate treasurers “have to do all they can to squeeze every last Singapore dollar, Hong Kong dollar, Malaysian ringgit, Philippine peso and the many other currencies used across the region from internal resources before accessing external credit lines.”

Knowing where the cash is can bring a multitude of benefits. Claudia Cassinari, head of Europe, Middle East and Africa (EMEA) payments market infrastructures, SWIFT, summarised it well earlier this year when she said that “better visibility on global cash allows reduction of borrowing cost, optimisation of un-invested cash and avoidance of working capital growth.”

As an increasing number of Asian companies have expanded their operations from domestic markets to overseas, and as multinationals in Asia that already have overseas operations get bigger, cash visibility is still more important, yet has sometimes been elusive as local entities maintain their own accounts. The historical legacy of paper records and electronic spreadsheets has also made finding where the cash is more difficult. Bank of America (BofA) described the current status by saying that “legacy accounts and processes can be unwieldy” in Asia and “the basic processes surrounding bank account management have remained in the dark ages”.

As the importance of cash visibility increases, more of these corporations that are still paper-based or spreadsheet-based are looking towards automation and other technology solutions to find and track the cash. As Paul Bramwell, senior vice president (SVP), treasury solutions, SunGard, said: “Corporations are discovering new ways to harness technology to increase their visibility to cash and to better manage the risks that have become more prevalent.”

One solution that is growing in the region is electronic bank account management (eBAM), which better-enables centralised tracking of accounts and balances. BofA says it is seeing more companies move towards eBAM so they can “access and manage their records quickly and efficiently via an online interface,” and it also expects Asia to adopt the recognition of e-signatures more readily than perhaps other emerging markets,” which will make eBAM even easier.

More corporates are also connecting directly to SWIFT. HSBC says that corporates can “streamline processes, reduce costs, lower risks and improve cash management” when they connect to SWIFT. While the numbers have been relatively small in the past, the pace of connecting by Asian corporates is increasing.

Having sufficient data about accounts and cash flows is also important. Mayank Mishra, director and the regional head for information services at Citi’s global transaction services (GTS) in Asia-Pacific, said cash visualisation, mobilisation and optimisation are examples of what’s important for “understanding cash flow dynamics and coordinating liquidity and investment management”. Citi and other banks have solutions to help consolidate data from multiple sources.

While progress may have been slow in the past, that greater need for knowing where cash is and using it effectively seems likely to increase the pace of change within Asia. Whether it is eBAM, better data or other techniques, better cash visibility looks like a theme for 2012 that will move closer to reality for more corporations faster than before.

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