Strategic visions for regional treasury and how treasury could support business growth via supply chain financing programs were top of the topic list for The NeuGroup’s recent Fall 2012 meeting of the Asia Treasurer’s Peer Group (ATPG) in Singapore.
Also discussed in the Deutsche Bank-sponsored meeting were cash pooling in the region as well as the endemic recruiting and retention challenges Asia treasurers face.
Regional Treasurers Seek a Bigger Role. In addition to the conventional treasury functions such as cash management, members of the ATPG have sought to have more ownership in liquidity-related areas like excess cash investing, FX hedging, and becoming more involved in the business cycle vs. being an afterthought in activities like M&A. Also problematic for regional treasurers in Asia is the added distance between the regional treasury center (RTC) and HQ, which members feel needs to be overcome to ensure abundant communication and to build trust between the two.
Treasury’s Support to Business via Financing Programs. One group member shared his company’s success in supporting business growth and growing revenue by implementing a supply chain finance program. By promoting a “cash is king” culture, this company was able to raise the profile of cash and liquidity.
At the same time, treasury worked closely with its banking partner to roll out a 60-day term finance program to selected suppliers, which saw an overwhelming signup rate. As a result, the company was able to drastically increase DPO, decrease DSO, and improve their overall liquidity health. However, SCF is not for everyone, companies considering it should be careful of its requirement and impact on the credit rating of the corporate as well as its suppliers, also any misstep in execution may result in program disqualification and categorizing of the transactions.
Cash Pooling in Asia – RMB Case Study. Centralized multi-currency notional cash pooling has been the golden standard for many MNCs for the past few decades, but with recent trends of increasing complexity and uncertainty in global and regional economic, regulatory and banking landscape, some are rethinking the old model. Regional treasurers are seeing more benefits in regionally managed cash pool structure.
One member gave an overview of his company’s groundbreaking pilot program in cross-border RMB pooling, which allows the company to settle intercompany transactions across the border in RMB and pool cash to offshore RMB accounts in its European treasury center. But the program is not without limits; for now, only two of its three offices in mainland China can conduct the settlement and only intercompany transactions can be settled in RMB. Members showed great interest in the fast-moving RMB internationalization scheme although most are still sitting on the fence.
Difficulty in Recruiting and Confusion with HR Recognized. Regional treasurers in Asia find it more difficult in some countries to recruit and retain qualified staff for their treasury operation, and India and China stand out as the harder cases. The reasons behind this situation are varied, but most ATPG members point to a generational gap in work ethic and expectation, along with the more familiar competition from other companies, including those in the financial service sectors. Also, the niche status of treasury positions and the lack of accurate job description and salary benchmarks have generated confusion when communicating with HR department. Members feel the need for more detailed study on treasury specific positions differentiating from other taxation or accounting ones.