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Global Treasury

Asia Transformation Drivers and Five Ideas for Regional Finance Leadership

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May 30, 2018

By Joseph Neu

Recent exchanges with customers in Asia show degree to which transformation drives finance and treasury in the region. 

Transformation in Asia arguably is happening at a pace that few other places experience. Thus, it is a great place for companies seeking to keep pace with change globally to witness how and how fast things can move. This point was driven home at NeuGroup’s AsiaCFO meeting for MNCs in China, hosted at McKinsey & Co.’s Digital Capabilities Center in Beijing. Members shared anecdotes from recent leadership meetings (that they’ve encouraged; see below) to bring company leaders to China to experience the level and pace of change. The digitalization of day-to-day human experiences taking place in China and thus the need for more innovation, implemented more quickly than most large corporates are used to, are a precursor to how the pace of innovation and implementation will need to be quickened to stay in business in China and, soon, almost anywhere. Finance and treasury teams operating in the region need to help the businesses they support make this transition, which is often called a digital transformation. What many are doing is proactively asking to take the lead on global initiatives and make Asia the proof of concept for them.

Digital Transformation Strategy and Execution

Proactively seeking to take the lead on global initiatives, especially surrounding digital transformation, represents an opportunity that every Asia regional CFO or treasurer should seize with gusto. Meanwhile, more MNCs, based outside Asia, are opening their eyes to the fact that they need to move more strategic decisions to the region to keep up. The confluence of these trends will make Asia regional finance roles super exciting over the next five years and allow them to become even more of a pathway to senior leadership, but HQ must get out of the way. Here are a few ideas for things HQ can delegate to regional finance leads to aid transformation:

1) Finance support for digital business transformation. As noted above, several AsiaCFO members suggested bringing their global teams to China to have them experience the digitalization of the economy for themselves. Common “team-building” exercises include getting set up on WeChat, paying with WeChat Pay, renting a share bike, and visiting an Alibaba Hema supermarket store to witness online and offline integration. Several members noted making visits to Alibaba (they have 99.5% consumer forecast accuracy due to analysis of customer data) and Alipay for team-to-team discussions as well as meeting with MNCs that have good projects going in China to benchmark. This is all part of broader projects to “digitalize finance.”

2) Finance support of the brand. Asia, and again China in particular, is very much focused on brands and brand stories. This is why there are malls everywhere with brand-name stores that seem as if they are just billboards that you can walk into. What’s more, the brand story in Asia can be different, or carry different meaning, than it does elsewhere. This is both a risk and an opportunity to create new business models in line with the value of the brand story and how the brand story might be perceived. What I learned from exchanges with tech firms in Taiwan, for example, is that a brand story can help shift firms from PC and device manufacturing, a declining business, to more of marketing or services-oriented business model with different finance needs.

3) Tapping Asia capital markets. There has been an uptick of late in MNCs tapping niche capital markets, including those in Asia. With a rising rate environment in the US, and cross-currency swap overlays, there can be a cost of funds as well as an investor diversification play in tapping Asia capital markets. What’s more, with US firms bringing cash back to the US because of tax reform, funding needs in region may rise. And speaking of investor diversification, the wealth and proliferation of institutional investors based in Asia makes it a target-rich environment for investor roadshows and investor relations, both on the equity and fixed income side.

4) Diversifying bank relationships to local banks. Local banks in key markets are getting better with their capabilities and can offer MNCs alternatives to global banks, especially regarding local financing options. Private conversations with bankers in the region suggest that global network banks are going to find it very difficult and expensive to sustain their networks indefinitely. And even regional treasurers confirm that there is interest in working with local banks, just not on cash management until integration with cross-border, bank-agnostic networks improves. To move relationships with local banks forward, HQ treasurers, especially outside Asia, need to become more open-minded regarding bank relationships

5) Engage with central bank/monetary system innovation. Many finance professionals point to the MAS in Singapore (supporting fintech blockchain initiatives, including bank KYC compliance, for example) and the HKMA in Hong Kong (fintech and green finance initiatives) as being innovation leaders among central banks. But it’s important to note that the PBOC in China has allowed quite a bit of innovation to take place in China, too, particularly around payments and digital financial services. For this reason, regional finance experience in dealing with Asian central banking and monetary authorities, and related ranks of regulators, will become useful in understanding how to navigate regulation of digital finance initiatives elsewhere. It will also help firms learn to better deal with a less US/EU-centric financial regulatory world.

Put Focus on the Impact Looking Forward

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