A look at what’s on International Treasurer’s radar screen this week.
With several NeuGroup peer group meetings just completed, there were several topics that came out of this week’s editorial meeting. These included another look at supply chain finance, making tax structures more efficient and the Euro crisis’s impact on Asia.
Supply chain finance.
Although we’ve recently written about supply chain finance, because it’s receiving a lot more attention from corporates we thought we’d dig a little deeper. We’ll explore the demographics of the supply chain and how it’s critical to have a platform that is tailored to suit not only the more established players but also the mom and pop or family-run suppliers (as is often the case in China). Supply chain finance programs tend to work well with companies of size, but are more difficult with the smaller, family-run businesses that tend to be the more prominent among suppliers in Asia. We’ll also look into how some banks are not meeting expectations in helping companies and suppliers with their trade finance. As one member at a recent NeuGroup peer group meeting said of the bank with which he has a supply chain finance program, “they are worse than clueless.”
To be fair, banks might be trying to play catch up as they deal with their own balance sheet issues and as they deal with new regulations. Nonetheless, they’re getting low grades for over-promising and under-delivering.
Tax structure overhaul. IT will take a look at making tax structures more efficient particularly in light of how global tax authorities are coordinating at a faster rate to catch avoidance practices. At the recent NeuGroup Asia Treasurers’ Peer Group (ATPG), a key takeaway in one session was regulated markets and tax structure impediments. Regulated markets pose challenges on their own in terms of having access to liquidity for utilization of investment; however, this situation is often compounded by the tax structure of entities in the region. In some cases the tax and legal entity structures are left over from an era when the region (in this case, Asia) did not represent the strategic growth engine for the company. This has changed of course and structures need to be updated. But the required overhaul can be a major undertaking and needs to be pushed at a senior level across functions from the business as well as finance side.
Euro Crisis Asia Impact. The European debt crisis, well established by the end of 2011 and again tripping up US and European economic performances in 2012, is starting to concern Asia. According to Standard Chartered’s recent earnings release, Asian markets were performing very well, however, Richard Meddings, a finance director at SC, said that Asian economies cannot forever be insulated from a major shock in Europe. “One has to watch for it,” he said, according to the Financial Times. This was mostly the sentiment heard at The NeuGroup’s recent ATPG meeting. There members heard and agreed that Asian economies are currently robust and diversified enough that the impact will be very limited. Nevertheless, those with responsibility for Europe will certainly need to maintain counterparty vigilance over the area, according to Dr. Gunter Dufey, a business professor at the University of Michigan and a presenter at the Asia meeting.