Cash & Liquidity Management

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Cash and Treasury Management in Rapidly Growing Countries BNP Paribas’ Cash Management University Preview In the last two editions of TMI, we have been pleased to feature the 3rd BNP Paribas’ Cash Management University, which takes place on 8 – 9 October 2009 in Paris, France. This year, the event will focus on two of treasurers’ most important priorities: liquidity and risk. In the third article in this series, we preview another of the workshops that will take place during the event, looking at some of the issues for treasurers managing cash and treasury in the newer, rapidly growing economies, such as in Asia, Central and Eastern Europe (CEE) and the Middle East.

Cash and  Treasury Management in Rapidly Growing Countries

BNP Paribas’ Cash Management University Preview

In the last two editions of TMI, we have been pleased to feature the 3rd BNP Paribas’ Cash Management University, which takes place on 8 – 9 October 2009 in Paris, France. This year, the event will focus on two of treasurers’ most important priorities: liquidity and risk. In the third article in this series, we preview another of the workshops that will take place during the event, looking at some of the issues for treasurers managing cash and treasury in the newer, rapidly growing economies, such as in Asia, Central and Eastern Europe (CEE) and the Middle East.

Companies are taking a holistic view of risk, including liquidity risk and counterparty risk, in some cases for the first time.

The economic crisis has hit every region in the world, and consequently, many of the challenges that have emerged as a result of the crisis are common to all companies. For example, multinational corporations, wherever they are headquartered, are seeking to maximise visibility and control over global cash, and ensure that as much cash as possible can be mobilised to meet financial obligations and external borrowings reduced. Companies either based in, or operating in rapidly growing economies, such as in parts of Asia, the Middle East and CEE, are no exception. As Soo Tat Kua, Head of Cash Management, Asia, BNP Paribas explains,

“Companies throughout the rapidly-growing economies are prioritising working capital improvements and risk management. In the former instance, there is an increased focus on gaining visibility over cash and increased efficiency, as well as a greater focus on banking and account consolidation and reviewing banking relationships.”

However, despite similar priorities, the tools that are available to these firms to deal with the crisis are not always the same as those in Western Europe and North America.

Risk management

The crisis has accentuated the need for a robust approach to risk management, including liquidity risk and counterparty risk which have perhaps been less of a priority than other types of risk, such as interest rate and FX risk management. As Andrew Woods, Group Vice President, Treasury Solutions, SunGard AvantGard explains,

“The past two years have witnessed extraordinary events and companies globally have established similar priorities to deal with the crisis. Risk management is a crucial theme, particularly in regions such as Asia which have had less of a focus in this area in the past. Companies are taking a holistic view of risk, including liquidity risk and counterparty risk, in some cases for the first time. A prerequisite is to achieve transparency over information so that treasurers and CFOs have an accurate view over the company’s cash flow and exposures.

The introduction of FAS 133 and IAS 39 accounting standards led many firms to reduce their use of derivatives to hedge their risk. Today, we are seeing an increase in the use of hedging products both by companies that have used them in the past, and by those that are using them for the first time, particularly in emerging markets.

Measuring and monitoring risk, and valuing derivatives, requires specialised software that is well-known to many companies in Europe and the United States, but is less familiar in less mature markets. Consequently, we are seeing substantial growth in regions such as the Middle East, where we have operated for many years, and in parts of Asia, such as China where we have an established presence.”

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