Strategic Treasury

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Growth Opportunities Across the Globe Richard Jaggard, Standard Chartered Bank, talks to us about growth strategies for treasurers, cash management and liquidity trends, and the growing interest of multinational corporations in RMB.

Growth Opportunities Across the Globe

While treasury in Europe is likely to be dominated by SEPA for much of 2013, what trends are you seeing in other regions, such as Asia?

Our clients are primarily focused on capturing growth opportunities, and the most apparent ones are in the emerging markets, in which trading volume is expected to make up 40% of global trade flows in 2030. This is a huge leap from today’s 18%. Both China and Africa, for example, are compelling regions. While many multinationals have been present in a number of Asian and African countries for many years, their involvement has been relatively limited in many cases. Today, however, these regions are pivotal to many corporate growth strategies. While growth in Africa is starting from a smaller base, its growth trajectory far exceeds that of many other markets.

What are treasurers looking for to facilitate this expansion?

Growth strategies often extend into less familiar, and highly diverse territories, but we are finding some consistent objectives amongst treasurers:

i) Extend existing capabilities and liquidity structures into new markets to optimise visibility and control over cash.

ii) Comply with diverse regulatory requirements, culture and market practices, and respond to evolution in the financial infrastructure in new markets, whilst maintaining financial and operational efficiency.

iii) Understand and take advantage of emerging opportunities to use RMB.

How are treasurers going about achieving these objectives: for example, ensuring visibility and control over cash?

Companies are increasingly centralising their Asian cash and treasury activities through regional treasury centres (RTCs) providing on-the-ground treasury support, while remaining closely integrated with treasury centres in other regions. In the past, many treasurers managed their Asian business from Europe, but this proved challenging for a variety of reasons, not least the timezone difference, lack of proximity to the business, and diverse regulations and market infrastructures are just some of them. Now an increasing number of multinational corporations have developed sufficient critical mass in Asia to justify setting up a regional treasury presence. Companies are therefore in a better position to develop specialist expertise on regional treasury issues, such as restrictions on liquidity and FX management techniques, and the complexities of the regulatory environment and market infrastructure.

Technology plays an important part in enabling companies to achieve their cash and treasury management objectives. Enormous advances in treasury management and banking technology continue to help treasurers achieve a far higher degree of efficiency, access to information control and analytics than has been possible in the past. In addition, the rationalisation of ERP platforms and its integration with treasury is resulting in enhanced visibility over information relating to cash flows, forecasts, budgets and exposures both regionally and globally. As companies expand into new markets, their panel of cash management banks may also need to expand, and we are seeing a growing interest in managing bank connectivity to handle high volumes of transactions in a robust, secure and standardised way. The desire to do this with ‘open standards’ is accelerating the adoption of SWIFT for Corporates, as well as an increase in host-to-host communication using standardised connection within ERP systems.

Maintaining access to liquidity is a priority for companies as their business expands, but this becomes more challenging in more restricted environments. In recognising that it is often more helpful to maintain liquidity at a regional level to support the treasurer’s increased focus on managing counterparty risk, companies are moving away from having a single global liquidity bank. Instead, they are seeking regional liquidity partners, who have considerable depth of presence across markets within the region, and have the technology, expertise and creativity to develop creative liquidity solutions in challenging environments.

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