Transforming Challenges into Opportunities
by Voon Hoe Chen, Corporate Treasury Leader, PwC, Singapore
PwC’s Asia Corporate Treasury Survey examines corporate treasury functions in Asia and shares insights on, among other issues, the structure of these treasuries, their key challenges, their risk management approaches, their relationships with their bankers, and their approaches to cash and liquidity management. The survey is based on information gathered from 117 organisations across seven countries in Asia, covering a broad range of industries, including commodities, manufacturing and consumer products. This article contains highlights of the survey. A complete version of the survey report is available directly from pwc.com/corporatetreasury.
The global financial crisis and the subsequent economic recession have brought about several changes to corporate treasury functions in Asia in recent years. Dealing with the crisis, including the impact on funding, liquidity management, commodity price volatility and financial counterparty risk has provided the most rigorous test for treasury teams. Yet it has also brought the importance of treasury to the forefront of the boardroom agenda and created a once-in-a-career opportunity to raise the status and influence of the treasury function within the business. Businesses operating in Asia also face challenges unique to the region – there is no single regulator, there is no single currency, the banking landscape is very diverse, and there are many restrictions relating to the multiple emerging currencies. PwC’s inaugural Asia Corporate Treasury Survey aims to understand how treasury teams in the region cope with the challenges. Are they adding value to their businesses? What are the main concerns of treasurers? What is the future of treasury going to be like?
Deployment of treasury staff
Our survey shows close to 30% of treasuries operate in geographically dispersed businesses, covering six or more countries; another 31% oversee between two to five countries. They are therefore likely to be dealing with complex cross-border liquidity, currency and counterparty issues. However, more than half of the respondents have five or fewer staff in their group treasury function.
Demand for appropriately skilled personnel outstrips the supply available.
Fifty-four per cent of respondents indicated dissatisfaction with current talent management in their organisations. This is compounded by rapid growth and cross-border expansion regionally. The demand for appropriately skilled personnel outstrips the supply available as a result; this is especially so in Asian countries with less sophisticated finance sectors and in companies with smaller corporate treasury teams. As risks become more complex, there is also a growing need for greater skill specialisation.
Top of Asia treasury’s agenda now
Cash and liquidity management and financial risk management were identified as the two most important treasury activities (Figure 1). This came as no surprise, as we witnessed a period of significant foreign exchange, interest rate and commodity price volatility in recent years. Notably, the market saw emerging currencies like the Indian rupee and the Indonesian rupiah tumbling in value in 2013. The uncertainty over the tapering of quantitative easing by the US Federal Reserve is also likely to have a considerable impact on interest rates and liquidity.
How do Asian corporates view their treasury?
The responses seem to imply the respondents may aspire to be value-added treasury centres rather than actually performing as one.
Sixty-two per cent of respondents perceived themselves to be ‘value-added’ treasuries, where treasury works actively with the business to achieve its strategic goals. However, our survey found that many treasuries in Asia are still using traditional methods for managing risks. Many have yet to implement proactive management of cash and liquidity or adopt treasury technology to drive process efficiencies and enhance timely and useful information to support better decision-making.
The responses seem to imply the respondents may aspire to be value-added treasury centres rather than actually performing as one. As such, there appears to be some scope for moving treasury functions away from acting as a transactional treasury and towards a process-efficient, value enhancing or a strategic treasury.