For Malaysia based treasurer Wan Chun Shong, the continued integration of ASEAN and the ASEAN Economic Community (AEC) offers enormous opportunity for businesses in the region and beyond. But, before this can be fully grasped, treasury departments, particularly in Malaysia, need to invest in cutting edge technology to drive efficiency and best practice.
What has been your career path, and what attracted you to the treasury profession?
I began my career in banking, working on the FX and derivatives desk for Bank of Tokyo Mitsubishi UFJ in Malaysia, providing hedging solutions to Japanese corporates operating in the country. This was an interesting position and I was able to gain a solid grounding in treasury and a good understanding of the corporate treasury function and its role in the company.
It was during my time at the bank that I came to realise that the treasury is the heartbeat and profit centre of the organisation, and the perfect career path for somebody with my skillset. As a result, I left the bank and joined Elken Group in Malaysia in a corporate treasury role before later moving to a similar role with TwinWealth Group in Hong Kong – a change that allowed me to move out of my comfort zone and achieve some corporate experience in a different environment.
Today, I head up the treasury department at Tan Chong Group – an automotive conglomerate with revenue of around $3bn and operations across South East Asia – overseeing treasury, funding and risks.
What challenges is the treasury facing and what are you doing to overcome these?
As far as challenges are concerned, I believe that there is one that resonates with treasurers in Malaysia, and other markets around the world: working out how best to leverage technology. As an industry we are undergoing a tremendous transformation in terms of technology and how this is enabling us to find new ways of enhancing our business. But, on the other hand, it also presents a challenge in regards to rethinking how the treasury department should operate.
My team and I are therefore looking at how we can best streamline the financial value chain of the business. This includes analysing areas such as collections and promoting real-time electronic transfers and bank account auto reconciliation, improving visibility by replacing excel worksheets with a treasury management system (TMS) and also streamlining the payment process. Although this is a journey that has only recently begun, we have made great strides and have already brought in numerous efficiencies and greater control over core processes. Nevertheless, it is a long term project and we are aware that it will take many more years to complete.
As treasurer of the Malaysian Association of Corporate Treasurers (MACT), I am closely linked to my peers and there is a real push by the majority of companies to gain greater control through automation and the only way that this can be done is by investing in technology. Unfortunately, we are behind our European and US peers in this regard but I see this gap closing in the coming years.
Has the recent volatility in emerging markets impacted your treasury, and what tips would you offer fellow treasurers unsure of how to manage this volatility?
Emerging markets (EMs), and particularly those with weak fundamentals like Vietnam, Malaysia and Indonesia, have experienced a fair degree of volatility lately. There are various reasons for this, most notably: quantitative easing being unwound in the US, low oil prices and China’s slowdown.
For corporates, the volatility can create numerous risks including a significant impact on cash flow. The best way to mitigate this risk in my opinion is to use hedging solutions, enforced and controlled by a robust treasury policy. To ensure that the best results are obtained from hedging it is vital to work closely with your banking partners, as they have the expertise to help you find the most optimum solution.
Moreover, banks can also provide a wealth of information around the regulatory changes occurring in various markets and the impact this has on hedging strategies and various other treasury activities. I believe this is particularly important in the markets that we operate in, such as Vietnam, Myanmar, Cambodia and Laos, because regulations are frequently changing.
Vietnam, Myanmar, Cambodia and Laos are just four of the countries that make up ASEAN. What impact is ASEAN project and the creation of the AEC having on both your business and treasury operations?
Simply put, AEC is a similar project to the EU. It aims to create a highly competitive economic region with a single market and production base. This of course will have many benefits for businesses and afford higher productivity and cost efficiency through economies of scale and also because of the elimination of tariffs in countries like Vietnam, Myanmar and Cambodia. Moreover, for conglomerates operating in ASEAN, besides easier access to its markets, the free flow of goods and services will also boost their competitiveness regionally and globally.
Whilst ASEAN certainly offers businesses many opportunities, it does mean that the complexity of treasury operations is likely to increase, as a greater volume of transactions will be made across multiple geographies. This will place an even greater emphasis on treasury best practice, automation and control.
Recognising this challenge, we have centralised our treasury function after being granted Treasury Management Centre status by Malaysian Industrial Development Authority (MIDA) – a program that offers a number of incentives to companies who base their treasury operations out of Malaysia. As a result of this, we have been able to utilise an in-house bank structure enabling us to better manage our internal cash flows, reduce float and transaction fees, and subsequently bring down the operating costs of working across such a large market. I expect to see many more companies in Malaysia and across ASEAN replicate this structure going forward.
Looking ahead to the rest of the year what challenges do you expect to face?
This year will again be defined by volatility and treasurers need to be vigilant and hedging the exposures. There is also a need to think outside the box and ahead of time to guide the business through these uncertain spells.