Treasury Today Country Profiles in association with Citi

Asia’s 2017 treasury agenda

Future written on road

Trade, technology, regulation and relationships all look set to be high on the corporate treasurers’ agenda in 2017.

It’s fair to say that 2016 was something of a rollercoaster ride for treasurers around the world. As such, when asked to predict what shape 2017 will take, the word that first springs to mind is ‘uncertainty’.

On 23rd June, the world was shocked by the UK’s decision to exit the European Union. More was to follow with Donald Trump’s election victory in November, as well as the resignation of Italian prime minister Matteo Renzi in December, following the resounding defeat of his referendum on constitutional reforms.

Recent political events have the potential to impact treasurers in a number of different ways, from funding to investments. As such, treasurers will be watching events closely in 2017 – particularly the upcoming elections in France, Germany and the Netherlands.

“With the geopolitical changes that are happening, we see that trade agreements that are being proposed will have an important impact on what 2017 – and beyond – is going to look like,” says Venkatesh Somanathan, Global Head, Supplier Finance Solutions at Deutsche Bank. “We are living in a period of slower economic growth, with some headwinds on the horizon, which means that some of these trade agreements may take some time to batten down. There may be a recalibration or a pivoting of some of these countries into different blocs of agreements.”

Supporting trade

The trade finance gap is likely to be an important consideration this year: the Asian Development Bank (ADB’s) 2016 Trade Finance Gaps Survey identified a trade finance gap of $692bn in developing Asia, including India and China.

Somanathan points out that this gap slows down trade growth. “You can attribute this to various things – the commodity cycle is one, but we also see that regulatory expectations applying to financial institutions increasingly require them to do a lot more in order to continue to do trade finance.

“While some banks address this by investing in technology and people, some others find it easier to limit their presence. Rather than being present in more countries, they find it profitable to get back to their home markets and focus on a smaller number of countries. This kind of response could further accentuate the problems which are slowing down trade growth.” As such, Somanathan says that 2017 could be a crucial year in seeing how these trends play out.

Other areas to watch

Aside from the changing political landscape and developments in technology, the following trends and topics are also likely to be significant in 2017:

  • Technology.

    Mark Smith, Global Head of Liquidity Management Services at Citi, says that investing in automation and security will be another priority for treasurers in 2017 – not only as a means of achieving efficiency gains, but also to increase the security of treasury operations.

  • Regulatory change.

    In keeping with the last few years, regulatory change continues to be a major area of focus – and this is set to continue in the coming 12 months.

  • Relationships.

    Daniel Jefferies, Group Treasurer of Equiniti Group says that in the current low rate environment, both banks and corporates are looking to get the most out of their relationships.

  • Role of the treasurer.

    According to Smith, treasurers are continuing to be more engaged in driving business decisions on topics such as how and where best to set up working capital frameworks and liquidity pools.

Conclusion

While the core priorities of treasurers continue to be on managing cash, liquidity and risk effectively, the events of 2016 mean that treasurers are likely to be entering January with a greater sense of caution about the coming year. If treasurers took just one message from last year, it would be to expect the unexpected.

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