Now that the first month of the year is over and treasury departments are back running at full throttle, Venkat ES shares some of the key trends in the region and what treasury teams should be doing to harness the opportunities.
What were the key corporate treasury trends in 2017?
Since the global financial crisis, there has been a clear trend of treasury becoming more strategic and taking a more prominent role within the organisation, be it global multinationals or Asian corporates. In 2017, however, what I started to see very clearly is the increasingly strategic role that treasury teams within Asian domiciled multinational companies are beginning to take.
This is no surprise. As these companies become more global and reach the upper echelons of the Fortune 100 they are exposed to more complexity and risk than ever before. Treasury is the department best placed to manage this and, as a result, is receiving increased attention from the Board and senior management.
The challenge for many treasury teams in fast-growing Asian multinationals is that they have been relying on outdated technology. This is changing quickly though and we are seeing many of these companies adopting pioneering technology, leapfrogging their competitors and becoming best-in-class. The advantage these companies have is that unlike their European and US peers they do not have to undo a spaghetti bowl of legacy technology to push ahead.
This theme ties into the broader focus on technology from all corporates across the region. Whilst there has been lots of talk about AI, blockchain, machine learning and robotics for quite some time, 2017 was the year when genuine treasury use cases started to emerge.
Despite this, treasury departments are unable to devote all the time and resources they would like to harness new technologies. This is because a lot of their time is spent managing the dark side of technology: cyber-risk.
Away from technology, market instability once again troubled treasurers across the region last year – a hangover from the turbulent geopolitical events of 2016. Interestingly, this has brought with it a renewed focus on bank relationships. Treasurers are ensuring that they are with banks that are safe, committed to the region, can play the advisor role and move mountains in times of need.
What do you expect to be the big trends that emerge in 2018?
Treasurers of US companies in Asia will certainly be occupied with managing the impacts of US tax reform this year. For the past twelve months, there was lots of speculation about what this reform might look like. Now that we know, treasurers are having to quickly assess the implications and build plans around whether they will be holding the cash or repatriating it.
More broadly speaking, the focus on technology will continue. Many treasury teams want to stop talking about the potential of these technologies and begin using them. It is becoming a key performance indicator for them.
This poses an interesting challenge for banks, who will be delivering many of these solutions to clients. I truly believe that 2018 is the year we need to move beyond proof of concept when talking about new technologies and begin focusing on proof of value.
The final trend that I see is the continued emergence of real-time payment systems across the region. Treasurers are taking an increased interest in understanding how they can be used to benefit their businesses.
What will these mean for corporate treasury teams and what should they be doing to prepare?
It is a cliché, but there is no one-size-fits-all strategy. Each treasury teams need to run an internal audit to see where they are doing well, what areas can be improved, and what will deliver the most value to the business. From this, they can begin building a plan to revolutionise the department in the coming years.
One thing that I think all treasury teams should be doing more of is engaging their banking partners on this journey. We have our ear to the ground and are witnessing the emerging trends first hand. We want to pass on this knowledge to our clients and become their strategic advisors.
By working together, we can also begin to co-create solutions, experimenting with new technology and testing previously untried ideas and concepts. We have had some great success doing this with our clients over the years and we encourage more to come and have a chat with us, to talk through what is possible.