For Japanese multinationals operating in Europe, the COVID-19 crisis has presented some specific challenges – but as Nippon Express has found, Europe continues to offer attractive opportunities for cash management efficiency.
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Director – General Affairs and Finance
Head of Transaction Banking, BNP Paribas Tokyo Branch
Regional Cash Management Sales, BNP Paribas Paris
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Like corporations everywhere, Japanese multinationals have faced considerable challenges during the COVID-19 crisis.
These have included some challenges specific to the local market. “One of the main challenges for Japanese MNCs is how to manage the COVID-19 crisis in overseas areas,” explains Olaf Zimmlinghaus, Director – General Affairs and Finance at Nippon Express, a global logistics company with the group headquarters in Tokyo and the European headquarters in Düsseldorf, Germany, “There’s a considerable distance between their headquarters in Japan and Europe or the US, which can present challenges when it comes to responding to urgent situations.”
In addition, Zimmlinghaus says, Japanese multinationals faced complexity when staff who had previously been seconded to Europe had to return to Japan with their families. “Co-ordinating action between the local management, workers in Europe and Japanese people returning to Japan was a big challenge but finally well managed,” he adds.
The transition to home working
As in other countries, the transition to home working has also presented challenges. During the crisis under “state of emergency”, the Japanese government called on companies and asked 70% of their employees to work from home. While Japan has a strong culture of office working, the transition went smooth for large Japanese corporates, says Makoto Hasegawa, Head of Transaction Banking, BNP Paribas Tokyo Branch.
“This year was supposed to be the year of the Olympics in Japan,” she explains. “In the run up to the Olympic games, the government had already asked companies to prepare to work from home during the Olympic period in order to avoid heavy traffic and crowded trains. Even though we could not host the games in the end, Japanese corporates were able to deploy the contingency plans in place for the Olympics as the pandemic situation worsened.”
During this period, there was a marked increase in customers seeking to avoid disruption to their activities, says Isabelle André, Regional Cash Management Sales, BNP Paribas Paris. She adds that key priorities included ensuring that payments would be processed on time, and that information could be shared effectively between teams in different geographical locations when working from home.
One particular pain point was the Japanese local practice of chopping documents with a company seal, which is typically locked in a safe in the office. Consequently, staff had to go into the office in order to chop documents – but the Japanese government is currently reviewing this practice in order to shift to processes that can be carried out from home.
Full steam ahead
Despite the transition to a remote working environment, Nippon Express has not only maintained continuity of its treasury activities but has also kept up momentum with a major cash management project that was initiated before the crisis began.
In 2018, the company was seeking greater efficiency in its cash management strategy in Europe – which meant working with a banking partner that had a broad coverage across the European region. Following a formal RFP process, Nippon Express selected BNP Paribas. “Our target was to implement a European cash pool across Europe, with BNP Paribas bank accounts for all of our companies,” explains Zimmlinghaus. “The BNP Paribas bank accounts needed to be our primary settlement accounts for collections and payments. In addition, we wanted to have a cash management system that would enable us to see what liquidity we have in our organisation, and where it is placed.”
After selecting BNP Paribas, the next step was to set up a joint project team and map out the steps that the implementation would need to include. The relevant countries were divided into two phases – the UK, for example, is included in the second phase in light of the evolving Brexit situation – but during the course of the project the company has also been flexible in adjusting which countries should be prioritised.
In addition, weekly calls are held between BNP Paribas and Nippon Express Europe in order to maintain momentum. BNP Paribas provided a dedicated team which has followed the project from the outset and uses a dashboard to monitor progress and follow up action points. Other key success factors include transparency into the decision-making process.
“Also important is the communication from BNP Paribas in both Europe and Japan,” comments André. “There are two teams that are working together, with the same knowledge of the project.”
While the project is still under way, Nippon Express is well on its way to achieving its key goals of greater transparency, higher compliance and greater security within its financial environment. Following the adoption of BNP Paribas’ eBanking solution, the company has already gained visibility into the accounts that have already been opened. “The next step is to execute according to the clear road map we’ve committed to,” Zimmlinghaus says.
More generally, he observes that for Japanese MNCs operating in Europe, “the main challenge is to bring the differences in these cultures and working styles under one umbrella as much as possible.” He notes that Japanese companies should be prepared to hand some control to European management, as other Japanese multinationals have done. Conversely, he says, European multinationals moving into Japan need to “understand and respect the underlying structures and procedures of the highly developed Japanese business culture.”
With an eye on the future, Hasegawa says that Japanese companies operating in Europe will be focusing on expected market changes in the coming year. Nippon Express has regional headquarters in Germany, but for companies with regional headquarters in the UK, Brexit may make it necessary to move those headquarters elsewhere in Europe. Other challenges include the transition away from LIBOR.
But despite the challenges, Hasegawa points out that Europe continues to present considerable opportunities for Japanese multinationals. While Europe includes multiple currencies, the region’s regulatory environment makes it relatively easy to implement efficient cash management solutions. “With the opportunities available in Europe, Japanese corporates are increasingly looking at achieving greater efficiency across their payments, collections and liquidity management,” she concludes.