Companies in Asia are looking to increase the efficiency of their liquidity management practices while minimising risk. This requires a combination of intelligent systems, real-time solutions and expert guidance, says Citi’s Sandip Patil, Asia Pacific Liquidity Management Services Head and Digital Assets Lead.

Sandip Patil

Asia Pacific Liquidity Management Services Head and Digital Assets Lead

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Treasury teams in Asia are facing high levels of uncertainty in today’s market, for a number of reasons. Geopolitical risks and continues amid ongoing tensions between China and the US, while rate hikes introduced in the wake of the Covid pandemic, continue to put pressure on companies. At the same time, companies are navigating digital disruption to their business models, driven by the rapid rise of ecommerce and real-time models.

“These trends are visible everywhere, but they are even more prominent in Asia, simply because of the amount of digital infrastructure we have, and the widespread adoption of digital tools by the population,” comments Patil.

As a result of all these factors, companies in Asia are looking to tighten their liquidity management strategies – not least because access to loans is becoming increasingly restricted and costly. By optimising their liquidity in-house, companies can use their own cash to meet internal needs and improve the yield on any cash surpluses, including those trapped in different jurisdictions in Asia Pacific.

“If they release trapped cash, companies can then retire expensive debt on the balance sheet, or avoid raising additional equity,” says Patil. “With the capital they release, they can also deploy new technologies and digitise their ecommerce infrastructure.” But it’s not just about efficiency gains. As Patil explains, “Liquidity management also helps companies manage liquidity risk. You don’t want a situation where one of your entities doesn’t have the cash it needs at the right time, and consequently isn’t able to make a tax payment for instance.”

Localised solutions, intelligent systems

For Citi, the best way to help companies in the region is by giving them localised solutions in each individual market. “Whether that’s in India or China, we’re going deeper and offering them our RMB or INR solutions across different legal entities, centres and currencies,” says Patil. “Clients can then manage their liquidity pools in a fungible manner across entities.”

When companies are left with a cash surplus, they can move this from the individual country to a regional or global treasury centre. “To the extent that regulations allow, we upstream that liquidity, give clients all the reporting they need, and help them invest that liquidity in the most suitable manner depending on their tenor and risk appetite.”

Increasingly, says Patil, treasuries are expected to support ecommerce by enabling cash flows on a 24/7 basis – “and they also want to manage a lot of their liquidity passively.” As such, there is a growing appetite for intelligent systems and platforms, partly because of constraints in accessing the right talent, as well as concerns around human error.

Furthermore, navigating different regulations in the region is a challenge that can be addressed with more intelligent systems. “Our approach, and our clients’ preference, is to automate everything,” says Patil. “This includes putting platforms in place and making them self-service so that clients can change these parameters from time to time, based on their underlying business conditions.”

Innovation and automation

Citi has addressed these needs by creating a new generation of real-time liquidity solutions, such as On-Demand Sweeps and 7-Day Sweeps, that are already being used by over 100 clients. Meanwhile, products like cross-currency swaps and cross-currency target balancing are helping clients manage FX and liquidity risk. The bank has also launched a range of products that offer multi-banking capabilities – “so we can aggregate clients’ balances on their Citi accounts with balances from other banks.”

For companies with a net cash surplus, Citi is also bringing new investment products to the market. “Where investment solutions are needed in-country, we’re now automating a lot of that,” says Patil. For example, the bank is introducing new platforms that offer automated sweeping into vehicles ranging from time deposits to money market funds and commercial paper. To meet the growing demand for sustainable investments, Citi has also launched products including green deposits and sustainable deposits in certain markets, with further developments currently underway.

Navigating market developments

Alongside product innovation, the bank is focusing on offering complementary services such as digital onboarding and data-led initiatives, as well as providing advisory services. As Patil notes, “Clients are a lot more curious about what’s happening in specific markets, industries and countries. They are also looking to benchmark the efficiency of their liquidity management against their industry peers and seek advice on how to become more efficient.”

This advisory element encompasses everything from regulatory to accounting practices. For one thing, companies are keen for input when it comes to pinpointing which types of questions they should be asking their tax advisors. They are also looking for guidance to help them navigate the region’s evolving regulatory landscape and understand how regulations apply to their specific business models.

“By virtue of our longstanding relationship with regulators, we are in a position to get some of the complex questions answered on our clients’ behalf,” says Patil. “And of course, the more intelligent your platforms are, the better you can fulfil regulatory obligations and avoid problems that may arise in the future.” By launching digital onboarding capabilities for all of its liquidity management products, he adds, Citi is not only helping clients navigate the region’s regulatory challenges, but also giving CFOs and treasurers the tools they need to make well-informed decisions.