This may be ill-advised. Ford notes that some changes will, of course, need to be made to the document to accommodate local market nuances and ensure that the business is not exposed to excessive risks by using products that are not fully understood. However, he notes that whilst these changes should be well-detailed, they should not be limiting: “Ultimately the policy needs to empower local teams and enable them to operate efficiently and invest fully.”
The policy should therefore be drafted in such a way that it maintains the investment philosophy of the company’s headquarters, aligns with the regional office’s strategy, and accounts for local practice. “The only way to do this,” notes Ford, “is to take a holistic approach when drafting the policy; marrying together the local knowledge of the teams on the ground with the headquarter’s overall investment objectives. Approaching the drafting of the policy in this way will also provide uniformity across the region and ensure that the locals are comfortable with what they are doing, empowering autonomous decision making.”
Making changes to an investment policy, no matter how minor, requires a significant degree of effort. Indeed, according to the latest J.P. Morgan Global Liquidity Investment PeerViewSM survey, 82% of those planning to amend their policies stated this would require moderate or significant effort.
Interestingly, the same study also highlighted that only 26% of companies in Asia Pacific were considering making changes to their policies. When compared to the 39% in the Americas and 46% in Europe that said they were, this indicates that policy change is not top of mind for treasurers in Asia at present.
There is a logical reason for these findings, as the study also revealed that only 11% of corporates operating in Asia Pacific had been encouraged by their banks to move non-operating deposits off its balance sheet as a result of Basel III. And with a plethora of other challenges currently being dealt with by treasurers in the region it is understandable that their efforts are being focused elsewhere at present. But with the Basel III regulations increasingly beginning to bite, Shevlin encourages treasurers to start thinking in more detail about their investment policy.
“Bank deposits continue to be the investment tool of choice for corporates, but this will soon change as the banks in the region begin to conform with the Basel standards,” he says. “Once these changes are fully implemented, corporates will be forced to diversify their investments and think more proactively about what they are doing. Those companies that go through the short-term pain and create a robust and flexible policy will reap advantages in the long term.”
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Ford observes that corporates embarking on this journey away from bank deposits do not tend to start using complex products right away. Indeed, he notes that the journey for corporates is typically slow and considered.
“Most corporates in Asia tend to start investing cautiously in the region, primarily using time deposits with safe banks,” he says. “As they become more comfortable with the region and its rules and regulations, they eventually start branching out and use other instruments.”
As one of the region’s longest standing asset managers, Shevlin notes that J.P. Morgan Asset Management is there to support its clients at every stage of this journey. “Having offered short-term cash investment solutions to corporate clients in Asia for over ten years, we have built up a wealth of knowledge and experience,” says Shevlin. “Our clients can tap into this at any time and we are constantly acting as thought leaders to ensure our clients stay abreast of any changes that might impact their operations, or provide new opportunities.”
For Shevlin, investing with J.P. Morgan Asset Management ultimately gives treasurers reassurance. “Asia can seem complex and confusing,” he says. “There are lots of headlines about risks in the region but there are also lots of opportunities; having a fit for purpose investment policy suited to the region is the first step treasurers need to make in order to take advantage of such opportunities and stay one step ahead of their industry peers.”