Risk Management

Navigating complexity in diverse markets

Published: Mar 2020

Despite global tensions, growth in the Asia Pacific region is forecast to remain strong in the decade ahead. However, there are marked differences across the region in terms of regulations, market practices, languages and currencies. How can treasurers best manage the challenges brought by Asia’s diversity?

Person in a kayak exploring water cave

As a region, Asia Pacific is nothing if not diverse. Home to 60% of the world’s population, the region includes a heterogenous collection of countries, currencies, cultures and languages. And where treasurers are concerned, the region’s diversity presents considerable challenges in the form of diverse tax regimes, regulatory requirements and liquidity management practices – alongside attractive opportunities for growth.

“The Asian markets present growth opportunity to most businesses and industries,” says Adesh Sarup, Head of TB, North Asia, ANZ Institutional. “The region consists of 25+ different markets, c. 57% of the world’s population and consumers – including some of the largest economies in the world, together with some of the most rapidly emerging. It is also a highly attractive region for manufacturing and procurement.”

Harnessing these growth opportunities has, of course, long been a focus for companies in the region. “Growth remains a critical objective for most companies, even though some Asian economies are showing signs of slowing down,” says Faisal Ameen, head of Asia Pacific Global Transaction Services, Bank of America (BofA), adding that companies are keen to leverage Asia’s expansion to drive growth in their operations globally. “They are also looking at repositioning their businesses in the wake of a shift in trade corridors, relationships and exploration of new supply chain locations,” he notes.

“While Asia’s growth may have slowed as compared to a few years back, it remains a key growth driver for most global MNCs,” Ameen continues, noting that the World Economic Forum (WEF) has predicted that Asia’s GDP will overtake the rest of the world combined in 2020. “The key difference is companies are now starting to look beyond China and India at some of the emerging economies like Vietnam and the rest of Southeast Asia.”

Consequently, Ameen predicts that companies headquartered in Asia will continue to look for growth opportunities within the region, and even more so in other parts of the world. “This trend underlines the continued emergence of Asia MNCs,” he says.

Sarup, likewise, notes that the last decade has seen a growing list of Asia MNCs, which “often have the advantage of understanding the Asian markets better”. He adds, “Many such companies in Asia are also evolving their respective treasury and supply chain models to enable further growth.”

Barriers to growth

But while companies continue to focus on growth opportunities, it’s also clear that economic conditions have moved on since the very high growth rates experienced by China and India in previous years. In India, a decline in consumer spending and a reduction in factory output contributed to a reduction of GDP growth to 4.5% in the quarter ending September 2019 – the first time in seven years that GDP growth has fallen below 5%. Meanwhile, the China-US trade war has contributed to a reduction of GDP growth in both economies, with China’s GDP growth slowing to 6.1% last year, down from 6.6% in 2018.

Against this backdrop, the prospect of slowing growth in emerging markets – or indeed a global recession – is one that treasurers are keeping an eye on. In a survey carried out at the 2019 J.P. Morgan Asia Pacific CFO and Treasurers Forum in Shanghai, respondents identified top risk factors as a potential global recession (30%), the impact of global tariffs (27%) and an emerging markets slowdown (24%). Other concerns included cyber threats (10%) and the impact of Brexit and the future of the Eurozone (9%).

More recently, economists have downgraded 2020 growth forecasts in light of the current outbreak of the new coronavirus, Covid-19, with some predicting China’s first quarter growth could drop to as low as 3%. Other economies expected to be affected by the outbreak include Australia, which is also counting the cost of the recent devastating wildfires.

US-China trade war: where next?

The 18-month trade war between the US and China has been a key topic for treasurers in Asia and beyond. Since January 2018, the US has imposed or proposed tariffs on US$550bn of Chinese goods, while China has retaliated with tariffs on US$185bn of US products.

President Trump began imposing tariffs in January 2018. Initially focusing on washing machines and solar panels, the tariffs rapidly multiplied to include steel and aluminium. China responded with tariffs on US goods, ranging from soya beans to whisky. In July 2018, the US announced further tariffs on US$200bn of Chinese imports. Despite the two countries calling a truce in December 2018, last year brought additional tariffs alongside the continuing negotiations.

On January 15th 2020, a possible breakthrough came with the US and China signing the Phase One Deal. Under the terms of the deal, the US has committed to halving the tariff rate imposed on US$120bn of Chinese goods in September 2019, with other tariffs to be potentially removed under a Phase Two Deal. Other tariffs that had been due to come into effect have also been suspended. China, meanwhile, has agreed to increase purchases of US goods and services by US$200bn over the coming two years. Other conditions include restrictions on currency devaluations and increased protections for intellectual property.

The actions agreed in the Phase One Deal are already under way, with China halving tariffs on US goods worth US$75bn in February. But while the agreement has been welcomed, a White House official has warned that the current outbreak of Covid-19 could have an impact on China’s planned purchases of US agricultural products this year.

In the meantime, companies have been taking action to protect themselves from global supply chain disruptions. Thirty-four percent of respondents to a poll carried out at the 2019 J.P. Morgan Asia Pacific CFO and Treasurers Forum in Shanghai said they were exploring price options with suppliers, while 32% said they were sourcing alternative supplies. Fifteen percent said they are shifting production from China to other countries.

Shifting sands

Since the term BRIC was first coined to encompass the fast-growing economies of Brazil, Russia, India and China (and later expanded to BRICS to include South Africa) numerous other acronyms have been deployed to group other emerging markets together, such as CIVETs (Colombia, Indonesia, Vietnam, Egypt and Turkey) and TICKs (Taiwan, India, China and South Korea). There continues to be considerable interest in pinpointing markets which have the potential for rapid growth – although different companies will have different priorities when it comes to identifying the most interesting markets.

ANZ’s Sarup says that despite macroeconomic factors and geopolitical tensions playing some part in tactical activity shifts, “each market presents growth opportunities that will be of interest to different industries and businesses. Our view is that there are clusters of markets that will be ‘hotspots’ depending on the business or the industry.”

Among the factors contributing to this are dependency on technology and changing consumer behaviour, including the development of online marketplaces, demand for faster and more secure digital/internet capability and changing consumer choices, with a greater focus on healthier and more sustainable food, Sarup says.

Where specific markets are concerned, BofA’s Ameen notes that shifting supply chains are supporting steady trade growth in Southeast Asia. “The region continues to develop increasing manufacturing capacity, infrastructure and talent to support their growth,” he says. “Vietnam and the Philippines in particular are expected to emerge as key beneficiaries.”

Ameen also says that India will be interesting to watch this year. “Growth is slowing and inflation is rising, but at the same time, there is a shift towards increased manufacturing capacity and expertise,” he says. “This could drive corporates to look to India as they consider continued diversification away from China for their supply chains.”

Technology is another major consideration when it comes to growth. According to Ameen, the rise of the digital economy and ever-expanding coverage of unserved populations will also be a key consideration – “particularly in markets such as India and Indonesia, which have a huge population of the middle class entering the global economy.”

Complex landscape

Alongside the opportunities presented by high-growth markets, Asia is also characterised by considerable diversity. As Jason Tan, Regional Head of International Countries, Global Liquidity and Cash Management at HSBC observes, some say the diversity across Asia does not provide a consistent way to do business – “but Asia as a market is very different from its more established European and American counterparts – notably, in terms of its growth stage.”

Tan points out that the diversity of Asia Pacific allows international corporates with a global footprint and an in-depth knowledge of regulators and market practices to support the growth of this dynamic region. “This is particularly relevant to cash management, where that insight is there to help navigate the diversity, including local regulations and local payment infrastructures,” he adds.

For treasurers, the region’s diverse market conditions and business practices bring numerous challenges. For one thing, the region encompasses a multitude of regulatory environments, with different rules on areas such as accounting, tax and know your customer (KYC), as well as industry-specific regulations. What’s more, the pace of regulatory change can be very rapid in some markets, meaning that companies need to work proactively to stay on top of upcoming developments.

Likewise, where liquidity management is concerned, treasurers operating in Asia will find the complex landscape can make it difficult to gain visibility over cash in different countries. What’s more, different countries will have different rules about cash management structures such as physical and notional cash pooling, making it difficult to consolidate cash balances and thereby reduce borrowing or maximise interest. In more highly regulated jurisdictions, treasurers will need to address the challenges brought by trapped cash.

Other challenges faced by treasurers in the region include:

  • Numerous currencies and diverse hedging techniques.
  • The adoption of real-time payments, with varying levels of maturity in different locations.
  • Trade-related risks and shifting relationships as a result of geopolitical considerations.

In addition to these obstacles, Sarup points out that treasurers also have to navigate the risk of sudden business changes, such as adjustments to the business model as a result of geopolitical factors. “Another example is the risk imposed by cyber threats and events – both these can vary widely in different Asian markets,” he says.

Overcoming the obstacles

Fortunately, there are plenty of steps that treasurers can take to address these issues. For one thing, technology can be a powerful tool when it comes to achieving greater efficiency across the region. Vijay Shankar, Head of TB ASEAN & India and Head of Regional Sales, ANZ Institutional, says that treasurers can mitigate challenges “by implementing an effective treasury management system (TMS) platform by integrating real-time API feeds from ERPs and banking platforms.”

Ameen, meanwhile, argues that technology “is no longer an enabler” but has become a key driver behind businesses, citing the adoption of API technology to connect treasury with bank systems for real-time interaction and exchange of information. “Companies can leverage technology such as AI and machine learning to drive automation,” he says. “This reduces dependency on human intervention, and with digitalisation, processes can be shifted across borders more easily.”

Other strategies treasurers can use to overcome the challenges of Asia Pacific’s diverse landscape include:

  • Stay informed. BofA’s Ameen says treasurers should look to their banking partners as a good source of information, alongside industry sources such as news outlets, associations, forums, journals and newsletters. “Besides regulations and local practices, banks can also provide case studies which provide useful insights into how other companies are managing similar issues,” he says.Shankar, meanwhile, notes that treasurers have multiple sources to consult. As well as banking partners, he cites companies’ empanelled legal/tax advisors, well-established consulting companies, government and industry trade associations, companies’ country CFOs and company secretaries, consulting websites – “and finally, practical experience of being in the industry from local management.”
  • Build strong bank relationships. Ameen points out that a company’s choice of banking partner is important when it comes to addressing the challenges, noting that treasurers “can leverage the expertise of their banking partners, who can provide insight to industry and market trends such as cyber-security and fraud trends.” In addition, he says, treasurers should aim to understand their banks’ technology and innovation roadmaps for the next five years “to see how they can harness emerging technologies to help them stay on top of changes.”
  • Be flexible. Ameen notes that treasurers should remain flexible, “so they can respond quickly to any changes in the regulatory environment and market, given the uncertain macro backdrop.”
  • Hedge effectively. Shankar says that treasurers can leverage low-cost funding options by “hedging base currency with effective deposit optimiser solutions offered by banks.” He also notes that adopting “optimum and effective hedging solutions” can address short to medium-term geopolitical uncertainties.

It is critical for treasurers to stay ahead and act quickly to manage the changes that would impact their businesses.

Faisal Ameen, head of Asia Pacific Global Transaction Services, Bank of America

Characteristics of a successful treasury

Given the diverse conditions of Asia Pacific, there are a number of characteristics that a successful treasury team is likely to possess. BofA’s Ameen notes that agility is key: “Today, changes are taking place at a faster pace. It is critical for treasurers to stay ahead and act quickly to manage the changes that would impact their businesses.” He also emphasises the importance of having a clear roadmap of the treasury’s role, clearly articulated and supported by senior management, as well as the adoption of technology to automate and reduce manual tasks.

ANZ’s Shankar, meanwhile, says the following steps may help treasurers navigate Asian markets:

  • Having an efficient shared service centre to drive a consistent, accurate and standardised approach to processing.
  • Establishing a regional treasury centre in Singapore or Hong Kong to manage liquidity pools and implement a hedging strategy to mitigate risk.
  • Implementing optimum cost-effective working capital access to operating entities in Asia.
  • Establishing a regional multi-currency long-term borrowing programme to complement group capital induction.
  • Leveraging bank-agnostic technology such as SWIFTNet, APIs, host-to-host connectivity and RPA.


It’s clear that Asia Pacific is characterised by both attractive growth opportunities and the challenges brought by the region’s diverse countries, currencies and regulatory regimes. For corporate treasurers, taking advantage of the former will also involve spending time addressing the latter – but by harnessing opportunities for centralisation, building robust relationships and harnessing technology effectively, treasurers will be well placed to overcome the challenges.

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