Outside large MNCs, TMS integration amongst regional Asian corporates has been slower and trails integration in the US and Europe. For companies in Europe and the US, treasury is increasingly knowledge-based and has a strategic role that now spans strategies like optimising cash pooling and the corporate structure. But for many Asian companies where hiring treasury personnel is cheaper and they don’t face the same pressure to reduce headcounts, treasury is still activity-based, focused on reconciling bank accounts or processing payments using Excel.
However, the landscape in Asia is starting to evolve. Asian companies seeking to scale in the region must step outside their home country and medium sized, regional companies have adopted cloud-based systems offering smaller versions of TMS. They don’t require substantial IT infrastructure, specialised personnel or come with high operational costs. They also allow treasury to tap financial data and functionality from anywhere ensuring that decision-making is both agile and informed.
Integrating a TMS has also got cheaper in other ways. Asian treasurers that have struggled to access the budget for a large infrastructure spend have been reluctant to commit to long-term contracts that lock in prices.
“Now pay-and-you-go payment models per module allow companies to scale up and down, making systems more affordable and easier to sign off from the CFO,” says Michael Sack, Treasury Director at Aspire in Singapore, one of the cohort of consultants to emerge on the treasury landscape able to help deliver solutions and that has also created a tailwind in implementation in the region.
The adoption of a modular approach is a new trend. Asian corporates have long-tended to have a one-size-fits-all technology strategy in contrast to other regions like the US where corporates seek a more tailored approach and are more comfortable integrating the right tools for specific needs around, say, data management or reporting.
The idea of treasury having one tech system applicable across the business that does everything and solves all problems is highly appealing but because companies evolve over time and become more complex, new technology comes into play that makes the concept of one system meeting every need challenging.
“As businesses grow and become more complex, treasury in Asia is increasingly aware that different tools fit different purposes and modularity is a developing theme,” says Amol Dhargalkar, Managing Partner and Chairman for Chatham Financial.
One area the modular approach has manifested is the payment factory feature of a TMS. APIs have given treasury the opportunity to use and leverage payment factories in new processes that have centralised payments internalising the process and making it cheaper. “API connectivity means smaller companies with less skilled treasury teams can take advantage of trends and tap into more affordable solutions,” says Sack.
Although a payment factory alone is not enough to merit integrating a TMS, Slack notices some corporates using a TMS for the payment factory functionality but then also tapping into risk management solutions in an increasingly fragmented world.
Take a company with a manufacturing operation in Thailand selling into other countries in the region. It can use a TMS for all payment entries from different sources. The in-house bank feature of a TMS allows treasury to net and clear payables and receivables without touching bank accounts, reducing bank transactions costs and increasing working capital.
“They can release working capital because they don’t have to leave money in country and can cut friction and costs by reducing bank transactions,” he says.
Other trends are underscoring the benefits of a TMS for larger corporates in the region too. Treasury Today Group interviewees believe at TMS can help sophisticated treasury teams navigate growing de-globalisation and de-centralisation trends that are beginning to impact cash management and FX strategies, triggering intense currency swings across their operations in Asia.
For example, the technology gives treasury confidence on exposure levels and where the cash sits and can help companies integrate more qualitative and flexible FX and risk management strategies that are increasingly reassuring for senior executives and boards in today’s world.
The shifting policy direction in Asia is visible in countries like India and the Philippines which are both incentivising in-country manufacturing in a change which could impact companies’ forecasts and exposure and treasury’s role in holding and managing FX risk. “In treasury, these kinds of trends matter in important ways,” says Dhargalkar. “Companies are increasingly having to respond to deglobalisation with more advanced strategies that could include M&A or divestment. Having treasury ready is really helpful.”
Fragmentation
Despite these trends, experts flag enduring challenges (and deterrents) to integrating a TMS in Asia. None more so than the region’s small markets and multiple currencies creating regulatory complexity. Plugging in Singapore or Hong Kong is relatively straightforward, but adding in additional markets like China, India, Japan or South Korea is complex because of different regulations in each country.
“At General Mills we staggered TMS integration beginning in the US and then adding on Europe and finally 13 different markets across Asia. It was difficult in Asia because sometimes pieces of the jigsaw were missing, and we came across barriers,” says Christopher Emslie, President Treasury Association of Singapore and Asian Regional Treasury Director at General Mills between 2017 and 2024 where he integrated a TMS.
Different markets have different rules on moving money in and out: it’s relatively easy to move money into India but difficult to move it out so a cash pool that draws money from India isn’t possible; Asian banks have varying levels of foreign market expertise, and different tax regulations effect different countries meaning TMS integration often requires different approvals from multiple government agencies.
“Straight through processing in Asia is undeveloped and the ERP and banking and regulatory landscape is very fragmented. It makes plug and play or any quick set up difficult,” says Sack.
Training and how to get the build right
Any decision to integrate a TMS will come from head office and timing the roll out is a skill in itself – it’s expensive, can drain resources and involves detailed work in the background ensuring information going into the TMS is correct.
Getting the build and functionality of a TMS right from the beginning is crucial. Cross border functionality involves a thoughtful process of the right output at the right time. For example, trying to incorporate a certain type of report late in the build may require a whole new functionality drawing on time and resources. “It’s impossible to go back to the old way of doing things, so don’t get stuck between what you have and what you want to have,” says Emslie. On the other hand, getting the build wrong might lead to functionality that has added a layer of cost but doesn’t actually add much benefit.
Automating treasury with a TMS requires companies having a firm grasp on their processes, adds Dhargalkar. All companies have different processes to produce a report or conduct a specific activity, often driven by technology that sits outside a TMS. They might have multiple ERP systems for example, or an additional level of complexity associated with M&A activity; treasury might be decentralised or FX gains (or losses) held at the parent.
“These different choices will have an impact on the processes that are followed,” he explains. “It can lead to two different approaches to the same problem and a platform that doesn’t fully deliver what is needed.”
The preparation and planning stage will also inform decision-making around a staggered roll out. Once companies have compiled their requirements and understood the needs of the organisation, they might decide to break the journey or use two different solutions that they pin together, he continues.
Training and testing are as important as the initial blueprint. Ongoing training is important during the build because teams, project managers and bosses, can change through the course of an implementation impacting seamless integration. Individuals involved in TMS integration also have day jobs in treasury from payments and reconciliations to managing FX and the capital structure. “The smaller the team the longer it takes and treasury is not a place companies particularly like spending money,” says Dhargalkar.
After the build, treasury should build in layers of testing and training to ensure the team are getting the information out of the TMS they targeted at the beginning of the project. It’s not unheard of for treasury to only use 15-20% of a TMS’ functionality. “The team that have selected and implemented the TMS might not be the ones using it on a day-to-day basis,” continues Dhargalkar. “If we are trying to put something in place that will last a decade we have to think of staff turnover. It’s hard to hire treasury with experience of a particularly TMS.”
“It’s all very well to implement it but if it has no benefit because staff don’t understand it and don’t get the output, it will sit on shelf and not get the benefit,” adds Emslie.
The complexity of integrating TMS in Asian markets makes going into the process with the right partners and a clear plan all the more important. It ensures the different pieces of the puzzle fit together and avoids shocks that come with suddenly finding out something isn’t possible.
It’s also costly. Estimates extend into the millions of dollars. Companies need to think about the benefit and long-term return on investment versus having the money earn interest in a bank account. “Work through it on a transactional basis and come up with the numbers,” says Emslie.
But get it right, and the reporting transformation is the biggest win. Treasury is able to push buttons to find reports; it’s possible to slice and dice and work smarter and quicker rather than manually plough through Excel and Word to track down information.
