Inaugural Asia-Pacific Treasury Barometer Survey Highlights Cash and Yield
A new ‘Asia-Pacific Treasury Barometer Survey’ has been launched by SunGard and Bank of America Merrill Lynch (BofA Merrill) with 913 treasury and finance respondents from 14 industries across 17 Asian countries taking part. The inaugural Asian survey is attempting to provide information about treasurers’ top concerns and priorities in the region and the partners hope to stage future iterations in order to allow comparisons.
I spoke to SunGard’s senior vice president of corporate liquidity in Asia-Pacific, Michael Fullmer, and his colleague Brad MacLean, who ran the survey, at the launch event in Singapore earlier this month to find out the results. I also asked them what they think the survey tells us about the current state of the Asian treasury market.
Over the next 12-24 months, MacLean said, Asian treasurers’ top priority will be cash visibility, followed by yield enhancement and interest expense. Cash concentration was ranked third in the inaugural ‘Asia-Pacific Treasury Barometer Survey’, with rationalisation of bank accounts fourth and mitigating counterparty risk in fifth position.
Asian Treasury Priorities
Improving cash visibility is important because most firms in the survey have less than 90% visibility over their cash – and many are below 70% – in both emerging and developed markets. A key reason for low cash visibility in Asia, claims the survey, is because 70% of treasury departments still rely on Excel spreadsheets.
Even high-revenue companies, SunGard’s Fullmer added, have a heavy dependence on spreadsheets. Furthermore, 66% of the 913 respondents don’t use cash forecasting tools – a surprisingly high figure. Technology adoption can, however, be quite conservative in markets like Singapore and Hong Kong, which are still developing, adds Fullmer. When Asian treasuries do invest it tends to be in state-of-the-art systems with no legacy concerns hindering fast rollouts. It is this cash rich, innovative market that is keen to avoid silos, which SunGard is obviously targeting for its range of treasury management systems (TMS) and other services.
Bank account rationalisation is another key area of focus. Most Asian firms with annual revenues of less than US$1bn, work with fewer than three banks. Companies with US$1-10 billion in revenue, on the other hand, typically work with four to ten banks. These mid-sized firms have more transactions than smaller firms but don’t have the weight or size of larger firms, so they work with more partners to provide reach.
Even though the vast majority of Asian treasurers said their firms have no plans to decrease the number of cash management banks, Fullmer says they are still looking at rationalising the number of accounts they hold. Conversely, however, even though bank account rationalisation is a claimed high priority, 78% of respondents said they have no plans for a tool to help with bank account management (BAM).
SunGard’s MacLean said that electronic e-banking and connectivity are also challenges that Asian treasurers are increasingly looking at. Many corporates are reliant on e-banking solutions and the vast majority simply log in to banks for information, so they often want more effective, comprehensive solutions. Over the next 24 months Asian firms will move more and more towards SWIFT to provide neutrality, he predicts, and there is also significant interest in host-to-host solutions.
While counterparty risk was a higher concern after the financial crisis, it has started moving down the list of Asian treasury priorities.
Internal Structures Need Overhauling
SunGard also asked participants in its inaugural ‘Asia-Pacific Treasury Barometer Survey’ whether the most common treasury challenges result from technology, banking practices or some other obstacle? Perhaps surprisingly, the vast majority said the most common problem is with their own internal policies and processes. The quickest wins, then, will come from reviewing and restructuring internal policies and procedures.
Fullmer said he has often heard that talent management is a regional issue, because corporates cannot find enough decent treasury-qualified people in Asia. The survey, however, highlighted a lack of investment in software, not just in people as prime concerns. Talent management will only become a bigger issue once treasury departments and treasury as a function grows within Asia.
Regional Treasury Centres (RTC) In China, Singapore and HK
MacLean believes that Regional Treasury Centres (RTC) are a massive part of the future of treasury in Asia. Two-thirds of respondents already have an RTC in the Asia-Pacific region, with more planned according to the survey. The corporate goal is to benefit from creating a centralised location for decision-making, more than to save costs.
Singapore is the top RTC destination, followed by China and then by Hong Kong. India ranks fourth, with other markets lagging behind the traditional ‘top four’.
MacLean noted that corporates establishing their RTC in China also have the bulk of their revenue in the country, with most being either Chinese firms or multinational corporates (MNCs) doing 60% or more of their business in China. Whereas RTCs in Singapore and Hong Kong have a strategic focus, RTCs in China are more transactional. In cases where the RTC is in Asia and decision-makers are currently in the US or Europe, respondents said there is an intension to merge, and to move decision-makers into the Asia region.
A key driver for the location of the RTC is having it in a location next to the core operation where the corporate drives their revenue. Talent and language capabilities are also important, with Indian’s traditional English-language strength helping here.
Mobile Solutions
More than 86% of survey respondents said they don’t use mobile technology to access bank accounts, but the small minority that do are loyal and accessed it within the last seven days. It would appear, therefore, that mobile treasury solutions still have an extremely low take-up rate, but those who do adopt trade authorisation and reporting technology on the move evidently like it.
Treasurers who use mobile solutions tend to focus more on consumption of information, rather than its creation, with bolt-on reporting or authorisation tools most common. Even if Asian treasurers are just checking positions or news, mobile users had higher levels of satisfaction on cash visibility and cash forecasting.
Technology
The firms surveyed use a variety of technology solutions. About one in four use enterprise resource planning (ERP) systems. Another quarter use a cloud solution plus specialist treasury solutions, while 23% use solutions built in-house, and the rest use a combination of banking or other solutions. Emerging markets, MacLean said, seemed more open to new technology.
The biggest barrier to cash flow forecasting is the data, and this a key challenge for many corporates in the region if they don’t have an internal reporting system. As Asian treasuries start putting in systems and automating procedures, corporates will start to use their regional resources better and will need fewer people in the future.
Interestingly, respondents in Australia have a high use of spreadsheets in treasury forecasting. While they do use treasury technology, merger and acquisitions (M&A) have resulted in disparate systems and corporates in Australia often use spreadsheets to tie systems together.
In China, on the other hand, corporate readiness to use specialist systems or hosted solutions or even ERP is higher than in other markets because they want to leapfrog the technology and avoid legacy traps. Developing countries can take that leap, avoiding silos.
Across markets, then, SunGard expects to see technology evolution at two speeds. China is open to best practices so the evolution will be quicker, and Australia will also be faster because of a need for automation. Singapore and Hong Kong, on the other hand, are more conservative markets and treasury technology adoption there may be slower.