Strategic Treasury

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A Transitional Force in Asia Pacific Treasury It is technology that will help the treasurer cope with change by providing greater visibility and control of all these factors, bridging the combined challenges of geography, diversity and lack of regulatory uniformity.

A Transitional Force in Asia Pacific Treasury

by Amit Sharma, Head of eCommerce and Channels Asia Pacific, Global Transaction Services, Bank of America Merrill Lynch

Treasury and technology go hand-in-hand. However, the relationship between treasury and technology is perhaps best defined by its diverse and transitional fundamentals; there is no one size fits all. In fact, for treasurers in Asia Pacific, technology comes in many different forms ranging from simple spreadsheets to highly-sophisticated treasury management systems.

In the past, treasurers in Asia Pacific who have tended to favour the spreadsheet as their primary technology application are now moving up the curve. Given that the role of the treasurer has become more strategic, dedicated solutions and new connectivity models are being embraced across the region. In our view, the reason is clear. Simply put, for treasurers planning to take their operations to the next level, these sophisticated solutions can provide greater efficiency, more accurate information and a lower risk of error than spreadsheet-based platforms.

Slowly but surely

From Australia to India, treasurers have long focused on increasing process efficiency and gaining greater visibility over their balances – but nowadays they are looking to access that information much more quickly. By requiring real-time information, treasurers are driving demand for solutions which can provide accurate information quickly and easily.

This shift is happening gradually, though. Treasurers’ transitional attitudes towards technology were explored in detail in the 2015 Asia Pacific Treasury Management Barometer, published by Bank of America Merrill Lynch. The survey found that 67% of respondents use spreadsheets in their treasury operations. This is only slightly less than the 69% recorded in 2013 – so it’s fair to say that treasurers in the region aren’t rushing to replace their spreadsheets with more sophisticated technology solutions.

Breaking this reliance on spreadsheets is clearly a longer-term process. The survey found that over half of respondents are planning a major investment in technology in the coming one-two years. Furthermore, one-third are planning to install or upgrade an existing Enterprise Resource Planning (ERP) system, while 23% intend to invest in a treasury management system. Meanwhile, 12% are planning to invest in SWIFT connectivity.

These results are in line with developments in the market and indicative of wider usage of up tiered solutions. From where we stand, the current focus on technology comes at a time when new developments are supporting five distinct areas of treasury management.

1. Payments

Treasurers routinely express ambitions to move away from manual payments and multiple bank interactions across the region. This is not always possible though. In certain Asia Pacific markets, companies hold accounts with a local bank for tax, customs or utility payments. Rather than setting up online banking services with their local banks, many treasurers prefer to leverage the capabilities of their international bank’s platform as one window to send instructions. The international bank then sends instructions to the local bank, thereby allowing companies to monitor their local accounts using single platform. This process eliminates multiple bank interactions and minimises fraud by providing greater visibility and control.

According to the Treasury Management Barometer, 32% of respondents are now using host-to-host connectivity for payments, up from 16% in 2013. The doubling of host-to-host utilisation tells us that treasurers are moving away from manual payments. They recognize the likelihood of errors and inherent risk in manual payments and are choosing to transition to best payment practices.

2. Bank statement reconciliation

Moving from manual to automated payments is a strategic goal for many treasuries – but fewer are seeking out a similar level of automation for their accounts receivable, where reconciliation is often a manual process. The Treasury Management Barometer found that 82% of participants download their statements from their bank platforms – a process which is prone to manual manipulation of information before uploading into ERP system. In many cases, the motivating factor is the fact that two-way connectivity is not established between the ERP system and the bank. Interestingly, most ERPs have electronic bank statement upload capability which is not turned on/utilised by the corporate users. Why is this? In our experience, the focus is more centred on automating the payment initiation from the corporate to the bank.

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