Treasury: Why Asia's New MNCs Must Catch Up

by Cesar Bacani, 20 September 2011

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topics:
Cash and Liquidity Management Treasury Management

tags:
ERP global liquidity portal global treasury centre regional treasury centre treasury management system

Many emerging Asian multinationals are “still managing their banking on a country-by-country basis,” says Victor Penna, Head of Regional Solutions & Advisory Team, Asia Pacific, at J.P.Morgan Treasury Services. “The challenge for them is how to go from a very decentralised structure, where they’ve got finance managers in each country managing their banking, to having a regional or global structure.”

In Part 3 of an interview he did with CFO Innovation’s Cesar Bacani, Penna discussed how Asian and Western MNCs are approaching treasury and cash management, the progress being made towards the standardisation of formats, and other developments that are making the corporate-banking relationship run more smoothly. Excerpts:

Let me ask you about treasury and cash management in emerging Asian multinationals compared with established MNCS. Are there differences?

We work with a lot of Asia-headquartered names and there are big differences. The first tier names are quite sophisticated and they’ve often set up similar structures to European and US organisations.

But there’s now a whole emerging group of Asian multinationals that are going global. Part of the challenge for them is they’ve built factories around the world, they have maybe made some acquisitions, but they don’t have a global treasury operation.

They do have a regional treasury centre, though, right?

Many don’t. Many are actually still managing their banking on a country-by-country basis. The challenge for them is how to go from a very decentralised structure where they’ve got finance managers in each country managing their banking to having a regional or global structure.

Let’s take the example of a global Asian corporation. I’m operating in 25 countries, and I really want to get to the point of operating a sophisticated global treasury centre, but I want to do it in one or two years, not the 10, 15, 20 years that it took European and US firms. And they don’t have a global ERP system. They don’t have a treasury management system.

If you look at the top European and US treasuries, they’ll have a global ERP system, and they’ll have quite an expensive treasury management system, and they’ll have all these feeds coming into the treasury management system.

A lot of Asian corporations will say, ‘No, I don’t want to do that, but I want you to give me a similar level of information and visibility.’ So we would give them our global liquidity portal. They can look at their cash positions all around the world using a module that we provide on our internet banking system. This gives them a lot of treasury management-type functionality without having a treasury management system in place.

Will they need to bank only with J.P. Morgan in every country to get that level of information and visibility?

If they have all their accounts with J.P. Morgan, the key advantage is they get real-time information. If they’re with a third party bank, then we can take a feed of that data but they’re relying on that bank data coming in on time. But they will still get a view of all of their balances through a comprehensive dashboard format.

If you’re a global treasurer, you can see exactly how much liquidity you’ve got in different accounts around the world, and then you can start to move your excess liquidity and redeploy it to achieve greater efficiencies.

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