5 key treasury priorities in Asia Pacific over the next 2 years

Cash flow forecasting is the primary challenge.

Bank of America Merrill Lynch Global Transaction Services (GTS) and SunGard announced the key findings of their inaugural Asia Pacific Treasury Barometer survey. The opinions expressed in the Asia Pacific-dedicated survey provide one of the most comprehensive examinations of the present and future priorities of the rapidly evolving regional treasury management industry.

Foremost, the results reveal that the five key priorities for treasurers in Asia Pacific over the next 12 to 24 months will be improving cash visibility, yield enhancement and interest expenses, cash concentration, rationalizing bank accounts, and mitigating counterparty risk.

· Improving cash visibility: The most common priority regionally over the next 12 to 24 months, with over 60 percent of respondents identifying this objective as a primary area of focus.

· Yield enhancement: Combined with a focus on minimizing interest expenses, yield enhancement was cited by over 44 percent of respondents as a major treasury priority.

· Cash concentration: Approximately 44 percent of treasurers and treasury professionals will devote more attention to cash concentration, most frequently in the middle market.

· Rationalizing bank accounts: Of respondents, 38 percent identify rationalization of bank accounts as a key priority, particularly in corporations in the highest revenue bracket.

· Mitigating counterparty risk: 31 percent of survey respondents will focus more efforts on enhanced risk mitigation structures.

Cash flow forecasting, a modeling method used by corporations to determine future financial liquidity, was identified by treasurers as a specific pain point of operating in the Asia Pacific region. Only 14 percent indicated complete satisfaction with their cash flow forecasting processes. Additionally, 66 percent of respondents indicated that they don’t utilize treasury tools for cash flow forecasting.

The survey results demonstrate that unsatisfactory cash flow forecasting processes are largely due to complications arising from internal platforms, policies and procedures rather than the solution suites currently provided by banks and technology vendors. The top five factors inhibiting accurate cash flow forecasting are identified as inaccurate sales targets and projections (35 percent), lack of internal systems integration (35 percent), limited availability of resources (23 percent), ineffective centralized reporting processes (23 percent) and inefficient collections processes (19 percent).

Furthermore, respondents offered insights into the role technology plays in enhancing regional treasury structures and cash flow forecasting. Across both emerging and developed markets, 69 percent of treasurers and treasury professionals still rely on spreadsheets to run their treasury management operations. Enterprise Resource Planning (ERP) and in-house systems are favored by 26 percent and 23 percent of treasurers, respectively. An additional 16 percent of companies opt for a specialist vendor for technology requirements such as hosted or cloud-based solutions.

In a media event organized by BAML, we also found out that only 10% of the companies adopted cloud as their incumbent treasury platform while only 14% of the respondents across Asia Pacific use their mobile devices for their treasury and banking needs.

Mr Ivo Distelbrink, Head of Global Transaction Services Asia Pacific at Bank of America Merrill Lynch reckons these companies could perform better if they tapped onto these technologies to aid them in their daily banking activities. He believes that this would not only improve the system but make it efficient as well, resulting in better customer satisfaction.

Furthermore, 19% of the respondents believe Singapore is one of the most ideal locations for a regional treasury centre. Next is China (17%) followed by Hong Kong (12%) and India (10%).

“The Asia Pacific Treasury Barometer survey stands as one of the most comprehensive treasury-specific research projects ever undertaken. The results clearly show that sophistication is developing in treasuries across Asia Pacific, but plenty of work remains. Encouragingly, corporations are committing themselves further to improving cash visibility, enhancing yield and concentrating cash priorities. In anyone’s language, these are extremely positive developments for the larger treasury management space and trends that play to our global strengths as a leading treasury management solution provider,” said Ivo Distelbrink, head of Global Transaction Services, Asia Pacific, Bank of America Merrill Lynch.

“Domestic reform and increasing internationalization will continue to be the key challenges facing treasuries across Asia for the next 12 to 24 months, a sentiment echoed in their unanimous top priority of ‘cash visibility.’ Few treasuries are satisfied with the status quo of manual processes and spreadsheets which remain entrenched largely due to internal systems integration issues. Across the board, treasurers have identified clear plans for change across their bank relationships, cash forecasting, treasury management and connectivity. The learning curve will be steep, and technology will take a critical role as an enabler. The quickest wins will also have the deepest long-term impact: treasurers must critically challenge their own biggest barriers, internal processes and policies,” said Michael Fullmer, senior vice president, Asia for SunGard’s Corporate Liquidity business.

The results were framed by the opinions of over 900 treasurers and treasury professionals, who were asked to identify business priorities, pinpoint market challenges and emerging trends.

The survey was conducted in the first quarter of 2013. Respondents to the Bank of America Merrill Lynch SunGard Asia Pacific Treasury Barometer represented companies across 14 industries across Asia Pacific, and also included opinions from treasurers covering the region from Europe and North America.

Survey respondents represented companies of all revenue sizes. Approximately 60 percent of respondents considered themselves mid-market companies with less than US$1 billion in annual sales. Twenty-five percent of respondents’ companies post revenues in the US$1-10 billion category, while 15 percent had annual sales above US$10 billion.

To ensure relevance to Asia Pacific treasurers and treasury professionals, Bank of America Merrill Lynch and SunGard drew upon their respective regional and global strengths to frame the content and identify key themes when developing the survey.