Essentials for future-proofing treasury

Cash management

Essentials for future-proofing treasury

May 2020

This article first appeared in the May 2020 edition of The Asset

Testing times have proved that digitization, full visibility of liquidity, harnessing regulatory and tech developments and combating cyber-fraud are key, while accelerating the pace of transformative treasury initiatives across the Asia-Pacific region

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The 2020s began with a range of predictions on what would be the new decade’s main drivers of cash management. As part of the Fourth Industrial Revolution, artificial intelligence and technologies such as robotic process automation (RPA) would eliminate the need for many processes to be conducted manually. Office-based tasks would instead be done remotely. Demand for real-time payments would grow and the need for cash diminish.

Since then the Covid-19 pandemic has disrupted business and international trade and far from interrupting the above revolutionary changes, it has instead fast-tracked the demand for them. The need for digitizing treasury services has been particularly acute, as transport disruption and lockdowns have prevented many treasury teams from travelling to work and forced them to maintain business as usual from home on a laptop. The move away from cash has accelerated, as consumers and businesses avoid cash and notes in favour of payments via contactless card, mobile and online.

Chintan Shah, Head of Cash Management, APAC at Deutsche Bank, reports that the Covid-19 situation has necessitated that corporate clients conduct their treasury transactions electronically. The events of recent weeks meant that digitization was suddenly no longer a ‘nice-to-have’ but an essential. Furthermore, increased demand for working from home (WFH) services and solutions looks set to continue long after normal business conditions return.

“Traditional lengthy and complex manual processes are no longer an option for corporate clients,” Shah explains. “The drivers for digitization will cut across all areas of our clients’ lifecycle management, including execution of domestic and cross border payments, transacting FX trades and reporting requirements.” The bank has assisted clients by extending facilities such as digital signatures, launched in APAC last August, to more countries.


“Traditional lengthy and complex manual processes are no longer an option for corporate clients.”

Chintan Shah, Head of Cash Management, APAC, Deutsche Bank


Keeping track of liquidity

We’re continuing to invest in instant payment and application programming interfaces (APIs), which bring real benefits to our clients’ ecosystems and is an enabler for transforming their business models. 

Chintan Shah

Treasury’s focus on liquidity is a constant, although the search for ways in which to utilize it more efficiently is temporarily displaced by the current need simply to maintain liquidity until business conditions return to normal.

Fortunately, unlike 1997 and 2008 when many companies were caught with high debt levels and little cash, corporate balance sheets are generally stronger this time around, so financial lifelines offered by governments and banks should enable most to survive. The decade-long legacy from the previous crisis of low, zero and even negative interest rates is now set to persist for several more years.

“The APAC region will continue to see companies focus on retaining liquidity,” confirms Shah. “However, regional treasury centres (RTCs) in APAC will have to balance between the centralization of liquidity in open markets while retaining sufficient liquidity in the local restricted markets.”

“So, having good visibility of liquidity, ensuring it is available for each country the company operates in – particularly where needed for meeting local requirements – and the ability to move quickly are all priorities for treasurers,” he adds.


Harnessing technology & regulation changes

The third main driver of change is that triggered by regulatory and technology initiatives, which have opened up various new business opportunities and made it easier to conduct business.

Instant payment services are being rolled out across the region and have been launched in multiple countries across APAC. “We’re continuing to invest in instant payment and application programming interfaces (APIs), which bring real benefits to our clients’ ecosystems and is an enabler for transforming their business models,” confirms Shah. “Companies in the new age economies like ecommerce, as well as traditional B2B companies looking to go online, will get tangible benefits.”

Shah also reports an increase in the demand for last mile solutions across Asia; particularly electronic facilities for statutory payments such as tax, customs and excise duties. “We regularly get clients asking how, for example, they should go about making a tax payment in markets across APAC.”

Another recent trend has seen more APAC companies require their bank to provide services on either a global or regional basis, instead of country-by-country. “Regional treasurers expect the bank to be a service provider for all countries their company operates in,” Shah explains. “That works to the benefit of Deutsche Bank; a global footprint is among our main strengths and will be added to by the launch of our cash management capabilities in Australia by July 2020.”

“In some cases, a country-by-country approach is still needed though – depending on the complexities of the company’s business there – and the treasurer will then review each bank’s local capabilities and complement that with a liquidity pooling framework.”

“The pandemic underlined the number of processes that include documents where signing of hard copies is still required.”

Rachel Whelan, Global Head of transactional FX Product Management and APAC Head of Cash Product Management, Deutsche Bank


Managing FX in volatile times

The first months of 2020 have seen much greater volatility than usual in the FX markets and increased the importance of regular client contact, reports Rachel Whelan, Deutsche Bank’s Global Head of transactional FX Product Management and APAC Head of Cash Product Management.

“We’ve been proactively taking the message to our clients that we can help maintain their liquidity and support their FX needs,” she says. “The dynamic of command and control has been very evident, with treasurers needing total visibility, getting it earlier and in a real-time manner. Deutsche Bank provides them with that visibility by monitoring the markets closely and communicating with clients on a regular basis.”

The trend to greater digitization will also see more companies take up e-solutions, predicts Whelan. “The pandemic underlined the number of processes that include documents where signing of hard copies is still required – for example booking FX trades in the Philippines. Corporates are also interested in electronic solutions across Asian markets to support FX hedging and FX payments and collections, a demand that we are seeing an increase significantly.”

“It has emphasized the need to influence the regulators so that authorizations for digital documents can be fast-tracked. This means changing attitudes in locations such as Taiwan, where many still harbour suspicions of e-solutions and continue to rely on paper.”

Whelan adds that the region’s more forward-thinking governments recognize the need for change in testing times and have swiftly responded. She cites the example of Singapore, where the city state’s closed restaurants were brought together with delivery services so locked-down households could order meals. “Singapore’s government has been proactive in understanding the many problems that the pandemic has created for businesses and new arrangements have been swiftly introduced.”

Treasuries must take a leading role in helping to change attitudes, with a greater need for a command and control approach going forward adds Whelan. “They will need as much visibility as possible in making decisions and we will provide them with the tools for the job, such as dashboard solutions allowing quicker decision making and if, for example, they make the decision to start buying from Indonesia rather than China, we have the product and support capability they need. Treasury will need to manage risk in a much more dynamic way as global companies continue to work from multiple locations.”


Combating cyber-fraud

The incidence of fraud and cyber-enabled crime is increasing and remains a significant threat to all corporates, regardless of the size, location or the industry they operate in. Significant amounts of money are lost to fraud; therefore, it is important that businesses identify and manage the fraud risks they are exposed to.

As part of this, all employees of an organization should receive fraud awareness training, giving them a greater opportunity to recognize the threat and helping to build organizational integrity. Frequent training and keeping the business up to date with the latest fraud/cyber-trends is important to increase the protection level. The threat can come both from inside the business and those external to the organization.

Deutsche Bank builds on five interconnected control components in preventing and detecting cyber-fraud and responding to the growing regulatory demand to address cyber-security, adds Shah. These are customer awareness; secure communications; strong customer authentication (SCA); technical preventive measures; and fraud monitoring and detection tools.

“Taking all of this into account, the future of cash management will be driven by a continually digitizing value chain and will see treasurers’ requiring greater thought leadership and treasury expertise from banking partners than ever before,” he concludes. “This is an evolution we are not only ready for, but also looking forward to.”



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