In today's environment, treasurers are often challenged to keep up and adapt to take advantage of the latest trends and developments in cash management. New technologies, evolving regulations, innovation in payments and new systems are constantly emerging, and leading treasurers are always on the look out for opportunities to optimise their strategy and company returns.
We have prepared a series of articles that deliver key insights across innovation in payments, best-in-class liquidity management, digital trends in treasury and cash management as well as specific strategies for cash management optimisation.
Click on any of the topics below to find out more.
See where you stand amongst other corporations or amongst your industry
What does it mean?
Here is where you can compare your overall digital score against your selected benchmark. A score in any one core digital value of between 1 and 3 indicates you are trailing behind the overall benchmark. Ascore of between 4 and 6 means you are roughly in line with your Asia Pacific treasury peer group,while a score of 7 and above means you are generally leading the pack.
It is important to ensure your company has a clear vision, from the top down, for how digital will transform your business. Without this, change will be hard to come by and fragmented. As a treasurer, we recommend you work closely with the three most influential offices in the company – the CEO, the CFO,and CTO. Clearly itemise your digital needs and articulate the benefit to the business if they are met –know what the end goal should look like. Make sure you have an influential stake in how digital will drive efficiencies within your business. Make doubly sure that the vision translates into a company’s readiness to transform into a digital first company.
Does your organisation have a digital strategy?
Your response: Yes, but it is underdeveloped
One in four companies confirmed having a fully baked digital strategy in play, with the remainder either admitting it was under-developed, one existed but had yet to be implemented, or simply did not have one. A lack of any strategy was more prevalent in markets such as Malaysia, Indonesia, Philippines and Vietnam, while around 40% of companies surveyed in Japan, South Korea, Singapore, Taiwan said they had a clearly defined strategy. “We’ve recognised the need to go digital for a while but have been slow to start; we are trying hard now to catch up,” said the group treasurer of a multi-billion dollar Malaysian food manufacturer.(not sure if sensitive to put actual t/ o nos for each of the quotes ? Perhaps just ‘large or small’ classifications ? Same with other quotes mentioned below) No problem – changes made.
If so, who is mainly responsible for implementing your organisation’s digital agenda?
Your response: CTO (Chief Technology Officer)
For those companies with a clear digital strategy already in place, or those ready to begin their digital planning journey, implementation typically rests with the chief technology officer (28.1%), or the treasurer (23.7%). Although the treasury department will have the best view of what is required, budgets will likely be smaller than the CTO’s and the skillset different. Companies across Asia are clearly divided on the best approach – businesses in India, Indonesia, South Korea, Thailand tend to expect the CTO to be responsible for implementation, while the remaining benchmarked nations, typically it is the treasurer –we believe close collaboration between the two is the ideal scenario.
If so, how is the organisation resourcing its move into its digital future?
Your response: Engaging external 3rd parties
The vast majority (86.2%) of corporates are opting to use in-house resources to develop their digital strategy, with only one in ten preferring to engage third parties. The efficacy of this approach will depend on the sector and expertise of the company in question, but clearly many departments will be vying for the limited time and internal resources available to them. Managing the digital journey using the resources of the finance and treasury department, of which 25% of companies say they are doing, may make for more focused and appropriate developments, but budgets will be relatively tight and treasurers need to ask themselves if they are the best qualified to make strategic technological decisions.
Where within the organisation are you experiencing the greatest push for digitisation coming from?
Your response: Treasury
Just over one in ten (11%) see the CEO’s office as setting their company’s digital agenda. We believe if a company has the digital buy -in and vision from the CEO down then positive change will be easier to come by but also more coherent and strategic.However, treasurers will also need to work closely with their CFO and, increasingly, the chief technology officer to ensure they have both the budget and the resources to make the necessary operational changes. “We have had to pick this up, being pushed by our business units with their own agendas and no one else put their hand up,” a corporate treasurer of a multi-billion dollar Australian mining company explained.
Do you see Treasury being:
Your response: On top of this/in the vanguard
You scored below average on readiness.A majority (44%) of companies across Asia believe their treasury department is broadly as sophisticated as other departments inside their business. However approximately 35% believe they are struggling to keep up with demand and/or deliver the solutions needed of them – this is especially the case in Vietnam, where this number jumps to 91%. In more developed markets such as South Korea, 50% of respondents believe they are behind the curve. Not so the case in China where more than half (57.6%) of Chinese businesses believe their treasury operations are in the digital vanguard. This may be a natural reflection of the China’s leading position in the digital revolution, especially in the area of payments.
What are the particular risks associated with the organisations drive to a digitised future?
Your response: Audit trails
Even with a clear vision for how digitisation can transform a business, anxiety surrounding the ability to attain those goals is high. The most prominent is getting to finishing line on time – 86% of those surveyed believe speed of change and complexity in the enabling technologies is a serious risk to success. In a similar vein, the vast majority (78%) believe execution and delivery of outcomes are a hurdle. Combine this with reservations about having the right people to execute, it is clear Asia’s treasurers’ are worried translating from vision to final product will succeed. Cyber security risks are also a prominent concern with 58.7% of respondents flagging it as a top risk.
How do you keep up with the pace of fintech innovation and identify the right solutions for your organisation?
Your response: We work with external vendors that offer treasury and technology as a package
It is clear that businesses rely on their third party relationships to keep track of the next best opportunities and peer group developments – namely banks. Companies in Australia, South Korea, Malaysia, Vietnam overwhelmingly rely on their banking relationships as their eyes and ears. As one group treasury executive from a Thai light manufacturer said: “We just don’t have the internal capability or skills for this. Our home bank does and we’re using them to drive implementation of our digital treasury”. China is an exception to this trend, where less than half of respondents rely on their banks for digital updates and trends. The regional average is 69%.
Are there specific areas that you see digitisation enabling greater organisational engagement with ESG (environmental, social and governance) principles and behaviour?
Your response: Improved issuer/investor interaction
Most companies across Asia Pacific are beginning to realise the value of digitisation in enabling better organisational engagement with ESG principles and engagement (This is less so the case in India and China, however). Practically six out of ten believe digitisation will deliver the benefit of improving the definition and terminology within ESG, strongly implying that to benefit, say, from raising ESG-friendly debt, both issuers and investors still require improved universal standards to work together. “We want to issue debt but there’s no rules and hence we can’t take advantage of investor appetite. Digitising these kind of rules would make a huge difference,” said a corporate treasurer of a Indonesian miner.
Please rate the time you consume on these activities, using a 1-5 scale where 1= little time and 5= extensive time.
Your response: 1
You scored below average on readiness.Treasurers are hoping to spend less time on traditional treasury responsibilities such as cash management, cash forecasting and risk management in the near future with the help of a superior digital strategy. However, the average score only shifts from 3.5 to 3.4 (note: 5 = extensive time, 1 = little time) in a 12 month period, implying that practitioners don’t believe digital solutions will erase the need to work on these tasks, merely reduce the operational burden by a small margin. Expectations are such that broadly more time will be spent on digital initiatives and non-bank third party connectivity, presumably on the expectation that traditional task will become easier.
How do you connect with your bank(s) currently and which channels will you be using in the next 12 months?
Your response: APIs
You scored below average on readiness.Businesses in India (25.7%), Indonesia (47%), Japan (57%), Hong Kong (43.6%) and Singapore (48%) prefer to connect with their banking partners via mobile connection. This contrasts with markets including Australia (83.2%), Malaysia (29.3%), Philippines (35.6%), South Korea 47%), Taiwan (53%) and Vietnam (18.8%) who maintain greater reliance on host-to-host structures. Overall, however, appetite to maintain more traditional host-to-host relationships is dampening. “[It’s] all about APIs for us; they are quick to deploy and tend not to require major re-works around our ERP platforms,” explained one multi-billion dollar HK-based exporter. “We’re finding the approach especially useful as well across our supply chain partners.
How do you connect with your other partners currently and which channels will you be using in the next 12 months?
Your response: Host-to-Host
In a trend that largely marries corporates’ relationships with banks, API is the preferred method for connecting with third-party clients and customers. In India, Hong Kong and Singapore, however, mobile is broadly the more popular approach. Australia is the outlier here with 18.8% of businesses presently using host-to-host; possibly a legacy issue that will change over time. Mobile and API usage is set to increase in 12 months’ time across the board regardless of business size, location, industry etc. Already at a comparative low, fewer businesses expect to apply host-to-host mechanisms to interact with third-party relationships. We expect to see this downward trend continue going forward.
How much of your current financial technology/platform spend is committed to NewTech solutions in your . . .
Your response: Overall increase in spend by 5 - 10%
Greater commitment to investing in new tech solutions, especially among the largest companies is evident. Regionally, treasuries are already investing an average of 13.9% of their total facilities management/ERP spend to fintech solutions and this is projected to increase to around 16.7% in the next 12 months. Companies in Singapore, Japan, China, Thailand, Hong Kong, and South Korea are typically spending more in this area. “I think we will see 100% of our ERP ecosystem get digital within the next 3-4 years; the trick for us is to stay in touch with all new solutions coming to market and use them to enable our digital implementation,” a CFO of a multi - billion dollar Japanese exporter explained.
Please rate the level of automation of your overall treasury reporting function, using a scale where 1=fully automated and 5=entirely manual?
Your response: 1
Full automation of treasury functions is still extremely hard to achieve across the board. The average rating amongst the largest and most sophisticated operations was 3.1, where 1 = fully automated and 5 = entirely manual, dropping down to 3.41 amongst mid-market companies. Markets such as Singapore (2.58) show signs of faster development, following by China (2.76), Japan (2.88), and South Korea (2.93). Skewing the overall results slightly is Vietnam where practically all companies are operating entirely manually, with an average score of 4.56. “Our biggest issue remains getting visibility across the business,” said a Singapore-based group treasurer of a logistics business.
Please rate the payback/return to the organisation from investing in technology solutions, using a 1-5 scale, where1=high return and 5=no return at all?
Your response: 4
You scored below average on effectiveness.Cutting cost and improving operational efficiencies is the top benefit from investing in new technology solutions with a regional average rating of 1.93 (1= high return, 5 = low return). Markets such as Hong Kong (1.96), Malaysia (1.91), Singapore (1.84), Taiwan (1.83), and Thailand (1.73) have clearly witnessed healthy improvements in customer experience. Although yielding some return (2.66), most treasurers across all markets and companies size don’t view technology investment as a means to drastically improving the top line. Interestingly, Indian companies find it very hard to benefit from extra investment in areas such as attracting talent and lifting revenue.
What do you see as the biggest barriers in adopting new technologies?
Your response: Cost
Practically every company we spoke to admitted that adopting new technology provides challenges of some kind. Chinese companies (89.9%), for example, are concerned about the reliability of the products they are investing in; businesses in Vietnam (94.1%) are anxious about the upfront investment cost. Seven in ten admitted they had concerns their staff had the necessary skillset to make digital adoption effective, very closely followed by anxiety that managing the unknown side effects of change posed serious concerns (69.1%). Just over half surveyed (54.4%) believe integration would stifle progress. The up-front cost of investing in digitisation being a top barrier to technology investment was an important factor (41.3%).
Please rate the value of these technologies for your business moving forward, using a 1-5 scale where 1=very valuable and 5= not valuable at all?
Your response: 3
You scored below average on effectiveness.With an average score of 1.76 on a one to five scale (one being very valuable), respondents believe strongly that incorporating smart contracts into business processes will offer the best return of investment. Smart contracts are agreements entered on the blockchain by at least two parties to make and receive payment for agreed services. “Smart contracts are a great way for us to achieve improved efficiencies and lower error rates in our trade business. We have been using them for over two years in our trade funding and the improvements we have achieved are very clear,” said a corporate treasurer of a large Taiwan tech manufacturer.