Post-pandemic Treasury: Innovation in Trade & Cash Management

As the impact of the pandemic continues, DBS Group Head of Global Transaction Services, John Laurens, shared his views on one expected outcome, in the webinar ‘Aftermath of COVID-19: Innovation in trade and cash management’.

The COVID-19 pandemic has left few untouched, and so it is not difficult to imagine that, as parts of the world begin to emerge, life will not look the same as it did before. In business, everything from people to processes to technology will be up for review as corporates seek to mitigate risk and maximise efficiency in what is proving for many to be a very rough economic environment.

But in adversity, opportunity may be found, and for DBS Group Head of Global Transaction Services, John Laurens, treasurers in particular will have a strong business case for the increased deployment of technology. Indeed, to ensure life after COVID-19 is as secure, safe and efficient as it can be, he argued in this webinar that post-pandemic life is going to be in the hands of digital more than was perhaps ever imagined.


Trade troubles

With WTO figures showing trade volumes having slumped by 18.5% in 2Q20, compared year-on-year, and IMF forecasts indicating that the global volume of goods and services trade will decline by 12% in 2020, the impact of the pandemic is and will be significant. It has struck at the heart of the global supply chain.

Although trade has fallen nearly 17% across the US, and in Europe by 20%, ‘emerging’ Asian trade has been spared the worst, declining only by around 6%. “The pandemic is driving a pivot in terms of the focus on China trade,” noted Laurens. Indeed, to May 2020, China-ASEAN trade rose by 1%, accounting for 14.7% of China’s total trade volume.

This in part is due to China’s primary trading partners in the US and the EU being variously subject to lockdown. But Laurens pointed to some interesting regional dynamics taking place too, with China’s imports from Vietnam in the first five months of 2020 surging 25% year-on-year, suggesting the latter is becoming a “vibrant market”.

There are a number of challenges being faced by businesses in Asia in terms of supply chain disruption and cash realisation, noted Laurens. Globally, demand curtailment has forced cash conversion cycles to lengthen, with SMEs in particular facing cash flow crises. Many face operational issues too, created by lockdown, including workforce restrictions in Asian production centres, and enforced homeworking that slows manual workflows (such as the need for wet signatures, and the stalling of movement of physical trade documentation which can slow progress of goods at ports).

Digital answer

The effect of such unusual events is the “phenomenal growth” in the adoption of digital solutions, especially APIs in the payment space, says Laurens, noting that “companies have had to move to provide for contact-free digital engagement with customers and suppliers, and their own employees”.

DBS alone has seen its digital cash management transactions rise by 78% across all industries and markets. “A big part of this is being able to move quickly to overcome the logistical and operational challenges as a consequence of COVID-19,” he explained. DBS reports a sharp pick up in Digidocs transactions in March 2020, up 204% month-on-month from February 2020, China businesses being the main driver here.

But with countries, including China, making special dispensation for the use of digital signatures, it provides some momentum for changes in the regulatory environment where these have not previously been permitted. It suggests change is coming.

Looking at the trend amongst corporates across Asia Pacific, treasury digital transformation journeys have been accelerated as a result of the pandemic. This comes as “no surprise”, said Laurens. DBS’ own research (of 1,600 mid to large Asia-based corporates) shows that 26% now have a clearly defined digital strategy, growing by 8% from nine months ago. Some 24% are starting to develop a digital strategy, increasing from 21% nine months ago.

For Laurens, the pandemic presents clear consequences for business. Firstly, there is an “absolute need to go contact-free”, with an immediate requirement to conduct business with customers and suppliers without physical contact. “There has also been a need for many companies to almost instantly transform their operational workflows,” he added, noting that a rapid move towards home or remote-working, an online sales model, and the automation of manual processes, has similarly become almost essential. Finally, he said most businesses will recognise that strong liquidity management, especially cash flow and working capital, has moved front and centre as they seek to cushion themselves from the impact of the pandemic.

Case for real-time

Laurens believes that there is now the strongest argument for the implementation of real-time transactional and information management systems. Citing a number of DBS’ own contact-free solutions, launched into diverse sectors, he offered a number of case studies to illustrate the power of digitalisation and real-time.

Notable here is how Chinese multinational home appliances and consumer electronics company, Haier Group, keen for domestic growth, adopted an integrated DBS financing programme powered by APIs. This allows the group’s nationwide distributors to be digitally onboarded “in minutes rather than weeks”. In these times of stress, Laurens explained that Haier’s suppliers now receive online multi-tier financing for their purchase orders within 24 hours. Managed through the company’s own digital supply chain platform, he added that Haier can now monitor its distributors’ business through real-time information exchanges with DBS.

“What has been phenomenal, in terms of the acceleration of digital adoption, is that the use of APIs has enabled some remarkable transformations,” said Laurens. “Delivering what companies were previously referencing as ‘something for the future’ has, with the impetus of having to alter operating models during the pandemic, been done today.”

Future days

It won’t stop here though, he states. The “new normal” for business will see a “replumbing and shortening of supply chains through reshoring and nearshoring”, something already being seen in the China-ASEAN trade flow data mentioned above.

There will be a further shift of major supply chains into ASEAN, with diversification of manufacturing and supplier sources being sought. The prevailing ‘Just in Time’ model will be augmented by ‘Just in Case’ supply chain processes, seeing the rise of low-costs markets, including Vietnam, Bangladesh, India and Indonesia.

Ecosystems with entire supply chains participating on a single platform, will continue to gain traction, says Laurens, facilitating far more effective use of data analytics across those platforms. E-commerce, which he said in many respects “has come of age during the pandemic”, especially with changes in consumer behaviour, will continue to gain ground throughout the region.

Digital innovation will continue apace as 5G rolls out, with new 5G-enabled business models and opportunities increasing. As part of this, he predicts that IoT-based solutions across commercial, risk management and sustainability agendas will further drive the provision of analytics-based financing.

As the accelerated shift to cloud reduces technology investment costs, and facilitates dynamic scalability of solutions, greater API connectivity will be achievable, itself powering new data-driven business models.

The degree of digitally-led change over the next few years even demands workforce adaptability, warned Laurens. “I think it’s unlikely that the workplace will revert to how it was pre-COVID-19, with flexible working arrangements and clear implications for business travel.”

However, far from negative, as digitalisation programmes assume the momentum exerted by enforced change, now is the perfect time to examine what tomorrow’s treasury will look like. There may never be a better opportunity.

Have a conversation with DBS today.

Start your digital transformation journey today by finding out more about the latest, available digital solutions that can help to solve your treasury challenges. See our most recent articles on Digital Pulse, or sign up/login to Treasury Prism today to discover a world of opportunities.


This article was first published on Treasury Today’s website in July 2020.

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only.

The information is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation

DBS Bank Ltd. All rights reserved. All services are subject to applicable laws and regulations and service terms. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by DBS Bank Ltd and/or its affiliates/subsidiaries.