Eight best practices for ASEAN treasurers
Discover key takeaways from our recent regional treasury event to help you make the most of new technologies and operating structures.
As ASEAN-based businesses expand and globalise, new strategies are needed to better manage treasury operations, with innovative technologies such as AI required to respond effectively to rapidly evolving market dynamics. We deep dive into eight areas where treasurers can focus their efforts for the most impact.
New technologies could create tremendous potential for treasury departments. Already, the integration of artificial intelligence (AI) and other novel technologies into conventional software and solutions is rapidly reshaping treasury operations. However, this is also creating new risks.
At the same time, multinational companies (MNCs) are seeking to optimise their cash and liquidity management, as well as dealing with emerging matters that traditionally were not the remit of treasurers. As their role evolves, so too are the purpose and operating models of treasury centres.
What new technologies are transforming treasury departments, and what is the optimal structure for treasury centres of today and tomorrow?
At Standard Chartered’s Regional Treasury Leadership Forum 2024 in Singapore, industry leaders shared their views on the potential of various new treasury technologies and operating structures, offering advice around how best to capitalise on today’s trends.
Below are eight best practices from the forum.
AI integration: focus on effective essentials
Most treasury departments today need assistance with three fundamental tasks, outlined Debarshi Bandyopadhyay, Director, Financial Services Advisory at KPMG Singapore. First, accurate and timely cash forecasting. Second, to create cost efficiencies through automation of a wide variety of tasks across cash optimisation and liquidity management. And third, better fraud protection and transaction monitoring.
At a poll conducted at the forum, 60 per cent of delegates said AI-embedded analytics, such as predictive models for cash flow forecasting, is the most popular domain of treasury management.
AI is already being deployed to elevate treasury performance across all three areas, although levels of AI adoption vary greatly depending on the type of organisation. Big Tech players are using their own proprietary AI-powered software to improve treasury operations, with large non-tech companies leveraging these solutions – tailored to fit their needs – within their own treasury operations. Mid-market and SME companies are mostly turning to cloud-based, off-the-shelf solutions to meet their requirements.
Develop bespoke solutions if necessary
Christopher Lim, Treasury Manager, Asia-Pacific at Shell, shared how his company is now exploring the use of generative-AI (gen-AI) to conduct treasury tasks with greater intelligence and precision than when using more conventional AI innovation. Gen-AI powered predictive analysis has the potential to provide timely behavioural insights in real time, which can for instance enable Shell to make smarter treasury decisions.
Ernest Chew, Chief Financial Officer at Carro, Singapore’s largest AI-driven used car marketplace, said his company is using the technology to reduce risk, stem fraud and improve the quality of its inventory, operation efficiencies and controls. For instance, used cars are generally inspected by mechanics, who assess the roadworthiness of the vehicle’s engine based on a combination of their experience and gut feeling.
Today however, Carro leverages AI and science to “listen” to the engine’s electromagnetic signatures and spot any anomalies through its proprietary engine AI algorithm. It also deploys machine vision to automatically identify and annotate vehicle defects such as scratches, dents and paint peels. These vastly improve its inspection processes. It continuously identifies flooded, stolen, ‘Beyond Economic Repair’ (BER), accident and/or mileage tampered vehicles to augment their database, significantly de-risking its transactions. The company is also using AI to price the vehicles in its marketplace by leveraging its own transaction database and real-time market pricing to establish benchmarks for different models of different age, mileages, and vehicle conditions. This also helps to identify fraud and prevent collusions on its platform.
Scale up blockchain
For over a decade, application of blockchain technology in financial transactions has been widely discussed, though many solutions are unproven at scale. Sunday Domingo, Global Head, Digital Platforms and Products, Digital Channels and Data Analytics, Corporate and Investment Banking at Standard Chartered, highlighted three notable use cases.
As trusted institutions, banks can play a role by leveraging Standard Chartered’s strong risk management practices. Its investor services clients seek out services for both traditional and crypto assets under custody. Blockchain-based transactions are irrevocable and relying on trusted providers to secure digital assets, and keys will be critical. While cryptocurrencies are becoming a viable, alternative asset class, their volatility prevents widespread adoption as a payment method. However, leveraging blockchain for payment use cases is developing. Standard Chartered completed the first Euro-denominated cross-border payment between Hong Kong and Singapore on Partior, the global unified ledger market infrastructure. Partior has its roots in Project Ubin – an initiative by the Monetary Authority of Singapore (MAS).
The recently-launched Project Guardian, another venture by the MAS and supported by Standard Chartered, aspires to enhance the liquidity and efficiency of financial markets through trade asset tokenisation. With the industry-wide collaboration across Web3 companies, traditional financial institutions, as well regulators, we are starting to see adoption of blockchain technology for real-world use cases.
Beware of the pitfalls
Adoption of new technologies is not without challenges, panellists asserted. Essential to any data transformation strategy is access to robust and timely data. Without a data strategy, including a governance framework to oversee its usage, multiple challenges may emerge in future. Likewise, when using AI, it is critical that rules are put in place to prevent inappropriate usage.
A further pitfall is approaching digitalisation piecemeal. Often, companies focus on digitalising customer-facing interactions only, overlooking middle-office and back-office applications such as the processing of payments or the fulfilment of goods and services. These risks undermining the customer and user experience.
However, speakers warned that not all transformations can be rolled out at the same time due to resource constraints. It is therefore imperative that businesses prioritise their tasks and consider factors including impact and urgency.
Pick the right partners for your business
No treasury team can complete all of their tasks on their own, panellists agreed. In the past, companies typically looked for the cheapest and fastest solution on the market. In contrast, asserted KPMG’s Bandyopadhyay, companies now need the right market, product, cost, culture and value fit. Shell’s Lim believes openness, and the willingness to go the extra mile, are also critical attributes in a partner.
Lim personally favours buying off-the-shelf solutions for use-cases that are not unique to a company. He believes this is more efficient than building in-house and will save treasury departments time and money. Conversely, Standard Chartered’s Domingo prefers developing solutions in-house, as this builds intellectual property, and enables businesses to be unique in the market.
Developing solutions in-house can benefit companies enormously, including helping them to experiment, and offering treasury teams key learnings and help in deciding on the right product to adopt. Banks also gain a lot of data on their clients’ banking and finance activities, so they can add immense insight and value to the businesses of customers, added Domingo.
Maisie Chong, Global Head of Receivables Purchase and Head of Trade & Working Capital, ASEAN and South Asia stressed the importance of advanced technologies, collaboration and partnerships in building treasury departments of today and tomorrow: “To fully capitalise on the potential of gen-AI, data analytics and blockchain, companies must tap into the expertise of ecosystem partners, including tech vendors and their banks – to unleash the enormous benefits these technologies can bring to optimising cash and liquidity.”
Stay flexible: no ‘one size fits all’ for regional treasury centres
According to Ankur Kanwar, Global Head of Cash Structured Solutions Development and Head of Transaction Banking and Cash Management, Singapore and ASEAN, there are almost 4,300 treasury centres now located in Singapore, over half of which were set up after the COVID 19 lockdowns. This incredible number aside, what is truly noteworthy is that each of these is unique, not only in their size and capabilities, but also in how they fit into a company’s strategy around whether to centralise or decentralise, or whether a hybrid model is required.
Vibhash Joshi, Regional Treasury Head at GE Vernova, explained his company has opted for a centralised model, operating out of Singapore. However, he pointed out that when this was set up in 2018, there were only a few contenders in Asia able to meet their needs: Singapore, Hong Kong, and Shanghai. Today, other treasury hubs are emerging, especially in Malaysia and India. In particular, corporates are hoping that the latter may in the future allow treasuries to consolidate cash held in Indian rupee, which cannot be done in any other hub globally.
On the other hand, ST Telemedia Global Data Centres has adopted a hybrid model, said its Group Treasurer, Kelvin Ang. This strategy involves establishing regional treasury centres in the UK, India and Singapore, which support the operations in these markets and development of nearly 100 data centres across eleven regions in Asia and Europe. A poll conducted at the forum found that 48 per cent had centralised certain treasury functions in response to recent macroeconomic challenges, with just 8 per cent opting for decentralised operations to meet these conditions.
Be ready for a fast-evolving market
Peter Wong, Executive Director, Structured Solutions Development, Cash and Transaction Banking at Standard Chartered, expects more treasury centres to emerge, especially in ASEAN. The region is increasing in importance to MNCs from both the East and West, due to its enormous consumer market of more than 690 million in 2024, favourable demographics (61 per cent of the population is under 35), and its strategic importance over the long term.
The role of treasurers is also evolving. Today they look after matters including insurance and sustainable finance, in addition to conventional tasks like cash and liquidity management. They are also expected to build new operating models and structures; be aware of the latest regulations; and be up to speed on the latest technological developments.
Furthermore, treasury departments are now playing a key part in the sustainability efforts of companies. ST Telemedia Global Data Centres’ Group Treasurer, Kelvin Ang, highlighted the significant role that data centres and data transmission networks play in contributing over 1 per cent of energy-related greenhouse gas emissions. He emphasized that treasurers should not only work towards reducing their carbon footprint, but also actively engage with stakeholders to communicate these efforts and secure funding for climate-friendly facilities and equipment. This approach aligns with the company’s commitment to achieving carbon-neutral operations by 2030, as outlined in its sustainability-linked financial framework and ESG reports.
Prepare for the long term
François-Dominique Doll, Partner, Global Treasury Advisory Services at Deloitte Singapore, expects geopolitics to influence treasury operating models in the coming decade. Companies’ choice of where to operate may also be affected by restrictions imposed by various countries. Additionally, he advised delegates to keep an eye out for the OECD/G20 BEPS Project, an initiative that seeks to prohibit MNCs moving profits to low or no-tax jurisdictions.
Panellists agreed that both the biggest opportunity and challenge for treasury relates to talent. Currently there are no formal higher education courses in this field, which means professionals must learn on the job. This must change, they stressed. In addition, the workforce must prepare for future demands. For example, panellists predicted the role will involve more interaction with new technologies such as AI and data analytics.
“As businesses expand and globalise, sophisticated strategies are needed to help manage treasury operations,” outlined Chow Wan Thonh, Head, Banking and Coverage, Singapore and Asean, Corporate and Investment Banking, Standard Chartered. “Treasurers must leverage innovative technologies such as AI, to respond effectively to rapidly evolving market dynamics and stay ahead of the curve.”
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