HSBC's Guide to Cash, Supply Chain and Treasury Management in ...

Riding Out the Storm in Style
exchange (FX) risk, and corporate finance – including strategic financing via initial public offerings (IPOs),
spin-offs, off-balance sheet financing, mergers and acquisitions (M&A), capital structure review, etc.
Treasurers are partnering with business units to devise a capital structure and long-term financing profile
that support the strategic change of the business model and future sustainable growth.
Liquidity risk is not going to go away, thus the ability to have internal cash visibility, rolling cash forecasts
that reflect each business unit’s funding priority and real-time control of cash mobility are essential
elements of running a business in good times and in bad. Increasing numbers of corporate treasurers
in Asia are implementing new treasury management
systems (TMSs) after the 2008 financial crisis. A good
Liquidity risk is not going to go
away, thus the ability to have
internal cash visibility, rolling cash
forecasts that reflect each business
unit’s funding priority and realtime
control of cash mobility are
essential elements of running a
business in good times and in bad.
TMS is necessary but not sufficient.
A key enabler of this changing focus is connectivity,
supported by robust cash management systems and
processes. In addition, corporate treasurers will also need
to review and streamline their bank account structures,
strengthen cash concentration and cash pooling
arrangements as well as achieve a high degree of control
in the deployment of cash against any contingency liquidity
needs. Such operational cash management review can go
hand in hand with a banking partner review or assessment.
New Paradigm in Choosing Banking Partners
Banking facilities are becoming scarce resources. On the other hand, deposits from corporate customers
are valuable to banks to reduce dependence upon inter-bank funding. Fee businesses are attractive
to banks also as they do not require expensive capital support. Corporate treasurers can review their
banking arrangements and consider centralising their fee businesses and deposits with one or a few
core banks. A network of supporting banking partners is, however, important to maintain the diversity
of funding, to provide the counterparties required for risk management and to reduce concentration
risk. This will be a fine balancing act requiring constant monitoring in light of market developments and
periodic review considering the overall corporate development strategy.
Increasing Governance Oversight at the Board Level
Corporate boards are increasingly concerned whether companies have put in place robust processes to
guard against the possible deteriorating credit profiles of banks and customers if double-dip recession
becomes a reality. It is fair, therefore, for corporate treasurers to exhibit the behaviour of flight to quality
and to keep a relatively higher level of cash balances to mitigate liquidity risk.
The efficiency of the cash management system will also be monitored closely to ensure liquidity flow is
not trapped in times of need.
HSBC’s Guide to Cash, Supply Chain and Treasury Management in Asia Pacific 2012 29
The New Economic
Landscape