The Perfect Treasury

Backed by the latest IT advances, treasurers of multinationals in Asia leave nothing to chance.

Managing liquidity is getting easier. Treasurers of multinational or large local corporations can now perform in-country sweeping and arrange local currency pooling in many Asian countries. They can also do cross-border, even cross-regional, US-dollar pooling around the clock. Banks enable automatic investing of balances in overnight investment instruments, or they can actively manage short-term excess funds in investment-grade US commercial paper. Foreign exchange may be done over the Internet with the promise of straight-through processing. Treasury integrators even automatically input hedging information into FAS 133-compliant general ledgers.

In short, there should be no excuse for bad treasury management for large, wealthy multinationals or Asian corporations, thanks to the risk management capabilities that emerging technologies allow. No wonder then that treasurers see their roles evolving as well. According to David Blair, director of Nokia Treasury Services Asia in Singapore, which serves the Finnish mobile phone giant: “We add value by effectively reducing the financial risk and applying a very broad view of risk, [envisioning] enterprisewide risk, so that management and the people in operations can focus on designing great phones and selling them.”

All in the Family

At the $24 billion-a-year ABB Group, Scholer thinks the same way. Scholer oversees Group Treasury Services, which offers in-house banking services to ABB companies in 12 countries in the region. Being an in-house bank means all ABB units need only to contact ABB Treasury Center in Singapore for foreign exchange and money-market transactions. Most of these are done through an electronic trading platform at the treasury intranet page of the ABB Web site. The intranet integrates financial- and treasury-related information and serves as an automated trading and reporting platform.

The intranet application gives ABB management a comprehensive, real-time view of its foreign exchange risk exposures. Today, this couldn’t be more important. “Our risk at present is not so much internal or commercial cash flow, but foreign exchange, where we see the region devaluing further,” Scholer says. The four-year-old treasury center in Singapore can now do spot, forward and money-market transactions with units in countries where regulations are most liberal: Australia, New Zealand, Japan, Hong Kong and Singapore. “They contact us via the intranet, and if one says, ‘I want to sell $250,000 against Australian dollars,’ then we execute that,” says Scholer.

In terms of hedging, ABB keeps a low FX risk tolerance, which Scholer enforces. “All our companies have to hedge every committed cash flow, and they come to treasury for mandatory trading,” he says. Forward contracts normally range from three to six months.

In turn, the treasury center conducts active risk management with banks, either for its own trading gains or hedging. Scholer, for example, uses single-bank trading platforms when he wants to hedge a foreign exchange position. He is not yet trading on multibank platforms — such as FXall, Currenex and Atriax which promise better spreads — but he is in the process of doing so. “We’re still looking if we should trade with multibank [platforms], and are discussing this with users in other ABB Treasury Centers,” he says.


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