More setting up regional treasury centres in Singapore

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Singapore and Hong Kong have traditionally been the most popular locations for establishing regional treasury centres (RTCs) in Asia. In recent years, there has been a general trend of more business enquiries and the actual set-up of these treasuries in Singapore and within Asean.

According to Ankur Kanwar, head of cash products, Singapore & Asean and global head of structured solutions development, cash management, at Standard Chartered, this trend can be attributed broadly to the Covid pandemic and supply chain participants rebalancing their priorities, moving from a "just-in-time" model to a "just-in-case" approach.

"This change in business priorities contributed to Asean becoming the new supply chain production house," he said.

"Apart from supply chain factors, the post-Covid gyration of Fed fund rates, sharp pick-up in inflation and divergence in currency performance are compelling Asean corporates and US/Europe multinational companies in the region to take a hard look at the viability of not having an RTC in Asean," added Kanwar.

"As these international businesses plough more funds into Asean, Singapore became a natural gateway for the set-up of RTCs."

Regional treasury centres are a popular way for companies to manage new international markets as they expand beyond their home markets. These RTCs not only provide companies with real-time connectivity and alternatives to mobilise cash within the group, they also offer greater flexibility to make payments from another country.

These functions are especially useful in situations where disruptions in the foreign exchange market/payments infrastructure occur either due to geographical or other unanticipated events, noted Kanwar.

According to Kanwar, RTCs have 3 roles to play - a liquidity hub; creating greater financial capacity by strengthening the availability of surplus cash flow to fund new 'green investments'; and adopting end-to-end digital treasury solutions to go 'paperless' and 'cashless'.

"All in all, regional treasury centres play an important role in enabling business sustainability by ensuring that the business remains liquid with cash in the right currency available at the right time. At the same time, ethical funding decisions rest on the regional treasury centres to support business growth and expansions that are aligned with their sustainability agenda comprising of moral, social and environmental dimensions."

Banking on technology

Increasingly, Singapore's Smart Nation agenda and willingness to embrace smart technologies is helping the country stand out.

Indeed, technological and digital innovation is one of the top priorities for both treasurers and chief financial officers, said Chen Voon Hoe, financial reporting and accounting advisory leader at PwC Singapore.

According to PwC's 2021 Global Treasury Survey, the pandemic underscored the need for real-time treasury data and insights as teams responded to intense cash and liquidity challenges while working remotely. Indeed, CFOs and treasurers are focusing more on technology improvements and digital innovation now, compared to 2019, when they were last surveyed.

Some of the digital capabilities that Singapore can provide include:

  1. Application programming interfaces (APIs) which connect systems and share data through seamless connectivity.
  2. Blockchain which explores the use of distributed ledger technology protocols to encompass the broader stakeholder ecosystem of the business including payments, trade finance, storage, and digital identity.
  3. Artificial Intelligence (AI) and data analytics tools which can generate timely insights to support cash, liquidity and working capital management.

The benefits are manyfold. APIs for instance enable treasurers to access real-time treasury data and increase efficiency of decision making and transaction processing, noted Chen.

On the AI front meanwhile, the technology is increasingly being used to enhance robotic process automation work flows thus reducing manual processes in the payment, collection and reconciliation process flows of a treasurer, he said.

Other national digital initiatives which showcase a comprehensive suite of digital payment solutions which have simplified internal and external payment processes include FAST which facilitates direct, real-time transfers across different banks; PayNow for peer-to-peer transfers; and PayNow Corporate which allows businesses and government agencies to pay and receive funds using a unique entity number.

"Standard Chartered offers a broad range of digital cash management solutions and collaborates with our clients and the government to deliver innovative solutions. From PayNow Corporate to Direct Fast, we play a key role in our clients' digital payments advancement," said Kanwar.. 

Locally, the bank partnered with Allinpay Merchants Services (Singapore) to enable heartland enterprises to adopt contactless payments using PayNow Corporate. This collaboration was in support of the Singapore government's Heartlands Go Digital programme to empower neighbourhood enterprises to transform and adopt new business models for sustained growth. 

Regionally, Singapore has built payments connectivity with other Asean members. This includes the linkage of real-time retail payment systems with Thailand as part of the broader Asean Payment Connectivity plan initiated in 2019.

Separately, Standard Chartered's Straight2Bank online banking platform is one way the bank offers clients real-time transparency and overview of their cash, trade finance and financial transactions.

"Through partnerships with industry partners and the Singapore government, we leverage digitalisation to boost efficiency and data transparency for trade transactions. As a founding member of SGTraDex, we collaborate with industry partners to use cases aimed at pushing the boundaries of innovation for trusted data exchange," said Maisie Chong, head, transaction banking, Singapore and head, trade and working capital, Asean at Standard Chartered.

SGTraDex, short for Singapore Trade Data Exchange, is a digital infrastructure that facilitates trusted and secure sharing of data between supply chain ecosystem partners. It was launched in June this year.

Digitalisation also has an important role to play in enhancing transparency and accountability to drive greater adoption of sustainable finance, noted Chong.

"Initiatives such as STACS's blockchain-enabled ESGpedia registry platform are game-changers offering businesses verified and quality sustainability data that will be recognised by both the Monetary Authority of Singapore and global regulatory bodies," she noted.

Rising interest in sustainable business practices is undeniable. According to the Global Treasury survey, 42 per cent of respondents said their organisations have instituted formal policies around environmental, social and governance (ESG) principles while an additional 33 per cent say ESG is being incorporated into decision making.

Yet, when it comes to investing excess cash - a core activity in treasury - 54 per cent said they are not being guided formally by ESG factors.

The tide is quickly turning though, with sustainability filtering through much of what treasury does, said PwC's Chen.

"Some banks now factor ESG performance into the pricing of loans - both as part of a standard risk assessment and in product offerings like ESG-linked loans. Some loans may also be structured with lower interest rates if companies meet the ESG objectives set in the contract terms," he noted.

"As companies look to advance their ESG goals, treasurers can digitally track and leverage partnerships across their supply chain, and suppliers with more favourable ESG ratings may see more favourable financing conditions."

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