Times of economic hardship often serve as a wake-up call for companies and force them to streamline operations and take a closer look at areas of potential risk. That is what happened in Asia over the last few years and it led to many businesses to examine cash management issues in detail.
"Prior to the '97 financial crisis, Asia was going through tremendous growth and, at that time, cash management was not a priority," says Lawrence Webb, Asia-Pacific head of payment and cash management at the Hongkong and Shanghai Banking Corporation Limited (HSBC).
However, the downturn obliged companies to review their financial systems and realise that cash management was an essential tool for controlling risk. "Today, it has become the core banking need, more important than borrowing, trading and foreign exchange," says Mr Webb.
It is also a fast growing area for HSBC and involves the bank in advising companies of all sizes about efficient account structures, making payments, receiving funds and managing liquidity.
Since the core business for most companies is selling, manufacturing or distributing, if they outsource treasury or cash management operations, they can focus on what they are best at. This becomes especially important for businesses based in Asia when they are thinking of expanding into global markets.
"At last count, 123 of the Fortune Global 500 companies were Asian headquartered and an increasing number of Chinese, Korean, Japanese and Indian companies are looking to expand overseas," says Mr Webb. "The first thing is to ensure that the banking controls, systems and account structures are in place to manage their working capital and cash flow efficiently," he explains.
Typically, larger companies issue a request for proposal inviting several banks to bid for their cash management account. In the process of preparing the proposal, employees conduct research into the company's background and financial records; build relationships with senior executives; and find solutions to meet current and future needs. They must also have professional writing skills to draft a document which outlines the proposal, and presentation skills to pitch the final plan to the company.
With its extensive international network, HSBC can advise on local practices and regulations, as well as cultural differences. The bank's approach is to recognise that each client's business model is unique and therefore requires tailor-made services.
"We are the only bank in the region that covers all market structures," says Mr Webb.
This is a result of having a large client base, being innovative, and investing steadily in research and development. "We may develop new services for the large multinationals, but we also sell them to other clients, which really gives us a competitive advantage," he adds.
He points out that cash management is a very capital intensive business and that, since it is growing, experienced recruits are in demand. HSBC also offers fresh graduates entering this field a two-year training and career development programme. Besides specialist business courses, it includes overseas training in the UK or elsewhere in Asia. This provides both practical experience and the chance to gain broader exposure.
It is a great opportunity and attractive for those who are looking for something outside the traditional roles at a commercial bank," Mr Webb concludes.
- An economic downturn can expose deficiencies in a company's financial controls and risk management plans
- Cash management is important for streamlining finance-related procedures
- Companies can outsource treasury and cash management functions and focus on their core business
- Experienced candidates and fresh graduates are needed to fill available positions
- Trainees receive broad exposure and develop a wide range of skills