Industry leaders are increasingly looking to implement fully integrated end-to-end cash management solutions that offer standardised solutions to increase efficiency, streamline processes and connect across continents. In addition, the new solutions enable them to optimise performance, gain competitive advantage and ensure regulatory compliance.
Throughout Asia-Pacific, leading corporate treasurers are striving to optimise cash management, regulators are focusing on ensuring that corporates manage risks, and compliance teams are targeting more effective risk management. To meet these goals, cash management increasingly needs to be shifted from paper or spreadsheets to fully electronic formats. This will improve cash visibility and local cash management can be integrated into globally centralised systems. In countries such as India or China, capital controls and stringent regulatory requirements make this process more complex.
Even as cash management has become increasingly critical in Asia-Pacific, corporate treasury teams have become leaner. This has led to insufficient resources to ensure that controls are fully effective and functions are appropriately separated.
To deal with these challenges, treasury teams are looking at how to centralise their operations, automate processes and increase efficiency using a scalable model that will be adaptable as the business grows.
That the first step towards efficiency and improvement is to recognise that cash can be better managed, and to look for a solution. However, some corporates find that they may not have access to information about best practices or how technology has created new solutions.
To overcome these constraints, forward-looking corporates are increasingly turning to global bank with experienced treasury teams, J.P. Morgan to learn about best practices and identify solutions that can take their business up to the next level.
The ultimate goal is to identify an end-to-end industry-specific solution that addresses country-specific requirements. It would cater to corporate-specific needs for efficiency and control, and overcome inefficiencies across the working capital cycle.
While the solution that any corporate develops is unique to its own needs, common themes for successful transitions have emerged across industries.
Developing a solution that spans the entire cash management spectrum, from liquidity and working capital management to trade finance and foreign exchange (FX) is fundamental. Working with a global bank enables a corporate to tap into an experienced global team to create a comprehensive strategy and design an end-to-end solution that adds value.
Technology support is critical in enabling a fully integrated solution with products and value-added services that enhance cash visibility and support reconciliation. By leveraging a cutting-edge platform, corporates can ensure that they implement a solution that enables full integration with their ERP system as well as shifting to a fully electronic solution.
The highly consultative approach that leading banks employ, enables corporates to undertake a comprehensive review of existing processes and requirements across all aspects of their business. With local market knowledge and regional/global industry expertise, corporates can receive the full spectrum of support in setting up the right structure for their business.
The implementation of a new cash management solution at Mosaic Company in India provides an excellent example of how these concepts can be turned into effective practices that lead to competitive advantage.
Mosaic is the world’s leading producer of concentrated phosphate and potash, products that help farmers boost crop yields. Mosaic employs approximately 8,900 people in eight countries and participates in every aspect of crop nutrition development, which enables farmers to improve crop yields and meet rising global demand for food.
As Mosaic analysed their cash management in India, they identified strong needs for improvement and started working with J.P. Morgan to develop a customised solution that could elevate them to world-class cash management practices. An experienced J.P. Morgan team, with both in-market and global experts, started a consultative process to identify key needs and develop an effective solution.
Since Mosaic sourced goods from offices globally and sold to a large and widely-distributed client base in India, for example, it required a well-structured solution that did not disrupt the account numbering process, so that receivables would continue to have the client name and a reference number in the bank statement for ease of reconcilement. J.P. Morgan also developed simulations, using data provided by Mosaic, to illustrate and discuss the efficiencies of solutions such as cash concentration instead of a traditional zero balance account structure. Furthermore, in areas such as developing SWIFT host-to-host link format standards, J.P. Morgan provided a solution to meet Mosaic’s requirements. The result is that J.P. Morgan designed a solution that:
Along with supporting Mosaic in India, J.P. Morgan used its regional resources to look across Asia to develop a fully integrated and globally consistent cash management platform that enabled Mosaic to centralise all its banking operations for its India, Hong Kong and China businesses with a single bank, in line with industry standards in ensuring globally consistent processes.
While many organisations might see a function such as reconciliation as too routine, J.P. Morgan made reconciliation of accounts payable and accounts receivable as smooth as possible. It also ensured that clients could continue to send or receive funds and notifications regardless of whether they used paper or electronic files, and supported Mosaic’s use of electronic files, regulatory payments, and statutory payments through a single interface.
J.P. Morgan provided extensive support and conducted regular meetings as well as teleconferences, from the conceptualisation stage through to implementation, to help ensure ease of migration with minimal disruption. The implementation timeframe was substantially reduced by using existing connectivity, for example, and the J.P. Morgan team provided extensive training during the implementation cycle as different modules were being implemented as well as post-implementation.
Since Mosaic’s business is growing in India, as well as in other markets in Asia, J.P. Morgan helped the firm ensure that it implemented a technology solution that would support rapid expansion. The high level of automation means that Mosaic can easily manage changes such as increased volumes or increases in the number of banks its distributors connect to, with the standards ensuring that Mosaic won’t need to change formats or connectivity.
The net result was that Mosaic implemented an initiative that enabled it to gain real-time visibility into cash balances and achieve significant cost savings while reducing potential operational and compliance risks. Mosaic’s foresight led it to include fundamental yet far-reaching changes in daily operations to develop more effective practices for pooling, fund transfers, and trade finance so that it could leverage industry-leading practices.
As the director of finance at Mosaic India said: “The integrated solution has helped our local company and parent corporation in streamlining our processes and moved to a more secured and electronic way of initiating payments to our vendors. We received excellent support throughout the process.”
While a solution that works for today is important, it is critical for corporates to implement a solution that prepares for forecasted expansion, as well for new practices or technology that a corporate may not currently anticipate.
By leveraging J.P. Morgan’s position in supporting corporates’ cash management needs around the world, with its partnership approach and leadership in technology, corporates can implement a solution today and constantly have access to new practices that give them a competitive advantage for the future.
For more information, please contact Manoj Dugar, Managing Director and Head of Core Cash Management Product, Asia Pacific, Treasury Services, J.P. Morgan, at firstname.lastname@example.org
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