Asia Treasurers Talk US Tax Reform Effects, KYC Solutions and Better Cash Flow Forecasting
Tags: AsiaTPG 2018 H1 Meeting, blockchain, Cash Flow Forecasting, FP&A, KYC, regional treasury centers, tax reform
The Asia Treasury Peer Group (AsiaTPG) met in mid-April 2018 in Singapore, where members shared their top projects and priorities and enjoyed wide-ranging discussions on issues such as “trapped cash” in Asia, cash flow forecasting, the implications of US tax reform for treasury in Asia, plus technology solutions surrounding banks’ know your customer (KYC) requirements. Here are some highlights from the meeting:
US tax reform enables “frictionless” dividend payments. With US tax reform in place, corporations are expected to repatriate significant dividends to the US. Boundaries between US cash pools and international cash pools will start to disappear, and corporates can look forward to managing just one cash pool. Tax and legal teams are now likely to review the legal entity structures of all subsidiaries to maximize the benefits of US tax reform changes.
Future regional treasury center roles may focus on corporate finance and capital markets. As US MNCs consider raising funds outside the US (instead of in it), regional treasury teams may need to build up their experience and skills raising capital in the region. Asia’s growth is still accelerating, so raising capital to take advantage of that growth may arise as an in-region activity.
Standardize, centralize, digitize. These are three core principles identified by IHS Markit surrounding technology solutions for KYC compliance: setting common standards on documentary requirements (standardizing); putting all content in a common place (centralizing); using a trusted technology medium to share information (digitizing) in a controlled manner.
KYC compliance will no doubt get more burdensome, as regulatory standards rise and become more complex as growing businesses operate in multiple jurisdictions. Is “country level utility” the way to streamline KYC compliance? Following its success in South Africa, where Thomson Reuters launched a country utility to streamline KYC compliance, the company is working in consortium to build similar country utility services in Singapore and Hong Kong. This entails working with many banks to set the baseline standard regarding KYC documentation requirements. The solution is to establish a (nationwide) central repository that stores data and documents required to support a financial institution’s KYC procedures, and provide permissioned access to information requestors.
Blockchain technology presents opportunity for “collective KYC.” In a “sharing economy” approach, blockchain technology can present an opportunity for a transparent and trusted environment to create collective standards regarding KYC. IBM, a guest speaker at this meeting, shared details of its pilot implementation of this concept in Singapore.
Technology can ease workflows in KYC compliance. Another guest presenter, Bloomberg, discussed how it acts as technology service provider for its extensive user base, enabling a secure way to exchange documents with any counterparty. Leveraging on technology that recognizes text in documents to pre-populate data fields in databases or pre-fill any form based on designated corresponding fields, it assists to reduce duplicate tasks, thereby making work easier, simpler.
Leverage financial planning and analysis (FP&A) team for better cash flow forecasting. Quality cash flow forecasting allows treasury to be proactive about liquidity planning, rather than reacting to surprises. Raising accountability requires treasury to build partnerships with FP&A and reporting teams, and get involved earlier to cultivate familiarity with the data. At a member company, various finance teams across multiple countries and business units are “competing” to do their task well and produce forecasts of high quality, so such partnership efforts are paying off.
Following are NeuGroup Founder Joseph Neu's key takeaways from the meeting:
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