Innovation in emerging markets

Transcription

1 Michael Guralnick Global Head, Corporate Client Sales Management, Treasury and Trade Solutions, Global Transaction Services, Citi Sanjeev Chatrath Region Head, Asia-Pacific and Japan, Corporate Client Sales Management, Treasury and Trade Solutions, Global Transaction Services, Citi Michael Fossaceca Region Head, North America, Corporate Client Sales Management, Treasury and Trade Solutions, Global Transaction Services, Citi Carolina Juan Region Head, Latin America, Corporate Client Sales Management, Treasury and Trade Solutions, Global Transaction Services, Citi Swati Mitra Region Head, EMEA, Corporate Client Sales Management, Treasury and Trade Solutions, Global Transaction Services, Citi Innovation in emerging markets In today s global business environment, multinational companies are faced with complex business growth challenges which lead to new strategies pertaining to corporate resource and capital allocation. A critical variable in companies analyses is the factoring in of the impact of the much discussed new normal economic thesis. This thesis postulates a major shift in GDP growth patterns in emerging markets (EMs) which economists forecast will continue for the next five to seven years and diverge from the lesser growth rates of the OECD countries. 3

2 navigate the new normal 4 Michael Guralnick

3 lead through change 5 Sanjeev Chatrath

4 This change sees two distinct strategic patterns emerging: 1) companies in developed countries expanding their search for markets, widening global trade activity and bringing with it a new level of costly complexity; and 2) the vigorous growth of EM nations, and companies domiciled in those regions, accelerating global expansion for a competitive market share for their products and services. Winners and losers in EMs and OECD nations will be determined by cross-border performances in an increasingly regulated global marketplace. This requires focus on both sides of the performance coin: 1) gaining bottom-line financial cost efficiencies (strong defense); and 2) achieving competitive top-line revenue growth (strong offense). This two-pronged strategy has seen companies review areas of businesses affected by working capital management to root out inefficiencies and allocate more capital to clients to achieve commercial success. Michael Guralnick, Global Head, Client Sales Management, Treasury and Trade Solutions (TTS), Global Transaction Services (GTS), Citi, observes, Companies with resources dedicated to a multitude of internal processes to manage working capital are looking to deploy innovative tools to reduce cost and increase efficiency and effectiveness. Also, the complexity of the compliance issues and technical Companies with dedicated resources to a multitude of internal processes to manage working capital are looking to deploy innovative tools to reduce cost and increase efficiency and effectiveness. requirements of going global have persuaded companies to cast aside legacy techniques and work with a global banking partner well-versed in these global considerations. With a network spanning 100-plus countries, GTS has the hands-on experience and technical solutions to support its clients global expansion and growth. A fresh approach to funding Throughout the crisis, there emerged a greater focus on alternative funding for OECD multinationals and large EM local corporates. The intensity of the credit crisis put pressure on liquidity, and companies sought sources and methods of financing conducive to meeting their plans for expansion. Citi s global presence provided the tools and the linkages to offer supplier finance and structure financing solutions involving export credit agencies. Both helped stabilize vital supply chains in EMs when liquidity was scarce, says Guralnick. Throughout and beyond the crisis, GTS has continued to invest in innovations helping its clients to achieve working capital and liquidity management goals. Sharing success Citi s investment in innovation is well represented in areas where financial infrastructure is still developing and where cash is the sole payment/ collection mechanism for a significant portion of the population. An estimated 1 billion people in EMs do not have bank accounts but do have 6

5 mobile phones. We are working with national governments through public sector initiatives to use mobile technology to accelerate the speed, accuracy and security of payments and collections, says Guralnick. These mobile networks are providing substitute banking infrastructure capable of improving receivables management and risk reduction across sectors. Citi can provide a two-way transfer of innovative ideas and services to support clients thanks to the global connectivity of its people and branch network. Here we employ our leading edge developments and apply them in EMs from the OECD, or co-opt the innovations, such as mobile payments and collections, from the EM into the OECD. Guralnick mentions, Another example is GTS launch of Citi Prepaid Cards, initially developed in the USA and introduced into Europe, Africa, the Middle East and Asia-Pacific. This innovative payment tool replaces paper-based instruments and addresses both sides of the offense/defense equation, driving positive working capital efficiency while meeting sales goals. The solution enhances a company s risk-management and cost-control processes; has multiple payment uses (such as sales incentives, consumer incentives, payroll, employee rewards, and loyalty and employee referral programs); and typifies Citi s global client strategy of taking global ideas to local markets and local innovations onto a global scale. Asia EMs are important to the global economy and many corporates in Asia with aggressive growth ambitions see a large proportion of their expansion in other EMs, which carry greater risk than developed markets, explains Sanjeev Chatrath, Region Head, Client Sales Management, Asia-Pacific and Japan, TTS, Citi. And risk mitigation solutions like supply chain finance are important. GTS s range of transaction solutions facilitates M&A activity. Escrow services, issuer services, integration tools these help companies stay nimble while expanding into other markets, where improving local knowledge and maintaining control over remote businesses are key. Present in over 100 markets, Citi can act as an extension of their organization, says Chatrath. Top tier local corporates can remain competitive as they expand using Citi s Treasury Diagnostic tool, which benchmarks against OECD peers. Expanding companies who do away with massive legacy technology platforms and adopt new technology tools, says Chatrath, are at an advantage. As a market leader in delivering innovative solutions including prepaid, SWIFT exchange and mobile commerce Citi is a natural home for leading Asian firms that go global. 7

6 enhance success 8 Michael Fossaceca

7 set the pace 9 Carolina Juan

8 Latin America Top-tier corporates expanding regionally or globally must accommodate new risks such as currency volatility (important given frequent local currency revaluations against the dollar), and cross-border expansion makes maintaining multiple local bank relationships and finance platforms impractical, says Carolina Juan, Region Head, Client Sales Management, Latin America, TTS, Citi. But Citi offers one quality standard across countries. Its regional treasury solution gives treasurers visibility and control of subsidiaries flows and balances online through a single, multicurrency platform. Moreover, positive balances can offset overdrafts through a single pooling structure. With a single contact at head-office level and a coordinated regional team of relationship managers and product sales (organized according to industry specialization) and implementation, Citi makes expansion straightforward. Implementation is also easy, says Juan, as we partner with clients technology teams to best fit SWIFT projects or embed Citi platforms. Directly uploading letters of credit onto the CitiDirect Online Banking trade platform, using templates that adopt the correct UCP600 format, is one acclaimed Citi offering that avoids straight-through processing problems. Well regarded by large trade-volume retailers to Asia, it simplifies and speeds up import/export documentation processing, says Juan. Clients also appreciate GTS s LatAm Financial Professional Forum and Client Advisory Board, which offer learning, networking and advisory opportunities to local leaders to become regional or global names. EMEA and North America When expanding into emerging markets, companies from developed markets often face challenges emanating from the need to understand local market nuances and best practices. Understanding the operating environment and what can or can t be done from a banking and regulatory perspective is crucial to initial setup and management of ongoing operations, says Swati Mitra, GTS EMEA Region Head, Client Sales Management, Corporates, Citi. Citi s extensive on-the-ground teams, knowledge of local practices, regulations, and banking and clearing systems support growth in regions with complex environments and risk and control challenges. Mitra explains that Citi was appointed a core banking provider, supporting liquidity management, receivables management, payments via host-tohost solution and excise guarantees, for a global multinational in South and West Africa due to our onthe-ground resources, integrated platforms and product capabilities and local market knowledge. 10

9 Local understanding also enables Citi to deal with regulations and tax issues. Governments have stepped up regulatory activities and many areas change regularly and are open to interpretation, says Michael Fossaceca, Region Head, Client Sales Management, North America, TTS, Citi. Partnering with local experts to navigate these regulations is critical. systems and using techniques such as interest optimization, efficient intercompany netting programs and reinvoicing centers are essential. Citi works with clients to match inflows and outflows to create natural hedges while TreasuryVision optimizes client positions to meet challenges. Previously published in Global Finance, December 2010 Understanding the operating environment and what can or can t be done from a banking and regulatory perspective is crucial to initial setup and management of ongoing operations. Cash visibility and control is a prerequisite in developed markets. Establishing optimal levels of cash and understanding the cross-border currency flow is challenging in EMs, says Fossaceca. Moreover, companies operating with capital controls face challenges in getting value from cash trapped in EMs and in repatriating cash. Establishing excellent forecasting 11

10 collaborate. innovate 12 Swati Fossaceca Mitra xxxxxx