1) Fit for Growth: Enhancing Treasury Success in Developed and Emerging Markets Helen Sanders, Editor, in conversation with Michael Guralnick, Global Head, Corporate and Public Sector Sales, and Global Marketing, Treasury and Trade Solutions and Swati Mitra, Global Sales Leader, Emerging Market Corporate Clients, Treasury and Trade Solutions, Citi S upporting growth whilst addressing the opportunities and challenges of globalisation, digitisation and regulation, are core to treasury strategy for multinationals around the world, but the ways in which companies are achieving these Reprinted from TMI | objectives can be different. In this feature, Michael Guralnick and Swati Mitra explore the relative experiences and priorities of treasurers of corporations headquartered in developed markets compared with those in emerging markets. www.treasury-management.com 

2) insight Are the issues being faced by treasurers in developed markets vs emerging markets two sides of the same coin? Guralnick: Three key themes emerge from our discussions with treasurers of companies in developed markets: generating returns, improving supply chain and risk management, and managing the impact of regulations. Companies are focused on returns, and treasurers are helping CEOs and business heads create the ‘financial optionality’ to support growth and returns. This is connected to the second issue of managing risk. Treasurers are managing multiple streams of volatility as global markets adjust to divergent economic growth prospects, the US Fed timing on interest rate increases remains uncertain and quantative easing spreads in Europe and China. With geopolitical and economic uncertainty in many regions, treasurers are taking a holistic approach to managing investment, counterparty and supply chain risk to reduce the impact of market volatility. Furthermore, the pace of technological change is introducing a new element of risk: cybersecurity. Thirdly, treasurers need to assess and act upon the implication of changes in the regulatory and tax landscape. For example, as banks adjust to financial regulations such as Basel III, corporate treasury practices from shortterm funding to cash management are being refined. Treasurers are working through these changes and building deeper links with strategic partners. Ultimately, these objectives are linked to an overriding ambition to grow their businesses. Treasurers recognise that cash unduly tied up in the supply chain is cash that cannot be used to fund growth, so creating a transparent and more efficient end-to-end supply chain has become a priority for companies. Mitra: Whilst similar objectives, challenges and opportunities are shared by treasurers in both developed and emerging markets, the approach, readiness and ability to deal with some of the complexity varies due to differences in pace of growth, treasury resource allocation or perceived relevance. For emerging market treasurers, the pace of growth is often faster, and facilitating growth may take precedence over other priorities. While some of the regulatory responses that treasurers in developed markets need to prioritise may initially appear to be less significant in emerging markets, particularly as there has been limited impact on bank relationships and financing as a result of these changes so far, an understanding of regulations is becoming more significant as these companies expand their geographic footprint and global regulations increase. Which markets are the most challenging for treasurers, and how are your clients structuring their treasury to address complexity in these markets whilst supporting group-wide objectives? Mitra: Typically, countries with capital and FX controls are the most complex in which to do business, such as Russia and some countries in Latin America, Africa and Asia . As a result of these controls, it can be difficult to fund entities, repatriate cash and set up regional or global liquidity structures. Market complexity can also be viewed from a clearing system perspective, level of cash, paper vs electronic transactions and statutory reporting, tax and other requirements. As corporates expand into emerging markets, these factors have to be considered when designing the treasury operating model, policies and procedures, and in making decisions to centralise activities such as accounts payable, accounts receivables etc. Guralnick: Companies in developed markets that have an established treasury function generally aim to extend the same techniques into emerging markets; however, they often experience obstacles in achieving the same degree of centralisation and efficiency. In many cases, they address this by establishing regional centres to gain closer proximity to the business that they support, which makes it easier to understand and manage the complexity. Our clients find that tools such as Citi’s Treasury Diagnostics enable them to benchmark performance and identify opportunities for enhancing efficiency and control at a regional and global level. Reprinted from TMI | Are there differences in treasury operating models or structures between corporations headquartered in developed or emerging markets? Guralnick: There are a variety of business drivers that contribute to a company’s design of its treasury operating model, including the need for visibility and control over transactions, information flows and managing risks. Treasurers are moving towards what we call ‘smart centralisation’ (i.e., globalised treasury organisations and reengineered processes to centralise more functions). The best-inclass models vary but the concept of a ‘functionally centralised, globally distributed’ treasury organisation is common. This includes developing centres of excellence, and integrating different functional areas to ensure the appropriate flow of information irrespective of business function location. Further drivers leading to accelerated centralisation are macro trends such as the internationalisation of the RMB, the creation of the ASEAN Economic Community (AEC) and the increasing cross-regional flows from Middle East to Africa and China to Latin America. These are creating opportunities to establish new hubs in China, ASEAN, Middle East or North Africa. Mitra: Companies headquartered in emerging markets tend to manage treasury from their home country headquarters initially, but once they reach a certain size and scale with their offshore operations, they start to emulate their peers from developed markets by adopting regional treasury and shared service centre models. Cost reduction and greater control are primary drivers when establishing shared service centres, or shifting manufacturing and procurement hubs to lower cost locations. For these companies, it is essential to get advice so they understand the opportunities that finance companies, in-house banks or reinvoicing centres can offer. Generally, while cost is a major priority, establishing efficient operational processes and sophisticated end-to-end risk management frameworks has not become as significant a priority for emerging market corporations yet. This is partly due to the www.treasury-management.com Treasurers are managing multiple streams of volatility as global markets adjust to divergent economic growth prospects. 

3) We now have clients centralising RMB into multicurrency cash pools in London. relative early stage of development of these corporations’ international operations compared with their developed market peers. Yet this is changing rapidly. As these corporations lack the legacy technology, processes and organisational structures of their developed market peers, they are often able to ‘leapfrog’ stages of treasury and technology evolution that many longstanding treasuries have experienced, and can bring in external treasury expertise and develop state-of-the-art treasury technology relatively quickly. By doing so, they can extract the maximum value from their technology rather than trying to overcome limitations in legacy infrastructure. It is not only in technology that emerging market corporations are able to take a more innovative approach. Typically, western companies have developed their international footprint through regional expansion models. In contrast, emerging market corporations tend to focus on specific trading corridors when identifying organisational structures, processes and risks, which can lead to a more precise approach. to west and south to south, that is impacting the selection of priority markets. For example, Brazilian companies are looking for growth in markets beyond South and Central America, while some Chinese firms that previously focused internationalisation efforts on neighbouring countries in South-east Asia are now looking to Middle East, North Africa, and Latin America. Guralnick: When looking at mergers and acquisitions, we are seeing many Asian corporations investing in, or acquiring western businesses as they seek to gain market share and position their businesses for growth. In the United States, for example, there has been enormous inbound investment over the past two years from Japanese, Chinese, Taiwanese and Indian corporations seeking to capitalise on the resurgence of the US economy. The expectation that the United States will reemerge as an engine for growth, as well as economic improvements in parts of Europe, will influence corporations’ growth strategy. Many African governments are continuing to offer incentives to foreign investment through regulatory liberalisation and many US consumer product companies are setting up new manufacturing operations in Africa to service the needs of its growing, increasingly affluent population. Guralnick: Swati raises an interesting point on corporate growth patterns. Many companies today are ‘global’ to a degree and we have even seen the rise of ‘micro multinationals’ that may initially be small in sales turnover but buy and sell internationally and leverage innovative ecommerce models and a global supply chain. Evolving business models bring new risks, and cost and supply chain management considerations become more important, consequently there is focus on process standardisation, centralisation and improved controls. How is RMB internationalisation reshaping treasurers’ priorities? Guralnick: Deregulation in China continues as the People’s Bank of China (PBoC) and the State Administrator of Foreign Exchange (SAFE) promote the internationalisation of China by focusing on liberalising the RMB, now the 5th most traded international currency, and foreign currency reforms domestically, most notably by developing the Shanghai Free Trade Zone. This brings opportunities for corporations to establish more advanced treasury techniques, and align cash and treasury management in China with other regions. Recent developments, such as the ability to include onshore RMB balances in crossborder cash pools, mean that China is no longer viewed as a ‘trapped cash’ location, which has enormous Has the focus on BRIC (Brazil, Russia, India and China) diminished and if so, what new growth markets are emerging? Mitra: The BRIC countries remain highly relevant as they are large economies that continue to have enormous potential and impact globally, despite growth slowdown in some cases. However, given that trade in goods between emerging economies is now nearly 25% of overall world trade, the real shift is in the new corridors of activity, east Reprinted from TMI | implications for regional and global liquidity management and corporate strategy in China. For example, we now have clients centralising RMB into multicurrency cash pools in London, and many clients keen to learn about these opportunities. Corporates are increasingly creating RMB hubs, in locations like Hong Kong or Singapore, to serve as a conduit for onshore and offshore counterparties, for trade and financial management activities. Mitra: Now that treasurers have more flexibility in managing cash, foreign exchange and working capital, the use of RMB is opening up new business opportunities, largely because it reduces FX risk, and allows access to a wider range of buyers and sellers. FX activity in China can now be managed centrally by a treasury centre, lowering costs and improving visibility and control. Is digitisation helping companies with their treasury strategy or is it creating new challenges? Guralnick: In both developed and emerging markets, digital technology use is undoubtedly an enabler of more efficient, streamlined and standardised processes. However, as Swati said, for developed market companies, it is often difficult to migrate from legacy technology, particularly when replacing multiple systems, across multiple geographies and business lines with a single, standardised solution. We see many corporations taking a phased approach and focusing initially on the digitisation of paper processes, in order to achieve, to the degree possible, straight through processing and reconciliation. There are new digital tools available to clients to support these processes which provide improved data analytics, reporting and control and cost benefits. Furthermore, the rapid pace of growth in software, mobile technology, ecommerce, data analytics, security and cloud technology is introducing new opportunities for sales and distribution channels, marketing as well as workflow efficiency. As companies invest in new digital processes, cybersecurity is becoming a www.treasury-management.com 

4) insight priority across developed and emerging markets. Consequently, there is increased focus on host-to-host connectivity, file encryption, and payment alerts. Many companies are reviewing and auditing their technology infrastructure, financial processes and employee knowledge of control procedures as a means to combat fraud and manage risk and control more closely. Mitra: While digital technology is a game changer in many respects, corporations in emerging markets often lag behind their western peers in using treasury management systems (TMS) and enterprise resource planning (ERP) tools. This often leads to gaps in these treasuries’ ability to perform sophisticated, automated processes such as cash flow forecasting and bank account reconciliation. How do you help clients develop a practical roadmap to evolve their treasury management? Mitra: Clients in emerging markets are often at an early stage in their journey towards becoming an efficient treasury organisation, so they value Citi’s Treasury and Trade Solutions Sales and Advisory teams who can share insights on best practices and support peer evaluation. Many participate in our Treasury Diagnostics benchmarking survey to help prioritise the next stage in their treasury roadmap. Typically, efficient account structures, cash visibility, liquidity and working capital management are among the initial priorities. Treasurers can then look at technology and connectivity to create standardisation and automation. Guralnick: When we work with treasurers to evaluate their treasury framework, we look at where the company is on its growth curve. This informs our discussions and helps us collaboratively create a blueprint to design the right treasury architecture for each client. There will, naturally, be regional variations. In the US, for example, many companies are looking to digitise their paper payments and collections processes to move away from cheques, so we work with our clients to analyse their payment and collection flows to design the optimum processes that support their treasury transformation agendas. There is no one size fits all approach, so we listen to our clients’ needs and work with them to ensure the solution we design together is flexible enough to evolve with their ever-changing treasury and commercial business requirements. Mitra: In any discussions about the future treasury management journey, it is important to take an enterprise-wide approach by connecting stakeholders such as IT, procurement, finance etc. to ensure that the roadmap delivers efficiency and supports goals across the financial supply chain. Guralnick: Increasingly we are seeing treasurers and finance teams take a horizontal approach to goal-setting. This offers major advantages in achieving financial supply chain efficiency and optimising working capital across the enterprise. Treasury is often a change agent in co-ordinating different stakeholders across the business to develop common goals and facilitate integration across the supply chain for both operational efficiency and competitive corporate advantage. I Michael Guralnick Swati Mitra Global Head, Corporate and Public Sector Sales, and Global Marketing, Treasury and Trade Solutions, Citi Global Sales Leader, Emerging Market Corporate Clients, Treasury and Trade Solutions, Citi Michael Guralnick has global sales responsibility for Citi’s Treasury and Trade Solutions (TTS) Corporate and Public Sector clients, and Global Marketing. His principal activity is to lead and direct TTS’ global sales strategies for the bank’s Corporate & Public Sector clients including: new sales origination, cross-sell, and ensuring client satisfaction. The team’s mission is to develop long-term treasury and working capital management relationships with its clients across their financial and commercial ecosystems, leading to a deeper and broader strategic banking partnership. In addition, he is responsible for leading the development of marketing strategy for TTS across all regions, products, and segments. Prior to his current role, Michael held senior management positions with Citi in Asia Pacific, EMEA and North America. Reprinted from TMI | Swati Mitra is the TTS Global Sales Leader for Emerging Market Corporate Clients, based in Singapore. The primary focus of her role is to connect client and Citi teams across the globe to success transfer best practices, drive thought leadership, and focus on sales training and segment specific initiatives for Citi’s globalising clients. Swati has worked for Citi for 22 years in senior sales leadership roles in Australia, Singapore, Hong Kong and the United Kingdom. www.treasury-management.com