“We have a notional cash pool located in Singapore in which entities in all eligible countries are included. As a result of the diversity of the markets and different regulations that control the movement and conversion of currency, managing liquidity in Asia Pacific is more challenging than in some other regions,” says the treasurer.
In India, for example, the company’s second largest operation after Singapore, it uses offshore accounts wherever possible to pool US$, but offshore accounts are not permitted, impacting the ability to accurately forecast cash flow.
“We are always seeking improvements to our cash flow forecasting processes,” says the treasurer. “In the past, we have focused on the largest entities, but over the past year, we have received cash flow forecasts from all of our entities to support treasury decision-making. Accuracy and timeliness of data remains an issue, and we are trying to take a more proactive approach to resolving this by extracting data directly from planning and budgeting systems which business units then validate. The next step will be to produce variance reporting, so we can work with local entities to identify and address forecasting discrepancies in a more systematic way.”
Technology is an important enabler of improved treasury efficiency. The corporation utilizes a TMS for all aspects of cash, treasury and risk management, including cash flow forecasting. More recently, it has started migrating local entities from spreadsheets to its TMS to create more efficient cash flow forecasts, and integrating the solution with its ERP and planning system. However, the cloud-based nature of its TMS differentiates this corporation as a next generation technology adopter both globally and regionally.
“Our TMS is a cloud-based solution that we adopted in 2008,” the treasurer explains. “We were attracted to a cloud-based solution as the upfront cost was lower, and the upgrade process is undertaken automatically, allowing us to take advantage of the latest version of the software without the need to dedicate IT and treasury resources to lengthy upgrade processes. We have also been able to take advantage of additional modules easily as our treasury requirements have expanded, again without the need for a lengthy implementation process.”
Mobile technology also represents another strategic option for its Asia Pacific treasury going forward. “As a business committed to innovation in the mobile space, we are actively considering the use of mobile devices to access our treasury and banking systems. Bank of America Merrill Lynch’s CashPro mobile solution was recently reviewed and approved by our IT security team, so we are now authorized to implement this on permitted devices, which are usually company-issued devices which have more robust security and encryption tools in place,” says the treasurer.
For this leading technology provider, the key to maximizing its treasury operations and delivering on its treasury priorities will rely on ongoing investment in its technology infrastructure to enhance the efficiency and control of treasury processes and the quality of decision-making.
As the world’s largest data center and colocation provider, Equinix operates International Business Exchange™ (IBX®) data centers in 32 locations across 15 countries in North America, Europe and Asia Pacific, with a corporate mission to protect, connect and power the digital economy. Asia Pacific is of particular strategic importance to Equinix, representing the firm’s fastest growing region, with 5% quarter-on-quarter growth in Q3, 2014 and 23% year-on- year on an as-reported basis. Given this impressive rate of growth, Wee Gee, CFO, Asia Pacific, discusses how he is positioning the organization both to meet current challenges and support future growth.
Finance organization in Asia Pacific
We host data centers and provide services in six markets in Asia Pacific: Singapore; Hong Kong; Japan; Australia; China and Indonesia. To support our operations in these countries, we have also established a financial shared service center (SSC) in Singapore, which provides transaction support in accounting, accounts payable and receivable, and treasury back office. The SSC works in close conjunction with in-country finance teams who provide local support and business partnering, and its regional headquarters in Singapore where value-added services such as financial planning and analysis, consolidation, internal controls, tax and treasury are conducted. Despite the opportunities for efficiency, control and economies of scale, Equinix has found that centralization comes with certain obstacles.
Obstacles to centralization
“Based on our experiences, I was not surprised that only 37% of participants in the Treasury Management Barometer had set up SSCs in Asia Pacific so far,” states Wee Gee. “The size of an organization is often a major hurdle: too small, and there is not sufficient opportunity to leverage the benefits; too large, and it may seem too complex an undertaking.”
In Wee Gee’s view, corporate strategy is also a consideration to any centralization project. “If a corporation has reached a steady state, with relatively modest growth in a region, initial benefits may not be compounded in the future. In addition, it is often difficult to prioritize centralization projects over other potential projects, particularly given the political sensitivity of transferring responsibility away for certain activities from local teams,” he says.
A shared services vision at Equinix
Equinix first proposed the concept of a finance SSC in Asia Pacific in early 2013 as part of a regional vision for financial optimization. Although the size of its business in the region was relatively modest at that time, growth rates were significant and senior management recognized the need to prepare for the next level in its corporate development.
Wee Gee explains, “When designing our SSC strategy, we identified clear objectives. We recognized that a decentralized finance model was not sustainable in the longer term given the need to add new resources to support business growth, so scalability was our first objective. Secondly, we wanted to address governance challenges: specifically, it was difficult to ensure compliance with group finance policies and processes without central visibility and control over activities such as accounts payable, receivable, treasury and accounting. Finally, we aimed to improve the efficiency of our finance processes, and deploy our resources in a way that offered the greatest value to the Equinix enterprise. And with the formation of an SSC, in-country finance teams could focus on business partnering with their local sales and operations teams.” The SSC project progressed quickly and successfully but inevitably, there have been some challenges given the scale and complexity of the undertaking.