Cash and treasury management solutions: New technologies and risk management techniques can be invaluable. (Special Advertising Feature).

Reducing risk is one of the top priorities for Latin America's cash and treasury managers facing a challenging economic climate. At the same time, new technology-based services, combined with traditional risk management techniques, are creating opportunities to lower operating costs, make smart investments and improve overall profitability. LATIN TRADE magazine discussed the latest cash and treasury solutions in advance of the eighth annual EuroFinance Conference on Treasury Management in Latin America in Miami on April 1-3, 2003.

Volatile Markets Create Challenges, Opportunities

Today's Latin American financial environment is characterized by high volatility, as Jorge A. Bermudez, executive vice president and chief executive officer for Citigroup Latin America, recently affirmed. "It's a challenging climate that presents treasury managers with a host of cash management problems," he said. "But organizations that manage their cash flows efficiently can reduce operating costs, and take advantage of the many direct and indirect investment opportunities created by a fast-changing marketplace."

For treasury managers, one of the keys to success is assuring adequate liquidity and immediate access to cash. To achieve this, managers can look to reduce bank partners to enable easy visibility and allow for quick action in a changing environment. Companies can also centralize their treasury operations to gain more control, and even outsource the payment and/or receivables process to reduce both fraud risk and processing time.

The ability to assess a situation, make the best decision and shift funds as necessary is one of the hallmarks of effective cash management. Hedging strategies, currency conversions and lockbox services are just a handful of the tools that are available to local, regional and multinational managers.

"Before making their decisions, cash managers need access to accurate, up-to-the-minute information on factors like their cash positions and liquidity with a particular country and within the region overall. Web-based solutions are necessary for managers to review the information quickly and to implement their financial decisions," said Bermudez.

CitiDirect[R], Citibank's online web-based cash management system, gives managers real-time information on their positions in a given country and region, 24 hours a day, seven days a week. CitiDirect[R] Online Banking provides direct, secure access to accounts for authorized users, anytime and anywhere in the world in order for companies to complete corporate banking functions. "With a history of continuous commitment to the region since 1914 and as a leading global provider of integrated cash management, treasury and trade services, Citibank is dedicated to helping our clients re-engineer processes, integrate supply chains and manage working capital more effectively," said Bermudez.

Web-Based Solutions: A Growing Tool

Web-based products can assist companies seeking to centralize their cash management operations in Latin America. They can speed the flow of transactions, reduce operating costs and provide better and faster information for making decisions.

Web-based tools also help companies reduce their number of banking relationships, thereby cutting costs associated with linking various internal systems to different banking interfaces, and consolidate their points of authorization. "A company can centralize receivables, accounts payable, investment and other cash management functions to a regional office. When those regional cash managers were traveling, they can access their network via the Internet and continue to make daily decisions," said Jose Arnaldo Vieira, director of international cash management for FleetBoston Financial Corp.

Web-based solutions are also easier to deploy and update, compared with the traditional approach of loading new software onto individual computers. Training can also be provided on-line, further reducing costs. Although the Internet provides an important new method to deliver cash management services, companies should not have to change their internal cash management operations just to accommodate a new solutions package. In other words, each solution should be customized in accordance with the company's individual goals, policies and procedures. One company might focus on centralization of payments, while another might prefer a decentralized approach and a successful solution will allow for either of these preferences.

As one of the largest providers of cash management services in the United States, Fleet is continuously investing in leading edge technology that can enable clients to implement best practices in their cash management. Through innovative Internet services such as Fleet International WebConnect [SM], a company's authorized personnel can enter payment instructions and authorized employees could approve the payments, both via the World Wide Web. This flexibility can enable faster deployment and make available an open layout format (Fleet's system can translate any type of layout), helping companies to manage the payment process and provide efficient access to information based on the organization's specific needs and each country's legal requirements.

"Web-based solutions delivered over a broadband network are quickly gaining a high degree of acceptance throughout Latin America," he said. "By providing the benefits of greater speed, cost savings and added productivity, usage of these solutions will continue to grow in the future."

Cutting-Edge Regional Solutions are Needed

The mission of banks in Latin America is to offer high-added-value products and services to their clients, according to Juan Jose Gomez Amaro, director of transnational banking at Grupo Santander - Division America. "We have noted that companies are changing the way they do business in order to be more competitive in the new world economic context," he said. "We have seen a growing trend toward the establishment of 'Regional Cash Asset Centers' by multinational companies in Latin America. We have also taken note of the growing demand for high-added-value transnational services. Our response has been to establish a highly specialized team in the region that offers support and advisory assistance to clients who are in the process of centralizing and optimizing cash assets and to develop cutting-edge solutions such as the Infocash regional system."

Infocash is an innovative tool used by Grupo Santander to control and manage regional cash assets. It is an integrated solution that connects the different local cash management services through the Internet. Infocash offers the exclusive advantage of regional access to on-line financial information in a consolidated, trilingual (Spanish, English, and Portuguese) format.

Its functions include consolidation of the company's cash assets position with Grupo Santander and other banks, a multibank module, query on account activity and balances, direct access to Grupo Santander banks' local cash management solutions, centralized administration of local payments for all Latin American countries in which Grupo Santander has a presence, and the highest security standards.

"We understand that, despite the progress that has been made, there are still significant barriers to extensive regionalization," said Gomez Amaro. "These include the different applications with respect to products and services in each country, regulations on convertibility, and availability of technology. Nevertheless, to us, cash management is a strategic service with very high added value for clients, to which we are strongly committed."

Outsourcing Can Unlock Working Capital

Effective cash management can be the key to unlocking working capital, according to Antoine Arts, senior vice president, head of Client Coverage Payments & Cash Management Latin America, ABN AMRO Working Capital.

"Corporate treasurers today need to focus their time on value-added activities, such as risk management or funding and investments activities, rather than operational issues like tracking receivables and reconciling collections," Arts said. "An experienced international bank can provide working capital solutions that integrate these cash management activities with a company's foreign exchange and money market operations."

In Latin America's tight credit environment, freeing up working capital has been receiving much more attention. To that end, more focus has been given to the efficient management of the collections and payables processes, adds Arts. In addition, many Latin American companies are linking their enterprise resource planning (ERP) systems to their banking partner's system in order to process high volumes of transactions in the most expeditious manner. This approach can streamline the company's operational processes and free up resources previously committed to transaction initiation and reconciliation activities.

"Many multinational companies are now evaluating or implementing this shared service center concept, where a company partners with a single bank or limited group of banks," Arts said. "A company's banking partner can establish or enhance those cash management processes and make them more efficient."

Based in the Netherlands, ABN AMRO has a 177-year banking history and a presence in more than 60 countries worldwide. ABN AMRO provides a range of powerful, flexible and progressive banking solutions in the areas of liquidity management, global payments and collections and trade finance services.