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With economic growth in emerging markets now outpacing the developed world, there are many opportunities for companies looking to trade overseas. However, growing a business in multiple jurisdictions, with varying tax regimes and regulatory environments, can quickly add to a firm’s organisational and financial complexity. And this, in turn, can mean higher costs.

Aidene Walsh, Head of Global Network Banking, and Catherine Adair-Faulkner, Head of Global Cash Management Solutions, Global Transaction Services, have helped a large number of firms develop detailed strategies to manage financial complexity and enter new markets successfully. Here is their advice on how to keep complexity at bay.

Surveying a container port from the cab of a crane is all in a day’s work for Aidene Walsh. She is in India to understand how RBS can help a client, Gateway Terminals India Ltd, expand its successful container terminal operation in the region efficiently and profitably.

Aidene heads the team charged with helping the bank’s large corporate clients make full use of a global banking network that is available in 37 countries, and in a further 22 via partner bank arrangements. “Many clients use our global electronic banking network for all their treasury and cash management needs. These include making treasury payments to overseas accounts so that working capital and funds for investment are in the right place at the right time, sending cross-border payments and exchanging trade data to facilitate their global supply chains and then repatriating surplus funds or concentrating them at a regional level as appropriate. They like the fact that they can monitor all their activity with fully integrated reporting online,” Aidene explains. “In many cases, they also ask us to provide in-country banking services to local operating units – account structures can be set up and managed locally or centrally from the client’s head office if required.”

Simplify complexity at the point of need

According to Aidene, clients like the combination of an electronic network that can give access to an extensive global footprint, to payment and clearing systems worldwide and to RBS’s local, in-country experts - who are able to provide practical advice and simplify the complexity of international business, either at the point of need, at home or in-market. “For example, local regulations and exchange controls can sometimes complicate business in emerging markets, as when Gateway Terminals wanted to repay a loan in India early. Our local markets experts were able to quickly understand the issues, facilitate discussions with the Indian regulatory authorities and find a solution that satisfied all parties.”

Tapping into an international network and specialist market knowledge can also be invaluable when it comes to optimising returns on short-term working capital in overseas markets. For example, RBS’s liquidity management experts have been able to structure balance optimisation solutions for a number of companies with business in Asia. These solutions can be applied to balances in both regulated and unregulated markets in Asia, and help to enhance returns on positive balances held in different countries across the region.

Opportunities lie beyond home borders

Working with a global network bank can help companies do business in emerging markets more efficiently and take advantage of the considerable opportunities.

Some companies, naturally enough, reacted to the global financial crisis by focusing activity closer to home (often in mature markets) where supply chains were shorter and the risks better understood. Due to the credit crunch and economic crisis, most firms also feel under great pressure to streamline internal operations and to reduce organisational complexity.

But it is timely to look again at the potential to expand overseas. Emerging markets, especially those in Asia, are moving ahead much faster than developed ones: The International Monetary Fund projects real GDP growth for the Asian region of 7.9% for 2010 and 6.7% for 2011, compared with a sluggish 2.7% (2010) and 2.2% (2011) for the US and 2.6% (2010) and 2.3% (2011) for the euro area. India’s GDP growth is projected at 8.4% in 2011 and China’s at 9.6%.

And companies are gearing up for the opportunities. The UNCTAD World Investments Prospects Survey 2009 – 2011 noted that Trans National Corporations (TNCs) surveyed were planning to reduce their foreign direct investment (FDI) expenditure in 2009, but “expected to resume their investment plans, albeit modestly, in 2010 but gain momentum in 2011.” Half of the TNC respondents expected their FDI expenditures to be higher in 2011 than in 2008. The UNCTAD report also identifies companies’ top five targets for FDI as: China, US, India, Brazil and the Russian Federation.

A global network bank can simplify the complexity of overseas operations

The banking support needed to do new business in emerging markets will vary considerably, depending on many factors. A company with operations elsewhere in a region might already manage a market remotely, but now needs to set up a presence locally and requires in-country accounts, payments and collection facilities.

A multinational company with several subsidiaries might have reached the critical mass to make setting up a regional treasury or shared services centre worthwhile. In this case, establishing which processes can be standardised and how to centralise liquidity across borders will be a priority when looking to manage financial complexity.

Another common scenario is when a subsidiary company finds investment funding for a particular project difficult to come by, or too expensive, in their home market and asks the parent company for help.

For a company manufacturing in one country and selling into a new market, a Letter of Credit or other trade finance facility may be required to protect against the credit risk involved. The company might also need pre-export financing to bridge the working capital gap between order and payment.

‘Fit for purpose’ tools to manage finances

In all these cases, local market expertise and cross-border capabilities are called for in order to structure and deliver the right solution. A global network bank can provide this, close to the customer and in their local language.

Catherine Adair-Faulkner points out that not only global companies, but also SMEs and corporates operating in the mid-market can benefit from the business reach available from a global network bank. “Smaller companies are facing many of the same issues when it comes to understanding local customs and requirements, getting accounts open, managing FX risk or putting funding in place. It is invaluable to work with a team of international experts, who will connect them to their overseas markets”, says Catherine. RBS has a range of “fit for purpose” solutions for customers across the business spectrum who need international services, with corporate customers of NatWest, Ulster Bank and Citizens Bank in the US all having full access to network banking as well.

Relationship matters

Whether the client is in Singapore, Mexico City or Dublin, in group treasury or managing a subsidiary operation, RBS provides a single point of contact to coordinate overseas requirements, bringing in country and product expertise as required. “Relationship becomes even more important when you need to get things done in different countries and jurisdictions” says Aidene Walsh. “It’s obvious that clients need us to act quickly and facilitate their transactions reliably, but the key differentiator for clients is often the bank’s commitment over time and a longer view of their business. When relationship banking works well, a constructive fit develops between two organisations that goes far beyond the immediate business issues on the table.”

RBS provides cash management services to three of Ingram Micro operating units in Asian countries. The relationship is coordinated from Singapore. Klaar Eyckerman, Director of Tax and Treasury, Asia Pacific says "we get excellent, well-co-ordinated products and service from RBS with a single point of contact for all our needs - but the relationship also delivers something else that's extremely valuable to us, and that's ideas. RBS not only say they want to be our trusted adviser - they think about our business and act like one."

Navigating through complexity

Aidene summarises, “Whether it’s about better management, or simplification of financial complexity, RBS can help. We provide the information you require to keep your business up-to-date with changes in risk and regulation. And you can rely on us to equip you with the right tools to manage cashflows, reporting and payments, across the globe. At the same time, our teams can help you to simplify financial complexity, getting involved from the very start, advising on standardising and automating internal processes wherever you’re doing business.”