Global Liquidity and Cash Management Corporates Guidebook For Treasurers

Global Liquidity and Cash Management
Corporates Guidebook for Treasurers

Evolving Treasury Trends
Together we thrive
FOREWORD
DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS
DIGITAL INNOVATION IN EMERGING MARKETS: CHINA FOCUS
BEING OPEN TO OPEN BANKING
SUSTAINABLE TREASURY IN THE DIGITAL WORLD
PROTECTING TREASURY IN A DIGITAL WORLD
LIQUIDITY MANAGEMENT: A WHOLE NEW WORLD

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CONTENTS
Global Liquidity and Cash Management

Corporates Guidebook for Treasurers
CONTENTS
2 Foreword
4 Digital Innovation in India: The Road Ahead
9 Digital India: A New Dawn for Treasury Management
14 On the Brink of a Cashless Society?
18 Being Open to Open Banking
23 Sustainability in Treasury: A View Beyond Financing
26 Case Study: Oceanagold - Future Proofing Growth
30 Latin American Cybersecurity: A Fast-Growth Priority
35 Case Study: AkzoNobel - A Journey with HSBC,

Building a Strong Partnership
38 Liquidity Management: A Whole New World
41 Global Liquidity: Faster, Deeper, Greater
44 Liquidity Management in Asia-Pacific: Change and Opportunity
47 Liquidity Management: Is Europe the New Asia?
51 North American Liquidity: Change, Challenge, Opportunity
55 Liquidity Management Portal: Finance at Your Fingertips
REPRINTED FROM TMI | TREASURY-MANAGEMENT.COM 1

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Global Liquidity and

Cash Management
Corporates Guidebook
for Treasurers
Foreword by Lance Kawaguchi, Managing
Director, Global Head – Corporates, Global
Liquidity and Cash Management, HSBC
2 REPRINTED FROM TMI | TREASURY-MANAGEMENT.COM

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FOREWORD
AN HSBC INDUSTRY VIEW
I
would like to introduce this guidebook with a wealth of interesting and
informative articles featuring HSBC’s work across the globe, to help
treasurers keep up to date with some of the most vital elements of their
world today – digitisation and technology. HSBC’s extensive global footprint as
well as some of its innovative product developments are highlighted in the range
of areas covered in these articles, across the continents of Europe, North America,
Latin America, India and Asia Pacific, and validated by recent case studies
provided by clients.
India is already well on the way to visibility by streamlining the underlying

becoming a digitally-empowered country. data management.
Many key milestones achieved since the Other articles illustrate valued
2015 launch of the government’s Digital partnerships in action, with case studies
India initiative are described within, provided by OceanaGold and AkzoNobel.
including the Smart Cities project, aimed OceanaGold, a fast-growing multinational
at increasing the sophistication of India’s gold producer, decided in 2012 to refinance
urban infrastructure and services. The city its debt facilities and review its banking
Lance Kawaguchi
of Hangzhou, China, is the home of relationships; at the time it had mining
technology giant, Alibaba, and the operations in New Zealand and was
payment service provider, Alipay. Almost opening a mine in the Philippines managed
everything including utilities, public from its Melbourne HQ. For its new primary
transport and retail services can be, and cash management bank the company
increasingly more often are, paid for by chose HSBC. The success of the partnership
smartphone, rendering Hangzhou a validated the view taken by its Group
virtually cashless city. In Asia-Pacific Treasurer that “a partner who could
generally, liquidity management is proving support our growth trajectory and new
a particularly dynamic feature, as locations would add value in terms of
regulatory changes within the region, shifts future-proofing”. HSBC’s extensive
in US tax legislation and interest rates all HSBC’s journey with AkzoNobel began
present corporate treasurers with a wide in 2007, when the company embarked on a
global footprint as
range of opportunities. treasury transformation project called One well as some of its
Cybersecurity is frequently at the top of Finance, a demanding project entailing
corporate treasury agendas and in Latin changes to its banking infrastructure,
innovative
America it is a ‘fast-growth priority’. This treasury policies, technology and product
booklet examines the current cybersecurity relationship with business units. In view of
landscape in the region and explores some our extensive network, HSBC was
developments are
of the best practices for cyber risk appointed as its primary banking partner in highlighted in the
mitigation. Indeed many of the articles on many regions and countries, and was
this subject demonstrate how HSBC, with subsequently also awarded the sole
range of areas
its breadth and depth of security expertise mandate for trade finance activities. Since covered in these
and ability to effectively operate globally then, the relationship has grown
across all client sectors, can offer significantly: AkzoNobel’s Head of Treasury articles and
invaluable assistance to companies in notes the major benefits her company has validated by
safeguarding their finances data. gained from the partnership, and we will
Partnership with our clients is of continue to explore opportunities to expand recent case studies
enormous importance to HSBC, and we and strengthen the relationship. provided by
are constantly expanding the range of I am confident that the articles in this
solutions available to our customers. One guidebook will prove to be a long standing clients.
featured here is our new Liquidity source of useful information, and insightful
Management Portal (LMP), developed to exploration of the future of liquidity and
help treasurers maximise liquidity cash management. ■

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Digital Innovation in India:

The Road Ahead
India is rapidly becoming a digitally-empowered society and economy, opening up new growth
and efficiency opportunities for corporates along the way. Successfully embracing digital
innovation is both a science and an art, however, as four industry experts explained during a
lively panel debate at HSBC’s recent Global Liquidity and Cash Management Digital Innovation
and Transformation Forum hosted by Lance Kawaguchi, Managing Director, Global Head –
Corporates, Global Liquidity and Cash Management, HSBC in Mumbai.

Enabling business over 400 million consumers in India are

transformation through digital connected to the internet. The country is Forum Host:
also home to 300 million smartphone
innovation users, each spending an average of four Lance Kawaguchi
hours a day using apps. There is therefore a Managing Director, Global Head -
Eleanor Hill, TMI: How is India’s tremendous potential to target a particular Corporates, Global Liquidity and Cash
digitisation journey progressing – and audience; digital media is evolving and Management, HSBC
how can corporates take advantage of new trends are emerging.
digital innovation to transform their The other important aspect of digital
Panellists:
business models, drive growth, and re- marketing is that brands can now go
engineer legacy processes? beyond the 20- or 30-second television
Srinivas Jain
commercial and create more effective, and
Executive Director and Chief Marketing
Divyesh Dalal, HSBC: Digitisation is more amplified, digital communications.
Officer, SBI Mutual Fund
advancing at a rapid pace across India, For example, today we are capable of
even in remote locations. Government and launching a product in one city and then
Nikhil Sohoni
regulatory initiatives are among the key connecting our trade partners, employees
Senior Vice President – Finance and
drivers, but consumer trends and and consumers to it – across India and the
Treasurer, Mahindra & Mahindra
technology evolution are adding to the world – through social media platforms at
momentum. the same time. This helps in creating
Rahul Tayal
In terms of milestones, the reach of the awareness and recall for a new launch. It
Director Strategic Business and
country’s digital ecosystem has improved also creates engagement with the
Marketing, Digital and Ecommerce, LG
markedly since the government launched audience, which in turn translates into
Electronics India Pvt. Ltd
the Digital India initiative in 2015. leads.
Alongside this, the National Payments
Divyesh Dalal
Corporation of India (NPCI) has been Srinivas Jain, SBI Mutual Fund: We are
India Head, Global Liquidity and Cash
working hard to build out new digital also looking into the possibilities that data
Management, HSBC
infrastructures, including the Unified holds, as well as digital innovation as a
Payments Interface (UPI) in 2016. means to improve legacy processes. The
On the back of these co-ordinated back end of our business has been digital Moderator:
efforts, the retail landscape has evolved, for some time, but the front end has
since more consumers are now able to traditionally been paper-based and many Eleanor Hill
make digital purchases with ease. Their of our treasury customers still send us Editor, TMI
confidence in technology is also growing, instructions by fax. While we have an
and cash transactions are steadily being automated fax management system that
replaced by electronic ones – for has led to process efficiencies, we wanted a
everything from utilities to insurance and better way to serve our 6,000 odd
investments. In turn, corporates are institutional clients.
quickly adapting their business models to So, in 2016, we set up a digital platform
better leverage digital innovation and for our institutional investors. More
revamping customer experiences to meet recently, we have also embraced virtual
this new demand. accounts, to help ensure the appropriate
allocation of client funds, in a more
Rahul Tayal, LG: Absolutely. Updating automated way. Uptake of such solutions
and even reinventing our business model among clients is currently around 20% but
to leverage the power of digitisation is a top is increasing as clients start to see the
priority at LG. As a consumer electronics efficiency benefits and appreciate the user
giant, our aim is to know our customers as experience.
well as we possibly can - in order to drive For SBI Mutual Fund itself, the value of
sales through one-to-one targeted these digital solutions stretches beyond
promotions. The best way for us to do that automation to real-time investor insights.
right now is to further embrace digital The data from the platform enables our
innovation. institutional sales team to proactively
Unlike traditional marketing, digital reach out to customers with suggestions
marketing provides a platform to focus on for switching between funds to achieve a
a specific target audience. Moreover, better rate, for example. We’re also
campaigns are designed on the basis of experimenting with leveraging the
consumer habits and preferences. Already, platform data to create reports on behalf of

our clients: not just performance reports; For treasury, this kind of digital
The Boston Consulting Group (BCG) is an but opportunity reports too, flagging innovation offers significant efficiency gains
American worldwide management interesting investment options for the as well as strategic wins. Nevertheless, it’s
consulting firm with 90 offices in 50 treasurer. important to realise that digitisation is an
countries. The firm advises clients in the Finally, we are using digital innovation to evolving trend, and what’s possible now is
private, public, and not-for-profit sectors improve our analytics and modelling, actually just the tip of the iceberg.
around the world, including more than specifically around liquidity. One of the
two-thirds of the Fortune 500 and is one widely recognised challenges in the mutual
of the 'Big Three' strategy consulting fund industry is that liquidity tends to A pathway to greater strategic
firms (MBB). tighten at certain points in the cycle – such focus
as quarter end. Armed with the data from
LG Electronics India Pvt. Ltd. the platform, we can now build up a much Eleanor Hill, TMI: To what extent does
manufactures and sells consumer clearer picture of liquidity in real time, and embracing digital innovation allow
electronics, home appliances, computer then optimise the portfolio as required. businesses – as well as finance and
products, and mobile phones in India. treasury functions – to be more
Nikhil Sohoni, Mahindra & Mahindra: strategic? Could you give some practical
SBI Funds Management Pvt. Ltd has 30 Picking up on some of the points Srinivas examples?
years of experience in funds raised, it’s very true that many treasurers
management and brings forward its still like to send faxes in connection with Rahul Tayal, LG: Embracing digital
expertise by consistently delivering value their investments, including instructions to innovation undoubtedly opens up
to its investors. It has a strong and proud move monies between investment funds. At opportunities for more strategic thinking –
lineage that traces back to the State Mahindra & Mahindra, we saw this as a whether that be at the boardroom level,
Bank of India (SBI) - India’s largest bank. hugely inefficient process, so decided to within sales and marketing, or in treasury
It is a Joint Venture between SBI and swap to a digital solution: the SWIFT India and finance. As I explained, at LG,
AMUNDI (France), one of the worlds’ platform. digitisation is allowing us to get to know
leading fund management companies. We are the first (and currently still the our customers that much better, meaning
only) company in India to sign up to this that we can be far more strategic in the way
payment platform and we are already we sell to them.
seeing significant efficiency benefits. Today, Increasingly, we are launching
before coming to this event, I invested large integrated campaigns with a focus on
sums in just four clicks. That’s the beauty of digital platforms. As an example, certain
digitisation. No faxes, no reconciliations and ranges in our product offering, such as air
no waiting for confirmations. It is seamless. purifiers and water purifiers are directed
Besides SWIFT India, we’re exploring a towards health-conscious people; and
number of other digital avenues, looking for through digital platforms we are targeting
new solutions to reduce the resource campaigns for these products through
burden and increase efficiency within the health influencers – namely celebrities.
treasury function. We’ve also attempted a This has helped in reaching a specific
Corporates are foreign remittance using blockchain, which target group, thereby generating greater
quickly adapting was a good learning experience. UPI doesn’t return on investment (ROI) for our
really fall into our remit in this part of the marketing and sales teams.
their business business, because the value of the payments In short, digital innovation is helping us
models to better we send or receive are simply too high. That to be more strategic about the customers
said, we absolutely recognise the potential we target and the offers we send them.
leverage digital of UPI within the right marketplace. We Blanket marketing is a thing of the past;
innovation and have explored it in a few of our group strategic partnerships fuelled by shared
companies and are already seeing the data are the future.
revamping benefits.
customer Elsewhere, we are considering advanced Nikhil Sohoni, Mahindra & Mahindra:
digitisation tools and are exploring We have been innovating around
experiences to leveraging artificial intelligence (AI) to payments and collections platforms.
meet this new enhance our foreign exchange (FX) hedging Although I mentioned that UPI was not the
practice. On many occasions, we tend to right tool for Mahindra & Mahindra
demand. react to movements in currencies. The idea Limited, we now use it extensively in one of
of leveraging AI is to be more proactive than our consumer-facing businesses,
reactive, aim to predict currency moves with Mahindra Rural Housing. The company
greater accuracy. provides loans to farmers who are located

in the interiors, or even further beyond, in the maximum strategic potential from their
the very deep interiors. digital investments must also consider the Mahindra and Mahindra Limited (M&M)
They have low annual incomes and loan digital and physical worlds together. This is is an Indian multinational car
repayment instalments may be as little as particularly true in tier 3 and tier 4 towns manufacturing corporation
INR 2,000-3,000 a month. The point here is where digital infrastructures are still headquartered in Mumbai, Maharashtra,
that nearly all of these payments used to be developing. The secret to success will be India. It is one of the largest vehicle
made in cash. When demonetisation tying the online and offline pieces together manufacturers by production in India and
happened, we encouraged customers to into a seamless solution. the largest manufacturer of tractors in
move to automated clearing house (ACH) the world. It is a part of the Mahindra
payments by offering 2% cash back. The Srinivas Jain, SBI Mutual Fund: For me, Group, an Indian conglomerate.
incentive is starting to kick in and 10-15% the best way to free up resources and
of our rural customers are now already on enable the business to become more Indian Software Products Industry Round
the ACH platform. This involved a lot of strategic is to build a friction-free Table (iSPIRT) is a think tank for the
groundwork for the company and the environment for customers, especially on Indian software products industry. It
bank. It was a task to get people to move the retail side. A good example of this is helps companies with policy – converting
from cash to digitised payment. electronic Know Your Customer (eKYC) ideas into policy proposals to take to
Interestingly, if the ACH looks like it will solutions. By committing to using eKYC in government stakeholders; playbooks –
fail because of insufficient funds in their our consumer business, we have converting conversations into playbooks
account, we have also set up a solution that onboarded more customers than any other for product entrepreneurs; and market
pings an alert, stating the amount they are large asset manager in India. catalysts – converting actions of self-help
short, to their mobile phone. If they want, As well as having an online eKYC communities into market catalysts for
they can then transfer this amount to their platform available, we also have around the software product industry.
account via UPI, thereby avoiding any 10,500 enabled devices across India that
failed payment charges relating to the ACH customers can use to become KYC- National Payments Corporation of India
or a delayed payment charge for an compliant. Interestingly, customers that (NPCI) is an umbrella organisation for
instalment default. have used the eKYC channels for operating retail payments and
Of course, for treasury, the benefits of onboarding are three times stickier than settlement systems in India. It is an
speeding up collections have been those who have used the traditional KYC initiative of Reserve Bank of India (RBI)
enormous. We can now be much more channels. So, through digital innovation, and Indian Banks’ Association (IBA) under
accurate with our cash forecasting and we have massively improved the customer the provisions of the Payment and
more strategic with investing any excess experience and garnered significant Settlement Systems Act, 2007, for
cash. As a company, we are no longer business benefits, whilst cutting down creating a robust Payment & Settlement
required to send our agents into the manual workloads. Infrastructure in India.
interiors to collect small amounts of cash In addition, we have built a business-to-
and this has also led to significant cost consumer (B2C) architecture, called Invest
savings, which is an additional positive. Stack, that rivals our offering in the
business-to-business (B2B) space, and
Divyesh Dalal, HSBC: From our makes use of API technology. Fintechs can
interactions with corporates, it’s clear that simply pick up these APIs and integrate
technology is one of the biggest strategic them into their platforms - and then start
enablers for businesses in India today – selling mutual funds. It really is that easy.
and that ‘instant’ business is a trend We have at least three fintechs already
companies can no longer ignore. Not only doing this, and this is a totally new arm of We can now be
can businesses leverage these market shifts our business strategy – but one that is
to speed up collections, as some of the proving to be highly effective.
much more
panellists have already discussed, but they accurate with our
can also turn them into strategic marketing
and sales tools, as well as competitive Digital disruption: threats and cash forecasting
bargaining chips. If, for instance, one opportunities and more
microfinance institution (MFI) can only
disperse a small ticket loan of say, INR Eleanor Hill, TMI: What emerging digital strategic with
1,000, by tomorrow morning, but a innovations should companies watch investing any
competitor can release a similar loan out for in the months to years ahead?
today, it’s clear which MFI will have the And how can they embrace the agility of excess cash.
strategic edge. new technologies, partners, and ways of
As well as understanding the working, whilst retaining the security of
opportunities, corporates looking to extract solutions they know and trust?

Divyesh Dalal, HSBC: There are a Nikhil Sohoni, Mahindra & Mahindra:
number of misnomers around ‘digital When it comes to disruption, I believe that
disruption’ which often lead to the we will see more corporates joining
concept being perceived as negative. But collaborative projects and effectively
digitisation doesn’t mean that everything leading the way around technological
must be done through digital channels – change. One area where treasurers would
and that tried and tested means of working no doubt be keen to work together with
have to be abandoned. As I alluded to banks and fintechs to solve an industry issue
before, there are benefits of combining the is KYC.
physical and digital worlds and essentially With each bank requiring different
augmenting existing processes with digital documentation, as well as multiple physical
elements. And in my view, this is the best copies of those documents, KYC is
form of digital disruption. currently a huge headache for everyone.
Take the lending sector, for instance. A But blockchain could potentially
number of deals are still done offline – but revolutionise the KYC process, meaning
thanks to digital solutions, such as online that corporates would only need to upload
credit checks and the eKYC solutions that one set of documentation, and then simply
Srinivas mentioned before, lenders can go grant permission to each of its banks to
through a largely offline process and yet access it.
still onboard a customer, identify their With such a solution, KYC processes
creditworthiness, and sanction a loan in could be completed in minutes, not days,
around five minutes. Approved loans can weeks, or even months. However, treasurers
also be disbursed more or less need to take that leadership role and push
immediately using an instant payments banks to look towards disruptive
service via API. technologies like blockchain in order to
So, don’t be fooled into thinking that build a better future for the industry.
embracing digital innovation or disruption
It is far better to has to mean a complete overhaul – it Rahul Tayal, LG: In terms of new
make mistakes could simply be an upgrade of systems technologies, we are closely observing new
and processes, enabling companies and trends such as chatbots, which will be the
along your consumers to have the best of both worlds. next big thing over the coming years. In fact,
digitisation by 2020 it is expected that 85% of customer
Srinivas Jain, SBI Mutual Fund: service interactions will be handled by bots.
journey, or in your Personally, I believe that a large The trend has started to dominate the
digital proportion of future digital disruption will industry already as research suggests that
be led by fintechs. The India Stack 27% of people are unable to figure out
collaborations, platform that I spoke about before came whether they spoke to a person or a chatbot
than to let fear about as a direct result of fintechs entering in their last customer service interaction.
the asset management industry and And on the topic of digital disruption, I’ll
prevent you from shaking up the way we do business – wrap up by saying that meaningful
getting started. which was arguably ripe for change. collaboration and a large dose of courage
They are bringing a totally new will be required for organisations to fully
dimension to investing, with solutions benefit from digital disruption and
such as robo advice. And traditional asset innovation. If businesses fail to embrace a
managers have to adapt to survive. India collaborative mind-set or treat it as a box-
Stack is our way of doing that. It has ticking exercise, they will fall foul of
allowed us to work with the fintechs within disruption.
an environment that is under our control. Certainly, adopting new technologies is
We are also leveraging fintechs to risky; but it is far better to make mistakes
provide us with deep-dive customer along your digitisation journey, or in your
analytics, and for last mile distribution. digital collaborations, than to let fear
So, we have combined the best parts of prevent you from getting started. As the rise
our existing offering with solutions from of the Chinese economy, and e-commerce
Disclaimer new entrants to improve the overall giants like Alibaba, have shown us, digital
Issued by HSBC Bank plc package for clients. Rather than referring innovation is the new world order – and the
For Professional Clients and Eligible counterparties to this as disruption, I prefer to call it biggest mistake companies can make is
only. Not for Retail customers. ‘progress’. failing to fully recognise this. ■

HSBCDIGIT18 NEW DAWN.qxp_Layout 1 24/09/2018 09:55 Page 9
Digital India: A New Dawn

for Treasury Management
As well as being technical experts and strategic business partners, today’s treasurers must also
keep up to speed with digital innovation. This means not only understanding the role of
digitisation in building a next-generation treasury function, but also recognising the importance
of digital disruption in helping the wider business to grow and prosper.
W
ith so much ‘noise’ around digital innovation, it can be difficult to filter
out the trends and initiatives that truly matter. To help treasurers in
India do just that, HSBC’s Global Liquidity and Cash Management
business held a Digital Innovation and Transformation Forum, April 2018 in
Mumbai. The Forum attracted over 100 corporate attendees and was hosted by
Lance Kawaguchi, Managing Director, Glob al Head - Corporates, Global Liquidity
and Cash Management, HSBC.

having to ‘choose sides’ between banks

Supporting widespread digital and fintechs. “HSBC will continue to focus
The Boston Consulting Group (BCG) is an
American worldwide management
adoption and invest in these types of partnerships
consulting firm with 90 offices in 50 Opening the Forum with an overview of going forward; to keep pace with the
countries. The firm advises clients in the India’s digital journey to date, Kawaguchi changing market and to best support our
private, public, and not-for-profit sectors explained how the country is well on its clients,” he noted.
around the world, including more than way to becoming a digitally-empowered
society and economy. He outlined some of
two-thirds of the Fortune 500 and is one
the key milestones achieved since the
Navigating the new digital
of the 'Big Three' strategy consulting
firms (MBB). launch of the government’s Digital India landscape
initiative in 2015, including the Following Kawaguchi’s opening address,
LG Electronics India Pvt. Ltd. introduction of Umung, a unified platform Pranay Mehrotra, Senior Partner, Boston
manufactures and sells consumer that supports e-government activities, and Consulting Group, took to the stage to
electronics, home appliances, computer the Smart Cities project aimed at delivering discuss how business and bank
products, and mobile phones in India. more sophisticated urban infrastructure interactions are changing as a result of the
and services. evolving digital ecosystem. He began by
SBI Funds Management Pvt. Ltd has 30 He noted that, “While one might think addressing the global themes of Industry
years of experience in funds that digital innovation projects such as this 4.0 and the digitisation of supply chains,
management and brings forward its are happening purely at a macro level, in moving on to the potential of blockchain
expertise by consistently delivering value fact, they are taking hold at a grassroots and robotics to enhance manufacturing
to its investors. It has a strong and proud level too, ensuring all citizens have access and deliver a better customer experience.
lineage that traces back to the State to a single ID for government and banking Homing in on the corporate treasury
Bank of India (SBI) - India’s largest bank. services, improving digital literacy and sphere, Mehrotra also spoke about the role
It is a Joint Venture between SBI and making internet accessible for millions of of banks in providing corporates with
AMUNDI (France), one of the worlds’ rural households.” cutting-edge digital solutions. He called out
leading fund management companies. Inevitably, this kind of systemic change the growing advisory role of banks, such as
is leading to new consumer and business helping treasury to better understand how
expectations. To support these, HSBC has to optimise the supply chain and improve
invested in its digital capabilities in the working capital metrics, through the use of
country. “We’ve leveraged digital technology. Data analytics would also be a
technology in the area of biometric data, key area where banks and corporates could
making it easier for you to initiate activity collaborate more closely in the future, he
on our e-banking platforms while said.
enhancing security through touch ID, Providing a counterbalance to these
voice recognition and most recently, facial digital opportunities, Mehrotra also
recognition,” he said. underlined one of the well-documented
“Furthermore, we were one of the first drawbacks of digitisation: cybercrime. He
banks to launch the Unified Payments urged treasurers in India to pay closer
Interface (UPI), allowing corporates and attention to cyber threats as digital
financial institutions digital access to the innovation continues, and to engage with
massive consumer-to- business (C2B) their banks around cybercrime prevention.
market. We were also among the first
banks to go live with e-mandates for direct Adding value through digital
debits and electronic support for Goods
and Services Tax (GST) Payments,” he innovation
explained. Next, four industry experts took to the
Kawaguchi then took a moment to stage to discuss the power of digital
address the elephant in the room: fintech. innovation in enabling business
“It’s been said before, but we truly aim to transformation; how digitisation allows
see these industry disrupters as partners, corporates to focus more on strategic
rather than threats,” he reassured the goals; and embracing digitisation within
audience – citing the bank’s partnership the treasury department.
with TradeShift, a fintech focused on Kicking off the session, Divyesh Dalal,
digitising the invoicing and supply chain India Head, Global Liquidity and Cash
process for corporates, as evidence of this. Management, HSBC, explained how
Collaboration is the order of the day, he forward-thinking corporates in India are
said, since there is no value in corporates quickly adapting their business models to

better leverage digital innovation and Picking up on some of the points raised
revamping customer experiences to meet by Jain, Nikhil Sohoni, Senior Vice Mahindra and Mahindra Limited (M&M)
new demands arising from the growth of President – Finance and Group Treasury, is an Indian multinational car
electronic transactions. Mahindra & Mahindra admitted that manufacturing corporation
Rahul Tayal, Director Strategic Business “many treasurers still like to send faxes in headquartered in Mumbai, Maharashtra,
and Marketing, Digital and E-commerce, connection with their investments, India. It is one of the largest vehicle
LG Electronics India Pvt. Ltd, agreed, including instructions to move monies manufacturers by production in India and
saying that: “Updating and even between investment funds”. But seeing this the largest manufacturer of tractors in
reinventing our business model to leverage as “a hugely inefficient process” the the world. It is a part of the Mahindra
the power of digitisation is a top priority at company decided to swap to a digital Group, an Indian conglomerate.
LG. As a consumer electronics giant, our solution: the SWIFT India platform.
aim is to know our customers as well as we “We are the first (and currently still the Indian Software Products Industry Round
possibly can - in order to drive sales only) company in India to sign up to this Table (iSPIRT) is a think tank for the
through one-to-one targeted promotions. payment platform and we are already Indian software products industry. It
The best way for us to do that right now is seeing significant efficiency benefits. helps companies with policy – converting
to further embrace digital innovation.” Today, before coming to this event, I ideas into policy proposals to take to
He then explained that, “Unlike invested large sums in just four clicks. government stakeholders; playbooks –
traditional marketing, digital marketing That’s the beauty of digitisation. No faxes, converting conversations into playbooks
provides a platform to focus on a specific no reconciliations and no waiting for for product entrepreneurs; and market
target audience. Moreover, campaigns are confirmations. It is seamless,” he catalysts – converting actions of self-help
designed on the basis of consumer habits explained. communities into market catalysts for
and preferences. Already, over 400 million In addition, Mahindra & Mahindra is the software product industry.
consumers in India are connected to the looking into the possibilities of technologies
internet. The country is also home to 300 such as blockchain and artificial National Payments Corporation of India
million smartphone users, each spending intelligence (AI), he said. “For treasury, this (NPCI) is an umbrella organisation for
an average of four hours a day using apps. kind of digital innovation offers significant operating retail payments and
There is therefore a tremendous potential to efficiency gains as well as strategic wins. settlement systems in India. It is an
target a particular audience; digital media is Nevertheless, it’s important to realise that initiative of Reserve Bank of India (RBI)
evolving and new trends are emerging.” digitisation is an evolving trend, and what’s and Indian Banks’ Association (IBA) under
Likewise, SBI Mutual Fund has possible now is actually just the tip of the the provisions of the Payment and
embraced digital innovation to better iceberg.” Settlement Systems Act, 2007, for
respond to customer needs, explained creating a robust Payment & Settlement
Srinivas Jain, Executive Director and Chief Infrastructure in India.
Marketing Officer at the company. “The Gaining a strategic edge
back end of our business has been digital for Moving on, the panel then discussed the
some time, but the front end has extent to which embracing digital
traditionally been paper-based. We wanted innovation allows businesses – as well as
a better way to serve our 6,000 odd treasury functions – to be more strategic.
institutional clients. So, in 2016, we set up a Here, Dalal shared some insights from
digital platform for our institutional his interactions with corporates, saying
investors. We have also embraced virtual that: “Technology is one of the biggest
accounts, to help ensure the appropriate strategic enablers for businesses in India
allocation of client funds, in a more today – and that ‘instant’ business is a
automated way,” he said. trend companies can no longer ignore.
For SBI Mutual Fund itself, the value of Not only can businesses leverage these
these digital solutions stretches beyond market shifts to speed up collections, but
automation to real-time investor insights. they can also turn them into strategic
“The data from the platform enables our marketing and sales tools, as well as
institutional sales team to proactively reach competitive bargaining chips.”
out to customers with suggestions for To Dalal’s point, Sohoni then
switching between funds to achieve a better explained how Mahindra Rural Housing
rate, for example. We’re also experimenting has garnered strategic advantages by
with leveraging the platform data to create moving customers away from cash
reports on behalf of our clients: not just towards digital payments. “For treasury,
performance reports, but opportunity the benefits of speeding up collections
reports too, flagging interesting investment have been enormous. We can now be
options for the treasurer,” he added. much more accurate with our cash

forecasting and more strategic with currently “a huge headache for everyone.
investing any excess cash,” he noted.
Redefining digital disruption But blockchain could potentially
In order to see the maximum possible The panel’s final topic for discussion was revolutionise the KYC process, meaning
operational and strategic benefits from digital disruption, and the inherent threats that corporates would only need to upload
this move away from cash, Sohoni said and opportunities. Dalal led the debate, one set of documentation, and then simply
the company had, “Encouraged stating that, “There are a number of grant permission to each of its banks to
customers to move to automated clearing misnomers around ‘digital disruption’ access it.”
house (ACH) payments by offering 2% which often lead to the concept being With such a solution, KYC processes
cash back. The incentive is starting to kick perceived as negative. But digitisation could be completed in minutes, not days,
in and 10-15% of our rural customers are doesn’t mean that everything must be weeks, or even months, he said. “However,
now already on the ACH platform.” done through digital channels – and that treasurers need to take that leadership role
Tayal was equally bullish on the tried and tested means of working have to and push banks to look towards disruptive
potential for digital innovation to unlock be abandoned.” technologies like blockchain in order to
strategic gains, saying simply that: There are benefits of combining the build a better future for the industry.”
“Digital innovation is helping us to be physical and digital worlds and essentially Tayal concluded the session, saying that
more strategic about the customers we augmenting existing processes with digital “meaningful collaboration and a large dose
target and the offers we send them. elements, he said. “So, don’t be fooled into of courage will be required for
Blanket marketing is a thing of the past; thinking that embracing digital innovation organisations to fully benefit from digital
strategic partnerships fuelled by shared or disruption has to mean a complete disruption and innovation. If businesses
data are the future.” overhaul – it could simply be an upgrade of fail to embrace a collaborative mind-set or
Meanwhile, Jain explained that, in his systems and processes, enabling treat it as a box-ticking exercise, they will
view, “The best way to free up resources companies and consumers to have the best fall foul of disruption,” he predicted.
and enable the business to become more of both worlds.” “Certainly, adopting new technologies is
strategic is to build a friction-free Jain, meanwhile, explained how he risky; but it is far better to make mistakes
environment for customers, especially on believed the concept of disruption was along your digitisation journey, or in your
the retail side. A good example of this is closely linked to fintechs. “We have built a digital collaborations, than to let fear
electronic Know Your Customer (eKYC) business-to-consumer (B2C) architecture, prevent you from getting started. As the
solutions. By committing to using eKYC called Invest Stack, that rivals our offering rise of the Chinese economy, and e-
in our consumer business, we have in the business-to-business (B2B) space, commerce giants like Alibaba, have shown
onboarded more customers than any and makes use of application us, digital innovation is the new world
other large asset manager in India.” programming interface (API) technology. order – and the biggest mistake companies
Fintechs can simply pick up these APIs and can make is failing to fully recognise this,”
integrate them into their platforms - and he advised.
then start selling mutual funds,” he said.
“This platform came about as a direct
result of fintechs entering the asset
Turning physical negatives into
management industry and shaking up the digital positives
way we do business – which was arguably Next, Nakul Saxena, Industry Policy
ripe for change,” he continued. “They are Advocacy Fellow at the iSPIRT Foundation,
bringing a totally new dimension to gave an insightful presentation looking at
investing, with solutions such as robo India Stack – a set of APIs that allows
advice. And traditional asset managers governments, businesses, startups and
have to adapt to survive.” developers to utilise an unique digital
We will see more For Sohoni, however, digital disruption infrastructure to move India’s economy
corporates joining means a different way of working between towards a presence-less, paperless, and
corporates and banks. He believes, “We cashless service delivery model. The open
collaborative will see more corporates joining API team at the iSPIRT Foundation is a
projects and collaborative projects and effectively pro-bono partner in the development,
leading the way around technological evolution, and evangelisation of these
effectively leading change. One area where treasurers would APIs, he explained.
the way around no doubt be keen to work together with After outlining how India Stack works,
banks and fintechs to solve an industry Saxena delved into the benefits, which
technological issue is KYC,” he said. include bringing millions of Indians into
change. Sohoni went on to explain that with the formal economy by reducing friction in
each bank requiring different traditional banking channels. He spoke
documentation, as well as multiple extensively about the role of UPI in
physical copies of those documents, KYC is achieving this. He described how India

Stack also stands to revolutionise we have already seen between four and
government services, moving them into a five million transactions processed via
more transparent, accountable and secure BBPS. Over the next 24 months, we expect
environment, through solutions such as transaction volumes to increase
DigiLocker. enormously, driven by the government’s
Indian citizens who sign up for a desire to move towards an electronic
DigiLocker account receive a dedicated model, together with the growing
cloud storage space that is linked to their interoperability and accessibility of bank
Aadhaar (UIDAI) number. Meanwhile, networks,” he predicted.
organisations that are registered with Despite the progress made to date, Asbe
DigiLocker have the ability to push was realistic about the fact that a critical
electronic copies of documents and mass has not yet been reached in terms of
certificates, such as driving licences, onboarding Indian citizens to digital
directly into citizens’ lockers, he explained. channels. To help achieve this, NPCI will
Much to the interest of the audience, continue “firing on all cylinders” and focus
Saxena also outlined how India Stack could on continuous improvement of its
reduce arduous KYC processes down to solutions to make them even easier for
circa two minutes, thanks to a paperless citizens to use – and more compelling from
process whereby a person’s identity and a value proposition perspective. “As an
address are verified electronically through example, we are in the process of
Aadhaar Authentication. launching UPI 2.0 (yet to be approved by
Saxena wrapped up by saying that the regulator) which will enable mandates
transactions that once would have been and invoices to be carried along with the
written off as science fiction are now transaction. We believe this will be a useful
becoming a reality in India, thanks to API functionality which will spur even greater
technology. interest in UPI,” he said.
Asbe then opened up the floor to
questions from the audience. Concerns
Digital payments innovation from corporates included real-time
The final presentation came from Dilip confirmations for UPI transactions,
Asbe, CEO, National Payments increasing the Rs. 1 lakh daily limit on UPI
Corporation of India (NPCI). He began by payments, and recourse on ACH returns.
recapping the role of the NPCI in aiming is On all counts, Asbe confirmed that NPCI is
to transform India into a society no longer working to iron out any creases, and
dependent on cash. “This does not mean invited individual corporates experiencing
‘cashless’, but a society that uses less cash – issues with particular banks, or with ideas
there is an important difference,” he noted. for improving current set-ups, to get in
Asbe then highlighted some of the key touch with the NPCI. “After all, a
milestones that the not-for-profit collaborative approach to developing our
organisation has achieved since its solutions is critical to moving towards our
inception eight years ago. He spoke about vision to be the best payments network
flagship initiatives such as the Immediate globally,” he concluded.
Payment Service (IMPS), the National
Automated Clearing House (NACH), and
UPI – which is seen as one of the most Furthering the digital cause
revolutionary payments products in India. This presentation brought the Forum to a
He also mentioned the significant close, but discussion of the topics did not
progress being made through schemes stop there, with lively debate carrying on
such as RuPay Credit Card (with over a networking dinner. And, of course,
contactless capabilities in the pipeline), the HSBC’s Global Liquidity and Cash
National Electronic Toll Collection (NETC) Management business will continue the
and the successful pilot of the Bharat Bill conversation going forward, drawing
Payment System (BBPS). “We have now corporates’ attention to important digital
taken BBPS into live mode, and five bill trends and opportunities, as well as Disclaimer
payment categories are allowed,” he investing in the most relevant digital Issued by HSBC Bank plc
added. innovations to enhance the overall client For Professional Clients and Eligible counterparties
“Although the solution is relatively new, experience. ■ only. Not for Retail customers.

HSBCDIGIT18 ZENG.qxp_Layout 1 24/09/2018 09:55 Page 14
On the Brink of a
Cashless Society?
T
By Irene Zeng, Director, he environment in Hangzhou, China today is similar to many other cities
around the world: building sites become shiny new shops, offices and
Head of Sales – Global apartments; new infrastructure moves people faster than ever, and a
vibrant community of people work, study and spend their leisure time. But in one
Banking Corporates, important respect, Hangzhou is quite different.
Greater China Global

A blueprint for China and including utilities, taxis, public transport
Liquidity and Cash and retail, services can be paid via
beyond smartphone. Naturally, many of
Management, Asia-Pacific In addition to being the home of Chinese Hangzhou’s citizens experience quite a
technology giant Alibaba and payment culture shock when they visit other cities
service provider Alipay, Hangzhou is a and have to pay by cash or card. However,
virtually cashless city. Almost everything the expectation is that paying with mobile

will become more the norm in other

Chinese cities. How will this rapid and Fig 1 Benefits of migration to electronic collection
profound shift in the way that people and
businesses pay for goods and services
affect corporate treasurers?
Although the pace of change can be CHEAPER
TARGETED
quicker in some markets, the migration
INSIGHTS INTO MARKETING
away from cash collections has been well- CUSTOMER
ELECTRONIC MORE BESPOKE SALES
received by most businesses, not only COLLECTIONS BEHAVIOURS
SECURE STRATEGIES
within China but also globally. Electronic AND SPENDING
collections are now cheaper, more secure PATTERNS RELEVANT
RICHER INCENTIVES
and notably accompanied by richer data. DATA
This can all be harnessed to offer
intelligence and insight into customers
and their behaviours to target marketing
campaigns, design incentive programmes
and formulate strategies. As regional and
global corporations gain experience and active users. They spend around a third of example of China illustrates. The difficulty
recognise the value of electronic their total smartphone time on WeChat, for businesses selling into China and
collections in one city or country, they are equivalent to around two hours a day. other markets that are experiencing
able to transfer this experience to their Another closely related trend is the growing e-commerce volumes is the need
operations elsewhere, which further level of adoption, and speed of growth in to support an expanding range of digital
accelerates adoption. e-commerce. China represents nearly half collection methods; however, at the same
of the world’s e-commerce3 which time offline sales still far exceed those
accounted for more than 23% of retail online. Consequently, in addition to
Catalysts of change sales in 2017, of which 75% – over $1tr - emerging new payment methods that
In many respects, the shift towards will be transacted via smartphone. This support e-commerce and m-commerce,
electronic payments and collections is figure is expected to increase to 40.8% by companies still need to support face-to-
neither new nor surprising. Consumers 20214. face payment methods, often including
and businesses have a wide range of These phenomena are not only relevant cash. Furthermore, new payment
electronic payment and collection to corporations that have local operations
methods available to them, including in China; other markets, such as India,
cards, direct debits, ACH and wire Hong Kong and Singapore are also
payments, as well as, in a growing number experiencing similar trends. What is
of markets, instant and mobile payments. different, however, is the drivers of change
However, there are three closely-linked in each market. In China, for example, the
trends that are now driving cashless trend towards a cashless society is being
societies at an unprecedented rate: driven by market forces; however, in
First is the ubiquity of smartphones. countries like India the digitisation of
Over half of China’s population accesses payments is the result of government or
the internet through a smartphone1, five central bank initiatives. For example, the
times the number of the United States. Indian government was keen to use Over half of
The growth in smartphone usage is a demonetisation as a way to increase China’s
global trend: China is the 26th country transparency in the economy and
globally ranked by percentage of encourage financial inclusion. One population
smartphone penetration, with countries or important illustration of this has been the
areas such as the Netherlands, Taiwan, government’s support for the Immediate
accesses the
Hong Kong, Norway and Ireland all seeing Payment Service (IMPS), an instant, internet through a
penetration rates above 90%2, illustrating interbank electronic funds transfer
the scale of change and opportunity. platform.
smartphone, five
Related to this is the use of social times the number
media, such as WeChat, which in China
offers integrated payment capabilities Taking an omni-channel of the United
through WeChat Pay – another trend that approach States.
is taking shape globally. For example, in In all markets where the use of digital
March 2018, WeChat’s owner Tencent payments is proliferating, e-commerce
announced that WeChat had one billion volumes are growing rapidly, as the

Fig 2 Top 15 Countries by Smartphone Users and Penetration
TOTAL POPULATION
SMARTPHONE
PENETRATION
1
1,388,233,000
# China SMARTPHONE USERS 51.7%

717,310,000
RANK COUNTRY TOTAL SMARTPHONE SMARTPHONE

POPULATION USERS PENETRATION
2 India 1,342,513,000 300,124,000 22.4%
3 United States 326,474,000 226,289,000 69.3%
4 Brazil 211,243,000 79,578,000 37.7%
5 Russian Federation 143,375,000 78,364,000 54.7%
6 Japan 126,045,000 63,089,000 50.1%
7 Germany 80,636,000 55,492,000 68.8%
8 Indonesia 263,510,000 54,494,000 20.7%
9 Mexico 130,223,000 52,993,000 40.7%
10 United Kingdom 65,511,000 44,953,000 68.6%
11 France 64,939,000 42,399,000 65.3%
12 Turkey 80,418,000 40,010,000 49.8%
13 Italy 59,798,000 39,323,000 65.8%
14 South Korea 50,705,000 36,262,000 71.5%
15 Spain 46,070,000 30,771,000 66.8%
Source: 2017 Global Mobile Market Report from Newzoo

methods tend to add to (rather than

A global view
replace) existing payment methods,
leading to increased complexity and cost. The value proposition of omni-channel
This problem becomes even greater for collection solutions extends globally but it
companies that operate internationally as is often most compelling in countries such In all markets
local payment practices and instruments as China and India where payment
differ across countries. digitisation is growing fastest. However, where the use of
A fast-growing number of corporations this is not an isolated phenomenon. The digital payments
are choosing to manage the proliferation combined stimulus of smartphone
of emerging and traditional collection proliferation, use and reach of social is proliferating, e-
methods in a consistent way through media, and growth of e-commerce, commerce
omni-channel collection solutions, such particularly in fast-growing and emerging
as those in the retail and luxury goods markets where these trends are most volumes are
sectors. This type of solution, which is acute, will continue to fuel changing growing rapidly,
gaining particular traction in China, consumer behaviours and treasurers will
provides merchants with the ability to need to respond quickly and efficiently. as the example of
accept and process a comprehensive Furthermore, as e-commerce becomes China illustrates.
range of collection methods through a increasingly cross-border and consumers
single channel. Incoming transactions are expect the same level of payment
presented in a standard format, and convenience when travelling overseas,
accompanied with rich information to electronic and digital payments trends will
support reconciliation, financial and continue to expand to other parts of the
strategic analysis. Corporate treasurers world. The right platforms will allow
therefore avoid the need to establish corporations to not only accommodate
separate channels for different collection trends as they appear today, but also to
methods or countries. At the same time, position their business for change and
an omni-channel approach also resolves competitive opportunities ahead. ■
the difficulty of different cut-off times and
varying post-transaction documentation
requirements between countries.
The commercial benefits of omni-
channel collection solutions are clear,
with customers enjoying a better, more
consistent experience when purchasing
products and services, leading to fewer
abandoned transactions and improved
customer satisfaction. Additionally, the
working capital benefits should not be
underestimated. Efficient collection,
predictable value-dating and the ability to
use data to automate reconciliation are all
essential components in an effective
treasury and working capital
management strategy. Treasurers can
accelerate the cash conversion cycle,
improve short-term cash flow forecasting
and liquidity planning, and reduce the
cash ‘buffer’ maintained for working
capital purposes.
Notes
1 51.7 percent, Newzoo's Global Mobile Market Report,
April 2017
2 Zenith’s Mobile Advertising Forecasts 2017
3 eMarketer, 2017
4 eMarketer, 2017

HSBCDIGIT18 OPEN BANK.qxp_Layout 1 24/09/2018 13:28 Page 18
Being Open to
Open Banking
By Drew Douglas, Head of HSBC has a new global strategy, is investing

Liquidity and Cash heavily in technology and is embracing
Management, North America
open-architecture to help its clients in digital
and Lance Kawaguchi,
transformation.
Global Head – Corporates,
Global Liquidity and Cash
T
reasurers at multinational corporations face immense pressure to make
better use of emerging, digital technologies – both to increase efficiency in
Management, HSBC treasury’s key areas of responsibility and to help the larger company meet
its strategic objectives. And this overarching pressure to automate and embrace
transformation has put additional focus on what is perhaps the single most
important relationship treasury has outside the company – with its banks.

HSBC is investing heavily in technology how things are done in London are exactly
and partnering with fintechs that can aid the way things are done in Singapore. For a
their effort to make banking faster and large multinational client, Mr. Kawaguchi
easier while addressing the often varying says, there is now “one group that covers it
needs of corporate clients. HSBC CEO John globally, not just for consistency of client Treasurers at
Flint in June announced the bank plans to experience, but also to make sure that the multinational
invest USD15-USD17bn in technology as solutions they are trying to put forth to the
part of its growth1. treasury team are better tailored to what’s corporations face
On a conference call, Mr. Flint said, important to them. It’s not one-size fits all.” immense pressure
“Technological disruption will accelerate in This is true of cash management, he
the coming years. It is therefore essential for says, adding that while some observers to make better use
the long-term competitiveness of the firm have said it’s become commoditised, at of emerging,
that we keep investing in technology. Being HSBC it’s considered strategic. This
able to invest at this point of the cycle will approach has helped HSBC secure both digital
differentiate future winners from the rest of North America’s and The World’s Best technologies.
the industry. We’re already seeing leading Bank for Transaction Services in the
banks push ahead of the rest. Given our size Euromoney magazine’s Awards for
and scale, we have an ability to invest that Excellence 20182.
others don’t, and we need to be better at this “Everything has to be client centric,”
than the competition.” says Mr. Kawaguchi. This means all its
But it’s going to take a strategic products and all its solutions have been
application of the investment to help based on the feedback from clients.
clients. As HSBC acknowledges, when it Previously, he says, banks tended to work
comes to automation, companies may internally “to try and guess what clients
have different priorities. For instance, a wanted instead of asking them what they
company with an outdated Enterprise needed.” So far, the sector- based approach
Resource Plan (ERP) may not see is working, based on more recent feedback.
upgrading as a priority, preferring instead “What we’re getting from the market and
to focus on new methods of accepting from our sector experts is that it’s actually
payments. Or a corporate customer may be much more efficient for the bank because
solely focused on geographic expansion or now we know where to allocate our
reorganisation and may move slowly in resources,” says Mr. Kawaguchi.
digitalisation as it spends time
acclimatising to new markets.
Ultimately, HSBC’s strategy rests on the Bring on the Technology
belief it can best service its clients using all With its sales structure in place, HSBC’s
the tools available to it—those developed Global Liquidity and Cash Management
inside the bank and those by third parties— says it can now better deploy its products
and by organising the bank to best meet the and strategy to hit all the needs of its
individual needs of each customer. clientele; needs that, as mentioned, are
very often disparate.
Drew Douglas, Head of Liquidity and
New Global Model Cash Management, North America at
As a result, concurrent with its big tech HSBC, says he and his colleagues
push, the bank’s Global Liquidity and Cash frequently see examples of these disparate
Management is realigning how it does or conflicting priorities when dealing with
business: It has been transitioning from a a range of clients. “We have some clients
purely country-based sales model to a where liquidity and working capital
global sector sales model. This effort is optimisation is a priority and we spend a
being led by Lance Kawaguchi, Global lot of time working with them on
Head - Corporates, Global Liquidity and solutions,” he says. But the next client may
Cash Management at HSBC. offer up a wholly separate set of priorities.
“We changed our Global Banking model “They might be in expansion mode and
to be more industry- aligned,” he says, and therefore liquidity and working capital
to move away from being a very country optimisation is going to stay at current
and region-specific bank, aiming for a levels.” Or they decide not to expand the
single approach to client interactions. So way they use their ERP system, reasoning

that they will just use them as they are efficiency, and reduce cost. One of the
because current objectives are to move offerings HSBC says is an attractive option
into new markets and prioritise resources for clients is its virtual accounts product,
on the expansion. which is currently live in the UK and being
HSBC is investing What Mr. Douglas and HSBC are rolled out in several other markets,
looking to do is to support both scenarios particularly in the US.
heavily in using the concept of interoperability and Virtual accounts have been around for
technology and open banking. Interoperability, via a long time, but they are now being used in
application programming interfaces or a wider context. Mr. Douglas says
partnering with APIs, provides the capability for systems customers often oversimplify the value of
fintechs that can and organisations to work together virtual accounts, thinking they only speed
seamlessly, based on common standards. up the way in which one can, for example,
aid their effort to This means partnering to more easily open an account under the same entity.
make banking facilitate the thousands of transactions But they offer much more, he says,
multinationals make daily by smoothing particularly if clients explore their value in
faster and easier. out bumps that get in the way. the context of using them for receivables
Mr. Douglas says “we have spoken of and payables management, in-house
interoperability for many years in asset banking and managing liquidity. They also
management, custody, prime brokerage help companies with the thorny issue of
and cash management. With rapidly having too many physical accounts.
expanding fintech solutions, the Replacing physical accounts with virtual
importance of ‘interoperability’ has never ones, for example, can reduce
been higher in the treasury space. The administrative costs.
more successful large international banks With virtual accounts, Mr. Douglas says
need to get the open architecture, the banks can support multiple purposes for
open banking, right,” he says. “We can’t any single bank account. “Through the use
partner with every fintech , but we think of next generation virtual accounts a
the world is changing quickly to the world company has a specific vendor or supplier
of open APIs; where we have a it needs to receive from and pay to can
responsibility to interoperate across the create as specific virtual accounts and
fintech environment.” better tracking of receipts and payments.”
And that means looking at banking Multipurpose accounts with huge volumes
across everything from HSBC’s own online are extremely difficult for large
offering, HSBCnet, “to a client’s treasury corporations, he says. However, if the
management system to their ERP systems company is given a specific virtual account
to SWIFT; to ACH payment process and payables and receivables land in that
providers and to how that universe account, they are much easier to execute,
interoperates to the satisfaction of specific track and reconcile.
client’s priority. Our focus is to support a Companies can do this very quickly,
thriving treasury environment” Mr. which then allows them to understand
Douglas says. where their cash reconciliation stands. “If
you’re a company running advanced cash
forecasting, then reconciling your future
Fintech investment forecasts of cash against your historic
Since 2015, HSBC has been a strategic receivables is critically important. The
investor in cloud- based treasury faster you can do that the better,” Mr.
management solutions provider Kyriba3, Douglas says.
and it also has investments in procure-to- The advantage of virtual accounts is
pay company Tradeshift4. And last year it that the path of that auto reconciliation
joined forces with GT Nexus, a supply can more easily be created and identified,
chain management platform that provides That structure can be extended to
companies with end-to- end connectivity, multiple subsidiaries, each with separate
visibility and collaboration with suppliers5. virtual accounts with “cash automatically
So HSBC, like many large global banks, being pooled.”
is leveraging third parties within its own Mr. Douglas acknowledges this can be
platforms to expand service offerings, done on an Excel spreadsheet or even
enhance client experiences, increase executed through a company’s treasury

management system. But with virtual “The digital evolution that’s happening on it, as they strive to enhance the
accounts, companies are drilling down right now has a significant impact on customer experience. They also must
into the data at multiple levels, “and that’s sustainability,” Mr. Kawaguchi says. HSBC, continually look ahead to and be thinking
the purpose of virtual accounts.” like others in the banking sector, has of the new digital capabilities that clients
recently come out with its own will need not just in the next few years but
sustainability agenda. “So a key factor and in the next 10 or 20.
Bringing Technology drive for that change is actually Mr. Douglas encapsulates this thinking
Agility Global digitalisation. If you think about reducing with an example of one of HSBC’s clients
A good example of where HSBC is using its the time ships are docked, there are several starting to embrace robotic process
technology capabilities is in the natural studies now where they’re talking about automation. “I think in today’s world it is a
resources sector, specifically oil and gas. the inefficiency of the lag time that’s conversation about not only what services
Much of the feedback it has received has happening” while ships sit idle “because of we can provide them but also finding out
helped HSBC refine its product offering to either paperwork not being reconciled or what our clients are doing around
make it more intuitive. paperwork not being stamped or vetted.”7. robotics,” he says. “We're very interested to
HSBC says feedback is also keeping the The customs world itself is also very find out what they’re doing because
bank ahead when it comes to areas where inefficient and paper- driven, Mr. whenever they employ robotics that means
corporations are less mature. “As the Kawaguchi notes, so HSBC is working with there’s some process they’re trying to
banker that sits in the middle, HSBC can several corporates, shipping companies automate or pain point they are trying to
help many up- and-coming companies to and customs houses on a blockchain eliminate. If we can link to that and help,
go international and look at best practices project to help this part of the shipping we become that much more valuable as a
that many of the larger multinational process become more straight-through8. service provider.” ■
companies are using already”6. “All of this helps fosters more
“I think you’ll see that we’ve sustainability, helps reduce the carbon
undertaken a range of projects at HSBC to footprint [of the sector] in addition to
develop agile technology for the long-term taking out the whole paper in the treasury
benefit of the bank and our customers,” space. All of these efforts add up to a kind
says Mr. Kawaguchi. of common goal that that has happened on
And this is a must, he adds. “The digital the back of the Paris Accords,” Mr.
age is right here, right now. It’s no longer Kawaguchi said.
looking at blue skies and what’s going to
happen. It’s happening. And many of the
banks, many of our own suppliers, for The Bank of the Future
instance, developers of ERPs or TMS, No matter where digitalisation is applied –
everyone is going digital; so, if you think whether virtual accounts, natural
about it and look at it from a client’s resources or shipping – the bank of the Virtual accounts
standpoint, everyone is talking digital now, future must embrace digital have been around
everyone is talking APIs; everyone is transformation and not look back. “A
talking about open banking and talking comprehensive digital transformation is a for a long time,
about having a seamless connectivity. So clear ‘no regrets’ move to prepare for a
you’re seeing a convergence between digital and data-driven world,” states a
but they are now
multiple sectors and leveraging some of McKinsey research report from 20179. This being used in a
the best practices that are happening in means that as banks become more client-
one area of the company to help in others.” centric, they must get comfortable with the
wider context.
open architecture/open banking concept.
In fact, their distinctiveness may depend
Adding Sustainability in the Mix
Of course, no discussion of the future of
banking and technology can ignore how
sustainability enters the equation, and Notes
HSBC is helping drive corporate 1 (https://www.wsj.com/articles/hsbc-ceo-promises-to-invest-17-billion-in-technology-and-asia-growth-1528725268).
2 (https://www.hsbc.com/news-and-insight/insight-archive/2018/hsbc-best-for-transaction-banking-says-euromoney).
consideration of the trend. For instance, 3 (https://www.kyriba.com/blog/jean-luc-robert/welcoming-hsbc-new-investor)
in the shipping sector, which is loaded 4 (https://tradeshift.com/press/tradeshift-raises-250-million-in-series-e-funding-round-bringing-company-valuation-to-1-1-
billion/)
with lots of paperwork and too much 5 (https://www.theglobaltreasurer.com/2017/07/11/hsbc-and-gt-nexus-partner-to-offer-digital-supply-chain-platform/).
6 (https://www.treasury-management.com/news/1086/hsbc-launches-facial-recognition-banking-for-corporate-
downtime at docks as ships await customs customers.html).
clearance, HSBC is working with partners 7 (https://multichannelmerchant.com/blog/6-effective-steps-to-create-a-sustainable-shipping-environment/)
8 (https://www.bloomberg.com/news/articles/2018-04-18/drowning-in-a-sea-of-paper-world-s-biggest-ships-seek-a-way-out)
to speed up the process and make it more 9 (https://www.mckinsey.com/industries/financial-services/our-insights/data-sharing-and-open-banking)
efficient overall.


HSBCDIGIT SUSTAIN.qxp_Layout 1 24/09/2018 09:57 Page 23
Sustainability in Treasury:
A View Beyond Financing
T
here have historically been questions around whether or not treasuries can
By Lance Kawaguchi, actively contribute towards their companies’ sustainability objectives.
Managing Director, Global However, in an age where sustainable financing has become more readily
available, treasuries now have a seat at the table and are more engaged in helping to
Head – Corporates, Global drive the sustainability agenda for their firms. As Lance Kawaguchi, Managing
Director, Global Head - Corporates, Global Liquidity and Cash Management at
Liquidity and Cash HSBC explains, there are several other areas that corporate treasurers can focus on
in today’s environment to influence their sustainability goals positively.
Management, HSBC
In less than twenty years corporate ethics KPMG’s most recent Survey of Corporate
have risen dramatically from something Responsibility Reporting1 underlines this
that a handful of large corporates did under point by revealing that formal reporting of
the corporate social responsibility (CSR) CR performance among the G2502 has
mantra in a relatively low key manner, to a risen from 37% of companies in 1999 to
more comprehensive sustainability 93% in 2017. In a survey commissioned by
approach that is a frequent discussion HSBC, East and Partners found that three
topic in numerous boardrooms globally. quarters of European investors judge

companies on their Environmental, Social The reasons why treasury can now play a social element of sustainability goals. An
and Governance (ESG) credentials. This more active role are varied, but include important concept here is the social
increased investor focus has led board dynamics such as technological innovation, performance of members of the corporate
members to identify the different types of the rising importance of workplace supply chain. This has become increasingly
sustainability measures the various parts wellbeing and an increasingly fluid relevant for business reasons too, as large
of the business can take, and treasury is regulatory environment. corporations are now keenly aware of the
no exception. potential knock-on reputational and
commercial damage to themselves of a
Environmental supplier or customer that has poor
So what can treasury do? Recent advances in technology mean that ecological or working practices. One
These and numerous other examples of treasuries now have numerous approach adopted by some leading
the rise of an Environmental, Social and opportunities for making a positive treasuries is to apply a minimum ESG
Governance (ESG) approach to capital environmental contribution to their requirement for customers/suppliers before
management suggest that this is a trend corporations’ sustainability strategy. onboarding a new relationship. While Know
that will persist and extend into smaller Digitisation is no longer blue-sky Your Customer (KYC) has traditionally been
corporates as well (the KPMG report thinking, but a practical reality. By adopting seen by many treasuries as an issue for
revealed a similar CR reporting growth electronic transaction processing, treasuries banks, a growing number are beginning to
trajectory among N100 companies to that can drastically reduce the amount of paper see the value of using a KYC approach when
of G250 corporates3.) In this sustainability- used by both their own corporation, as well applying ESG requirements to their own
positive environment, every part of a as their corporation’s counterparties. In counterparties.
corporation - including treasury - is addition to a potential reduction in water New tools to facilitate this due diligence
expected to help advance the pollution, this also has an environmental process are already becoming available.
corporation’s strategic sustainability aims. benefit in terms of emissions, both during The US Natural Resources Defense Council
But what practical CSR steps can treasury paper production and in the greenhouse (NRDC) and China’s Institute of Public &
actually take? gases no longer emitted during paper Environmental Affairs (IPE) have launched
Aligned with the investor approach, the document delivery. an IPE Green Supply Chain Map, which
opportunities open to treasuries today can The international trade cycle is links leading multinational corporations to
be divided into three broad categories: something that for many companies today their suppliers’ environmental
is unnecessarily extended by a combination performance. Using publicly available data
● Environmental of the use of paper and the large number of from the Chinese government, the database
● Social parties involved. Adopting digital processes and map offer real-time data and historical
● Governance instead of paper (and in due course also trends in air pollution emissions and
blockchain technology) could appreciably wastewater discharge for almost 15,000
shorten this cycle. Furthermore, treasury’s major industrial facilities in China, as well as
adoption of cloud computing can also have access to environmental supervision
a major impact on the environment. A records for over half a million more6.
recent report from WSP and Microsoft4 Another way in which treasury can send
concluded that Microsoft Cloud was 79-93% the right social message is in deploying
more efficient than a traditional in-house funding initiatives for smaller suppliers.
data centre and that Microsoft’s Azure These could range from providing supply
Compute had 92-98% lower annual carbon chain finance, to offering early settlement
emissions. terms to suppliers below a certain size, and
Treasury’s All these innovations can be facilitated even perhaps to prepayments for raw
influence on the with the assistance of a banking partner that materials. While DSO/DPO remain core
has not only made its own sustainability treasury targets, settlement initiatives for
corporate commitment to digitisation and the this supplier demographic can deliver an
environment5, but that also has extensive appreciable CSR benefit for a modest
ecosystem can be global in-house expertise in these various working capital cost.
used to support areas. An additional incentive is that other Digitisation and automation in treasury
parties, such as tech vendors and clearing can also provide a social gain for treasury
the social element system providers, are also aligned and ready employees. Manual cash management and
of sustainability to facilitate this digital transition. investment processes result in a heavy
workload and unsocial working hours,
goals. which ultimately degrade employee well-
Social being and performance. However, if
Treasury’s influence on the corporate improvements such as automated cash
ecosystem can also be used to support the reconciliation and investment have been

implemented, treasury employees will be accomplish, but fortunately the new Board-level support has already been
more productive and under less stress. boardroom emphasis on all elements of mentioned as a facilitating factor that is also
ESG makes it far more likely that treasurers likely to persist or increase as more senior
will have high-level support when they try to managers appreciate the importance of ESG
Governance stamp out illicit payments, such as to the corporation. In addition, a
Treasury obviously plays a key corporate kickbacks disguised as commission comprehensive sustainability approach is
role in risk management - one element of payments. also likely to be supported more generally
this lies in ensuring compliance with Additionaly, cyber security is now by newcomers to the workforce, both in
regulation and corporate policies. Apart increasingly being regarded as a part of ESG treasury and the corporate world.
from safeguarding the company’s financial governance. This is because it is seen as part Millennials continue to increase as a
assets, this also helps to fulfil the of the need for corporate decisions to reflect proportion of the total workforce and are
governance part of ESG. obligations to society at large, as well as to expected to represent 35% of the total
This risk management can take many shareholders, suppliers, customers and globally by 20208. As a group, they place a
forms, from complying with anti-money employees. Corporations and treasuries strong emphasis on the importance and
laundering legislation, to following country- that implement robust cyber security value of sustainability, with one survey
specific rules, such as only invoicing in local measures are implicitly impeding the stating that 92.1% of millennials believe that
currency. Banks continue to be an propagation of cyber threats such as working for an environmentally and socially
important channel through which treasury malware. Some academics see the concept responsible company is important9. They
can gather information on changing of corporations implementing stronger are therefore likely to be as supportive of
regulations. cyber security as part of their CSR as being any ESG activities as the boardroom.
Corruption is another major governance akin to vaccinating against disease. If
issue that treasury needs to be involved in sufficient numbers are protected, others
preventing. In certain countries, corruption also benefit through ‘herd immunity’7. Conclusion
is still prevalent, so treasuries need to be Treasuries have a responsibility to support
especially sensitive to any new countries the overall corporate sustainability strategy,
into which their corporation may be Facilitators but many may not realise that the
expanding. Treasury’s core control and While treasury’s responsibilities in relation organisations they deal with on a daily basis
governance role means that it has a major to sustainability may feel like a further – their banks – can be a valuable source of
responsibility to block any dubious activities burden on what is usually one of the most information and assistance with this task.
or transactions. lightly-resourced corporate functions, there Digitisation, automation, accelerating the
Historically this has sometimes been are various factors and entities that will help trade cycle and cloud treasury systems are
extremely difficult for treasury to to facilitate their implementation. just some of the areas that banks can help
An important point is that several of the with.
actions that support sustainability goals are Elsewhere, treasuries may find they are
also those that treasury is likely to be pushing a sustainability door that is more
undertaking anyway for other reasons, such open than they realised, with other groups
as introducing automation to improve such as technology providers, senior
efficiency and reduce costs. In many cases management and employees also being
these are also actions that certain banks are supportive. All of this leads to the
well-positioned and willing to assist with as conclusion that treasury can make a real
part of their existing relationship difference to sustainability goals and can
Digitisation, commitments. start working on implementing changes. ■
automation,
accelerating the
trade cycle and
Notes
cloud treasury 1 https://assets.kpmg.com/content/dam/kpmg/be/pdf/2017/kpmg-survey-of- corporate-responsibility-reporting-2017.pdf
2 The G250 are the world’s 250 largest companies by revenue based on the Fortune 500 ranking of 2016.
systems are just 3 The N100 is defined in the KPMG Survey of Corporate Responsibility Reporting as: “...a worldwide sample of 4,900
companies comprising the top 100 companies by revenue in each of the 49 countries researched in the study.”
4 “The Carbon Benefits of Cloud Computing: A Study on the Microsoft Cloud” https://www.wsp.com/en-
some of the areas US/insights/microsoft-cloud-computing-environmental- benefit-study
5 In addition to major investments in digital technology and automation, HSBC has also recently launched a new energy
that banks can policy - https://www.hsbc.com/-/media/ hsbc-com/newsroomassets/2018/pdfs/180420-hsbc-energy-policy.pdf?la=en-
gb&hash=2BE95DA2F82B9EF99AFF93A05566ECAE8E1774E6 - that aims to reduce environmental damage by no longer
help with. providing financial services to five categories of potentially damaging energy related activity.
6 https://www.nrdc.org/media/2018/180103 and http://wwwen.ipe.org.cn/ MapBrand/Brand.aspx?q=6
7 https://www.straitstimes.com/opinion/corporate-social-responsibility-should- include-cyber-security
8 https://www.manpowergroup.com/millennials
9 https://www.morningfuture.com/en/article/2017/08/16/millennials-csr- companies-responsible/60/

HSBCDIGIT18OCEAN.qxp_Layout 1 24/09/2018 10:22 Page 26
OceanaGold: Future
Proofing Growth
A
t HSBC, we partner with our clients across industries and markets, with
By Lance Kawaguchi, an extensive on-the ground network of senior bankers with an in-depth
Managing Director, Global understanding of their sectors. The following is a client example of our
partnership in the Natural Resources, Utilities and Chemicals sector. As a global
Head – Corporates, Global business that is growing quickly, multinational gold producer OceanaGold needs
a scalable, flexible, cash management and liquidity investment infrastructure.
Liquidity and Cash
Management, HSBC and So, when a reshuffle in its banking group Zealand and was constructing a mine in
triggered the decision to select a new the Philippines, managed from its
David Andrada, Global Sector primary cash management bank, headquarters in Melbourne, but
Head – Natural Resources & OceanaGold chose HSBC. further international expansion was
In mid 2012, OceanaGold refinanced already in prospect. The company
Utilities, Global Liquidity and its debt facilities and reviewed its therefore decided to put out a formal
banking relationships. At the time, the tender for a new global cash
Cash Management, HSBC company had mining operations in New management provider.

from a treasury perspective. We also like

Mandate award
the fact that it enables us to make the best
The tender process started in September use of any float we have, while
2012 and concluded in February 2013 simultaneously maximising yield.” This has
when OceanaGold announced that it was
awarding its cash management mandate
validated the view
to HSBC. A number of factors played into Implementation we took during the
this decision, one of which was banking The implementation, which involved
platform consistency. “We were incorporating OceanaGold bank accounts
RFP that a
previously having to use two different globally into an IEF structure, was partner who could
cash management platforms from the successfully completed in early 2014. A key
same provider, which was challenging,” element in the implementation’s success support our
says Matthew McConnell, OceanaGold’s was that HSBC’s implementation manager growth trajectory
Group Treasurer. “The two systems was based in the company’s head office
weren’t compatible and required location of Melbourne. and new locations
separate login credentials and tokens, so This proved to be of considerable value would add value
the global consistency of HSBCnet was as the implementation progressed. A
appealing. In addition, we had received common issue in sectors such as natural in terms of future-
positive feedback on HSBCnet from our resources and utilities (NRU) is that the proofing.
Philippine operations where it was often globally dispersed nature of the
already in use.” business can make global banking
Matthew McConnell,
A single global cash management implementations a major headache for
partner would also streamline day to day corporate treasuries. A global treasury
Group Treasurer,
treasury operations. This was particularly based in the head office location finds itself OceanaGold
relevant in view of the company’s ongoing having to monitor and manage
expansion, as considerable efficiencies implementation activities in remote
and cost savings could be achieved if locations and time zones.
future acquisitions did not result in the For the OceanaGold implementation,
proliferation of banking relationships. A HSBC appointed its Melbourne
banking partner such as HSBC, with a implementation manager as the global
global footprint that could support likely communication manager for the project.
future OceanaGold acquisitions, would This meant that the company had a single
minimise the risk of this. local point of contact for all information
Finally, OceanaGold maintained and activities relating to the
various cash balances across its implementation globally. The HSBC global
businesses, including one in Philippine communication manager liaised with
peso (PHP). Therefore, a banking partner colleagues in offices in New Zealand, USA,
that could offer interest compensation Canada and the Philippines to streamline
that reflected the level of all balances the implementation process. “This
globally – including PHP – would be arrangement definitely made life easier for
adding value. us than having to deal with multiple HSBC
HSBC’s Interest Enhancement Facility contacts globally during the
(IEF) met this criterion. IEF enables implementation,” says Matthew
clients to obtain preferential credit McConnell.
interest rate terms on global balances. As
mentioned above, this was particularly
pertinent for OceanaGold in view of its Relationship evolution
operations in the Philippines and its PHP Since the implementation, the advantages
balances there. In addition, the company of having a single global banking
held USD from its gold sales, as well as relationship with HSBC have been
NZD, AUD and CAD. underlined by the bank’s support for the
“The IEF was a neat solution for our company’s M&A growth. For instance,
needs,” says Matthew McConnell. “Its when the company added to its presence
notional nature is a better fit for us in in New Zealand by acquiring the Waihi
terms of flexibility than a solution Gold Mine on New Zealand’s North Island,
involving physical movement of cash and it opted to transfer its banking to HSBC to
also incurs less management overhead further leverage the benefits of its IEF

structure and a single HSBCnet login for day operation of the account is handled
control/visibility. HSBC had the necessary locally, but OceanaGold’s central treasury
new banking facilities up and running for in Melbourne also has visibility on, and
Waihi within a month. The company made access to, the account.
the same decision, when it made its first US Another development in the evolution of
acquisition, with the Haile gold mine in the relationship between OceanaGold and
South Carolina. When new bank accounts HSBC has been the refinement of the
and corporate cards were required, it company’s IEF. At the time of the tender,
turned to HSBC to transition the banking the company’s anticipated credit balances
services. “This has validated the view we were relatively modest. However, largely
took during the RFP that a partner who due to a significant increase in production,
could support our growth trajectory and its actual credit balances have been three to
new locations would add value in terms of four times the level originally anticipated. In
future-proofing,” says Matthew response, HSBC revised the interest rate
McConnell. The Haile gold mine is now up tiers in the company’s IEF by adding two
and running with HSBCnet, travel and tiers on top of the original three, as well as
expenses cards, ACH, wires, reporting, adding new accounts for the new
statement viewing and file upload. Day to acquisitions in the USA and New Zealand,
so the company could fully benefit from its
larger cash balances.
More generally, the IEF has proven a
Client profile: OceanaGold good fit with OceanaGold’s day to day
business operations. The company needs to
OceanaGold Corporation is a mid-tier, multinational gold producer. Over the years, the maintain local currency balances in all the
company has built up extensive global operating and development experience in low-cost countries in which it operates in order to
production. OceanaGold owns a portfolio of geographically diverse, high-quality assets in meet operational expenses. As a gold
the Philippines, New Zealand and the USA. producer, the company’s primary
The company has a strong commitment to sustainability and has operated in accordance receivables currency is USD. Apart from the
with this for more than a quarter of a century, in doing so building a strong reputation for specific benefit the IEF provides in relation
responsible environmental management and community engagement. It works collabora- to OceanaGold’s Philippine peso balances,
tively with valued stakeholders to identify and invest in social programs that are designed the facility is also convenient as regards the
to build capacity beyond a mine’s life cycle. company’s focus on reducing bank debt. As
The company’s most recent acquisitions have been the high-grade Waihi Gold Mine on soon as cash accrues in Australia it can be
New Zealand’s North Island and – through the purchase of Romarco Minerals – the top-tier used to repay debt or fund acquisitions.
Haile Gold Mine in South Carolina, USA. In October 2017, the company announced the In practical terms, the company treasurer
declaration of commercial production at Haile. regards the IEF as a more appropriate
OceanaGold has a significant pipeline of organic growth and exploration opportunities solution for the company’s needs than the
within the Asia-Pacific and Americas regions and has also made strategic investments in alternative of sweeping or pooling
two juni or exploration companies – Gold Standard Ventures and NuLegacy – both focused structures. Furthermore, keeping
on projects in Nevada, USA. convenient track of balances is trivial via
HSBCnet.
Having a client coverage in key hubs to support our Natural

Resources, Utilities and Chemical clients is vital to ensure we deliver
the adequate support to our clients for their liquidity and cash
management needs globally. This has been a clear success
throughout our relationship with OceanaGold.
David Andrada, Global Sector Head, Natural Resources & Utilities,
Global Liquidity and Cash Management, HSBC

Recent developments
While HSBC has been providing
OceanaGold with travel and expenses
cards for some time, the company is also
in the late stages of going live with the
bank’s MiVision online card
management platform. This will give the
company’s administrators and card-
holders considerable flexibility and
convenience in the day to day operation
of cards. In addition to reporting
functionality, administrators can request
single/ multiple cards themselves or by
automatically requesting holders to
complete an application. They have
granular control of limits in real time, as
well as card/PIN replacement and
numerous other controls. Cardholders
also have extensive control, including
requesting card/PIN replacements,
updating billing/personal details and
requesting cards be sent to third party
addresses (such as a hotel, if a card is
lost/stolen while travelling). MiVision can
also be connected to ERP or other
corporate systems for automated data
transfer.
The relationship between OceanaGold
and HSBC has also continued to evolve in
terms of day to day operations. A recent
example was where an issue arose with TT
remittances from the US to OceanaGold’s
account in New Zealand always arriving a
day late due to the international dateline.
Conclusion
HSBC’s local client service manager took OceanaGold’s partnership with HSBC exemplifies the company’s desire to maximise its
the initiative and discussed the problem strategic agility when making acquisitions. New businesses can be readily rolled into
directly with the paying bank and agreed a existing infrastructure, such as HSBCnet and the company’s IEF. This not only reduces the
solution whereby the remitter would turnaround time on acquisitions, it also maintains straightforward visibility and control,
schedule the payments a day earlier so they as well as maximising return on corporate cash.
would arrive with the correct value date. ■
“Finally, there’s also the consideration that we can have the best of
both worlds when it comes to service,” says Matthew McConnell.
“In-country, local language support and expertise are available, but
if an issue cannot be resolved there, it is straightforward to raise it to
a global level for resolution.”

HSBCDIGIT LATAM CYBER 5pp.qxp_Layout 1 24/09/2018 11:31 Page 30
Latin American Cybersecurity:

A Fast-Growth Priority
By Lance Kawaguchi, Managing Director, Global Head –

Corporates, Global Liquidity and Cash Management, HSBC and
Carlos Gonzalez Fillad, Managing Director, Regional Head of
Latin America, Global Liquidity and Cash Management, HSBC
T
he recent cyber breach of five firms in Mexico and the USD15m
exploitation of their connections to the SPEI1 domestic payment system2
have placed a spotlight on Latin American cybersecurity. However, while
the losses may have raised awareness in the region, there is still much work to be
done by corporates and their treasuries to prevent this sort of breach becoming
more commonplace. Lance Kawaguchi, Managing Director, Global Head –
Corporates, Global Liquidity and Cash Management and Carlos Gonzalez Fillad,
Managing Director, Regional Head of Latin America, Global Liquidity and Cash
Management at HSBC, examine the current cybersecurity landscape in the region
and explore some of the best practices for cyber risk mitigation.

implementing global best practice. In both

The cyber landscape
cases, there is definitely an important role
Corporate awareness and activity for banks to play in supporting clients.
Even before recent events in Mexico, which This has been very apparent from the
followed similar breaches from around the strongly positive response of Latin
globe, corporate treasurers were becoming American corporate treasuries to
increasingly concerned about cybersecurity cybersecurity events and information
issues. A report by Celent3 in November sharing offered by HSBC.
2017 revealed that 82% of treasurers cited
cybersecurity as their number one concern. Government awareness and activity
Yet despite this, corporate preparations The response of governments in the
appear less than comprehensive, as the region to cybersecurity is almost as diverse
report also revealed that globally: as that of corporates. Mexico has been
among the most active. Even before the
● 70% of organisations have not developed recent attacks, Mexico's central bank had
a cyber-incident response plan set out rules relating to the SPEI system
● 46% of organisations have not that required financial institutions to have
implemented or enhanced their phishing emergency response protocols prepared
awareness training for employees in the that would be triggered in the event of a
past 12-24 months cyber attack4. The central bank has also
● 43% of organisations lacked board-level announced the formation of a dedicated
responsibility for the review and cybersecurity unit that will design and
management of cyber risk issue information security guidelines to
● 37% of organisations have not yet the country’s banks.
estimated the financial impact of a Elsewhere, the Argentine government
cyber attack has already started working on cyber
● 34% of organisations do not assess their initiatives, including a cyber-policy
suppliers or customers for cyber risk partnership with the US5. Despite these
initiatives, there is still room for
Based upon various conversations with improvement in other Latin American
HSBC clients in Latin America, it seems countries, with a recent World Economic
likely that these figures would probably also Forum paper reporting that Latin America
be regionally representative. However, the was particularly vulnerable to cyber
picture is extremely varied, with a small attacks and that many countries in the
percentage of treasuries having a region still lacked the capacity to respond
sophisticated cybersecurity approach, a to major cyber incidents6. This is perhaps
larger group who are increasingly cyber- understandable, because until now the
aware, but a majority where both awareness primary focus for much of the available
and activity are low. government (and bank) resources in Latin
In general, these groupings seem to America has been focused on inhibiting
reflect the corporate demographic, with the the laundering of physical cash by
largest corporations typically being the most narcotics cartels.
active, while the large number of smaller This further underlines the value of being
companies are less active. However, able to rely on the support of a banking
irrespective of size, companies that trade partner that has made a substantive The response of
internationally seem to be more cyber- investment and commitment to governments in
aware than purely domestic organisations. cybersecurity and that is open to sharing its
At one end of the spectrum, companies knowledge of global best practice. In the region to
may be taking minimal or no cybersecurity addition, as more Latin American cybersecurity is
measures, but even where companies companies expand into new trade
have put security processes in place, corridors, the geographic extent of these almost as diverse
control gaps still exist. For example, capabilities across trade corridors will
treasury staff may lend each other security become increasingly important. For
as that of
tokens, or access to vendor data may not example, if a Mexican company has a corporates.
be stringently controlled. There is business unit in China and there is a cyber
therefore a need not only to raise cyber attack there, the company will value insight
awareness but also to be discovering and on the Chinese cyber situation that can be

provided at the head office in Mexico, as attractive target for the theft of both cash
well as elsewhere. and data.
Greater technical connectivity and the
The value of data rise of straight-through processing have
Treasury is also Treasury's control of cash makes it an unfortunately also given hackers a new
an extremely obvious target for hackers. However, what is attack vector. When a client submits a
less commonly realised is that direct payment file to their bank, the bank
attractive target monetary loss may not actually be the processes it automatically. Therefore, if
for the theft of biggest risk: treasury is also an extremely attackers manage to hack a corporate ERP
attractive target for the theft of financial and system they could alter payment files to
financial and commercial data. The potential send payments to bogus vendor bank
commercial data. reputational and indirect financial losses accounts that they control. A similar risk
from this could be far more severe than a applies to treasury management systems. In
straightforward cash theft. both cases, having access to process
The data stolen could be sold on for consulting that includes qualified local
commercial advantage, such as in bidding language in-country specialists in ERP and
for a contract where knowing a competitor's treasury management systems can help in
key price points is a major advantage. identifying and rectifying potential
However, in industries such as aviation, vulnerabilities in existing systems. However,
there is also real concern that stolen as a growing number of Latin American
technical data could be used for exploits, corporates transition from paper to
such as hijacking an aircraft. electronic processes, these specialists can
More generally, while the average Latin also be invaluable in supporting secure
American citizen may not regard initial system setup.
corporate cash loss through cyber theft as A bank that is capable of offering this
of particular concern to them, they are breadth and depth of expertise can also add
definitely becoming much more aware of value by helping a corporation to do its own
the personal risks to them of corporate or due diligence on its trading partners. A
government cyber data theft. The last few corporate may be secure, but if its suppliers
years have seen a steady trickle of security or customers (and their counterparties in
failures by store chains, credit reporting turn) are not, then the corporate itself is also
agencies and government bodies. While indirectly at risk. The good news here is that
the exact extent of the damage depends a bank that operates globally across all
upon the data stolen, in some cases categories and sizes of client will have
individuals had their identity data conducted its own due diligence on each of
completely compromised, rendering them them. While this obviously doesn't offer a
exceptionally vulnerable to identity theft. strict guarantee, the extensive scope of this
These individuals are unlikely to trust counterparty scrutiny offers a measure of
these organisations again, but the most comfort to companies conducting their own
severe failings may also have due diligence if they know their
fundamentally undermined the integrity counterparties also bank with the same
of the cyber ecosystem and its methods of reputable bank as themselves.
identity validation7.
The weakest link: people
Interconnection risk Technology measures, such as ensuring all
In the case of treasury, this data loss risk has network devices have the latest patches
become more acute in recent years as its applied or installing deception technology,
role has changed. Twenty years ago are undoubtedly an important element in
treasuries were far more detached from the effective cybersecurity. However, the
rest of the business (in terms of both benefits of these can be (and often are)
technology and processes) than they are completely negated by the human element,
today. Treasuries typically now play a much so a more holistic approach is needed that
greater consultative role in the business, also accommodates this. Individuals still
which coupled with the ubiquity of persist in clicking on phishing links or
enterprise resource planning (ERP) systems committing similar security indiscretions,
makes them more closely integrated with thus giving hackers their opportunity.
the rest of the business and thus a highly Hackers are well aware of this

unfortunate tendency. While they can and Effective cyber training attacks, such as Petya, the speed of spread
do automate scanning for technological Security awareness training, phishing tests, both within corporations and globally has
shortcomings (such as unpatched plus changing the corporate culture, are all been extremely rapid: on one global
hardware), they increasingly realise that valid steps in protecting against these corporate's network, 62,000 servers and
carefully crafting a credible looking email threats, but a key point here is repetition. workstations were knocked offline by Petya
with poisoned links to an individual within a Organisations such as the InfoSec Institute within an hour11. A global banking partner
company is likely to prove a more rewarding recommend that best practice is to repeat can be indispensable in a situation like this
attack vector. In many cases, rather than security awareness training every 90 days.10 if it is able to aggregate the cybersecurity
technology, people (or the business However, repetition will only be really information it collects across its entire
processes they are responsible for) can be effective if personnel also understand the network in real time and can share it with
the weakest cybersecurity link. reasoning behind the security processes clients wherever they require.
Verizon's most recent annual Data they learn about during cyber training.
Breach Investigations Report8 analysed Personnel circumventing secure measures Investing in business continuity
53,000 actual cyber incidents, which in the interests of convenience is a common Although the statistics in the Celent report
included 2,216 confirmed data breaches problem, but one that is less likely to occur if on the lack of board-level responsibility for
across 65 countries. One of the report's key they understand the purpose and value of cybersecurity are hardly encouraging, there
statistics was that 4% of phishing campaign such measures. are signs that this attitude is changing. From
targets would click a phishing link. While there are many generic good client conversations it appears that more
Furthermore, this behaviour was persistent: practices, training also needs to contain boards are now accepting cyber
someone who clicked a link once was more an element of role-specific material. For responsibility and more treasuries are
likely to do so again in the future. example, a software developer who never allocating budgets for cybersecurity, both
One of the biggest challenges here is leaves the office faces different threats within treasury as well as in the business
changing corporate culture. While from a sales person who often works from more generally.
individuals will take a measure of home. Cyber fraud attempts will also A robust strategy coupled with
personal responsibility for physical risk in often be role-specific, such as treasury or investment in both technological and
their organisation (such as sounding a fire finance personnel receiving bogus personnel cybersecurity measures can do
alarm upon discovering a fire) this payment instructions seemingly from much to make a corporation relatively
behaviour often doesn't apply to cyber senior management via a faked email unattractive for targeted attacks and less
risks. Instead, the mindset seems to be: address. These types of attack have vulnerable to generic attacks. However, it is
'the organisation takes care of all that, I unfortunately been successful in the past, unsafe to assume that even the most
don't need to do anything'. Nothing could but the training required to prevent them stringent measures will guarantee
be further from the truth. Individuals have is not especially onerous.
a personal responsibility at many levels, Alongside training, there is the need for
especially since the personalisation of internal measures to prevent corrupt
attacks makes it easier for cyber criminals employees from deliberately initiating or
to succeed. Private indiscretions on social assisting cyber crime. Rigorous employee
media today will boost the effectiveness of vetting can help, but also needs to be
socially-engineered spear phishing supported by other measures, such as
attacks tomorrow. whistle-blowing policies and
This indifferent attitude of many technological solutions.
individuals to their personal cyber Another key point is the sharing of best
responsibilities is alarming given that cyber practice and expertise, both internally and
crime continues to increase at a meteoric externally. For example, due to the nature In many cases,
rate (partly because of the attractive of their role, treasuries have a strong rather than
risk/reward ratio for perpetrators when control background and can add value by
compared to physical crime). Just one sharing that mindset with other functions technology, people
example of this cyber crime growth in Latin that do not. (or the business
America comes from statistics on Brazil in The global nature of cyber threats also
the AWPG's most recent quarterly report9, needs to be incorporated into corporate processes they are
which included: security strategy and training. Companies
with overseas subsidiaries face a particular
responsible for)
● a 379% increase in phishing (430 in Q3 challenge here, but the value of rapid can be the weakest
versus 1,631 in Q4) information exchange is equally applicable
● a 245% increase in scam websites (2,562 to purely domestic entities. A new and
cybersecurity link.
in Q3 versus 6,293 in Q4) successful type of attack in one country is
● a 247% increase in social media-based likely to be re-used elsewhere around the
scams (1,909 in Q3 versus 4,724 in Q4) globe shortly thereafter. In some recent

invulnerability, so having a business

continuity plan (BCP) that incorporates
cyber as well as physical threats is essential.
This needs to include measures that will
enable the business to function (even if only
at a basic level) while the clean-up takes
place. (It may also include sharing
information on the attack with trusted
partners so that they can share information
anonymously with other parties to hinder
further external propagation of the attack.)
In the event of a serious attack, it is
possible that the company's usual
processes for making payments will be out
of action. For instance, HSBC has seen at
least one example of a Latin American
client whose ERP was the subject of a
ransomware attack, leaving it unable to pay
staff salaries and suppliers. HSBC assisted
by scanning its own systems to retrieve
details of previous transactions and payee
details. Then using a highly secure manual
payment process provided by HSBC, the
client was at least able to make the majority
of the necessary payments.
In this example, HSBC provided the
workaround on an ad hoc basis, but having
a back-up process of this nature in place as
part of a cyber BCP makes sense. However,
accomplishing this requires the support of a
bank that has a deep understanding of how
the business functions and the nature of its Conclusion
financial flows and can leverage that on the Latin American companies and their treasuries are increasingly keen to learn more about
client's behalf in a cyber crisis. cybersecurity best practice and how to implement it. However, an important factor in
For many Latin American companies, achieving this is to understand that this is an ongoing process (not a 'fit and forget') - as is
the priority in recent years has been growth, any investment required to support it. It is therefore not unreasonable for these
so their focus has typically not been on companies to expect a similar (or greater)level of cyber commitment from their banks. It
developing a cyber BCP, even though they is not just that corporates understandably need to feel that their banks are following best
may already have a BCP for physical risks. cyber practice in handling client data and payments, but that they are also leading it and
Partly driven by recent cyber events, this sharing it globally. This could cover a broad spectrum, ranging from news of attacks and
attitude is gradually starting to change. In possible mitigation methods, to the development of new authentication methods such
some cases they are beginning to appreciate biometrics. Having access to this sort of expertise as part of a close working relationship
that growth through acquisition may can add significant value for a corporate trying to develop, implement or extend a
require a separate cyber BCP in its own cybersecurity strategy.
right. A company's existing measures,
processes and personnel may be relatively
secure, but what about those of an
acquisition it makes? These need to be
Notes
evaluated, ideally by expert process
1 1 Sistema de Pagos Electrónicos Interbancarios
consultants who can identify any 2 https://www.bloomberg.com/news/articles/2018-05-29/mexico-foiled-a-110-million-bank-heist-then-kept-it-a-secret
weaknesses in processes and technology, 3 "Combatting Treasury Fraud: External Forces Changing the Cybercrime and Cyberfraud Landscape", Celent, November 2017
4 https://www.bloomberg.com/news/articles/2018-05-29/mexico-foiled-a-110-million-bank-heist-then-kept-it-a-secret
and recommend appropriate remedies. An 5 https://www.state.gov/r/pa/prs/ps/2017/04/270496.htm
acquisition may need to be an additional 6 https://www.weforum.org/agenda/2018/03/this-is-the-biggest-threat-to-latin-america-s-digital-transformation/
7 https://blogs.scientificamerican.com/observations/the-equifax-hack-bad-for-them-worse-for-us/
element in a cyber BCP that will require 8 https://www.verizonenterprise.com/resources/reports/rp_DBIR_2018_Report_execsummary_en_xg.pdf
updating as the acquisition is on-boarded 9 http://docs.apwg.org/reports/apwg_trends_report_q4_2017.pdf
10 https://resources.infosecinstitute.com/security-awareness-course-design-best-practices/#gref
and its systems and processes transition to 11 https://cloudblogs.microsoft.com/microsoftsecure/2018/01/23/overview-of-rapid-cyberattacks/
those of the acquirer. ■

HSBCDIGIT AKZO.qxp_Layout 1 24/09/2018 10:06 Page 35
Our sectorised
focus has enabled
us to better
understand
clients like
AkzoNobel and
link their needs
with trends in the
industry.
AkzoNobel: A Journey with HSBC

– Building a Strong Partnership
Treasury Transformation: ● To provide comprehensive support to

By David Andrada, Global their businesses
Delivering Value To maintain integrity
Sector Head – Natural ●
Our journey with AkzoNobel started in ● To meet their corporate values.
Resources & Utilities, Global 2007, when they embarked on a treasury
transformation project called ‘One The project was demanding and entailed
Liquidity and Cash Finance’, with the intention of achieving a changes to their banking infrastructure,
number of key objectives for their finance technology, treasury policies and
Management, HSBC function: relationships with business units.
As part of One Finance, AkzoNobel
● To operate and be benchmarked as floated an Asia cash management RFP in
‘best in-class’ level versus our peer 2009 with the intention of increasing
group visibility of cash, improving cash flow

control, enhancing cash management and modules, such as in-house cash, payments
FX efficiency and standardising factory, treasury risk management, and
documentation under global and regional SAP XI, together with the application of
groupings. XML ISO 20022, MT101/940 messages and
In view of its extensive network, HSBC SWIFTNet through a Service Bureau. Once
was appointed by AkzoNobel as the implemented, these would improve
company’s primary banking partner in a control over cash flow as well as enhance
broad range of regions and countries: cash management and foreign exchange
execution.
● Asia Pacific: China, Hong Kong, An in-house bank structure was
Indonesia, Japan, Singapore, deployed in Asia Pacific and zero
Philippines, Taiwan and Vietnam balancing structures were implemented
● Middle East: Bahrain, Egypt, Qatar, from all open and semi-open economies
Turkey, Saudi Arabia and United Arab into Singapore, where POBO and
Emirates payments in the name of are executed.
● Latin America: Mexico and Argentina The benefits captured by successfully
as part of subsequent RFP’s for the implementing these solutions have been
respective regions. substantial. AkzoNobel has been able to
reduce the number of bank accounts it
In view of its In order to meet AkzoNobel’s objectives, holds by 50%. Furthermore, by
the solutions that HSBC needed to deliver streamlining processes it has been able to
extensive network, included a single centralised electronic lower foreign exchange and transactional
HSBC was banking platform, Payment on Behalf of charges by nearly 70%, as a result of
(POBO), payment in the name of and cash economies of scale and straight-through
appointed by pooling structures. In order to accomplish processing. An important consequence of
AkzoNobel as the these implementations successfully, it was these improvements has been that they
apparent that close collaboration would be have been able to enhance their capital
company’s required. This was accomplished by a structure by substantially reducing net
primary banking combination of detailed dialogue and debt and freeing up working capital.
robust project governance by the steering
partner in a committee, which established a shared
broad range of vision and goal. This meant that HSBC Recent developments
understood the requirements and was well In addition to the cash management
regions and prepared from the outset to partner and mandate, in March 2014 HSBC was
countries. provide strategic advisory during the awarded the sole bank mandate for trade
transformation journey. finance activities, which included letters of
The project included design and credit and guarantees. (All these were
development of various SAP treasury previously managed locally by each entity,

resulting in an inefficient process.) The Asia Pacific, and particularly China,

mandate spanned 14 countries in Asia continues to be an important and growing About AkzoNobel
Pacific, with AkzoNobel NV borrowing market for the company, where their
under a single umbrella facility. banking requirements and the solutions AkzoNobel is a leading global paints and
AkzoNobel has also revisited the needed to satisfy them are continuously coatings company and a major producer
management of foreign exchange risk in a evolving. AkzoNobel has also recently of speciality chemicals. Customers
search for further improvements, which announced the separation of its Speciality around the world use their brands and
has since resulted in the introduction of Chemicals business, where HSBC is products. Some of these are household
centralization of hedging exposures for providing cash management advisory and names, while others are more
restricted currencies in Asia Pacific. Pre- subsequent implementation. specialised products, but they share a
agreed margins have been established up “Our relationship with HSBC has grown common purpose to create everyday
to certain thresholds with HSBC, after significantly since 2012 and the team essentials that make people’s lives more
which Bloomberg FxGo is used for demonstrates good collaboration and liveable and inspiring.
competitive bidding and transaction delivers commitments on time,” says Eva The company announced the sale of
execution. Pang, Head of Treasury at AkzoNobel. its Specialty Chemicals business in
“Trust is one of the core components that March 2018 and is expected to complete
has helped to build our strong and enduring the transaction by the end of the year.1
A strong relationship: now and business relationship. Therefore, while the Today, AkzoNobel is a EUR 9.6bn
into the future company has already achieved company with over 35,000 employees.2
Over the past five years AkzoNobel and considerable benefits from the
HSBC have built a robust and trusted transformation, we look forward to
relationship. continuing our partnership with HSBC to
Core to the success of the relationship bring further value to our businesses.”
has been HSBC’s open approach, “Our relationship of more than five
consistent engagement, insights on best years with AkzoNobel is a testament to
practices, regulatory guidance and our strong advisory, implementation and
innovative market-leading solutions. This ongoing services, which are key elements
has enabled them to leverage HSBC’s for a successful start and longevity in any
insights to adapt their business agenda in cash management relationship,” says
response to an era of shifting economic Syed Zohair Ahmed, Senior Vice
powers and volatility in the business President, Global Liquidity and Cash
environment. “Our sectorized focus has Management at HSBC Singapore.
enabled us to better understand clients like “AkzoNobel and HSBC will continue to
AkzoNobel and link their needs with explore opportunities to expand and Notes
1 https://www.akzonobel.com/en/for-media/media-
trends in the industry” says David further strengthen the partnership. With releases-and-features/akzonobel-sell-specialty-
Andrada, Global Sector Head, Natural an evolving regulatory landscape and our chemicals-carlyle-group-and-gic-eu101
2 https://www.akzonobel.com/en/for-investors/for-
Resources and Utilities, Global Liquidity investment in innovation on the rise, the investors-overview
and Cash Management at HSBC. journey continues.” ■

HSBCDIGIT18 WHOLE NEW WORLD.qxp_Layout 1 24/09/2018 10:08 Page 38
Liquidity Management:
A Whole New World
By Lance Kawaguchi, Managing Director, Global Head –

Corporates, Global Liquidity and Cash Management, HSBC
W
hile the treasury environment is never static, one area where it has
become particularly dynamic of late is liquidity management. Multiple
drivers have combined to create a situation where continuous
(re)evaluation and evolution have become almost mandatory. Lance Kawaguchi,
Managing Director, Global Head – Corporates, Global Liquidity and Cash
Management at HSBC examines these factors and how they are affecting the
process of liquidity management.

ran successful tests in July 2017 with 16 addition to all the other drivers) to revisit
Change drivers
participants with GBP20m payments and is this sort of heritage structure is the
Macroeconomic factors expected to increase its transaction limits governance angle: e.g., is the structure in
One of the most striking changes in during 20188. Elsewhere, the new instant line with any corporate policy changes and
corporate liquidity in recent years is its payments system in the Netherlands, which does it comply with regulation such as
sheer volume. In the aftermath of the is due to go live on May 1 2019, will process PSD2?
financial crisis, corporate treasuries unlimited amounts9. While updating obsolete liquidity
worldwide put huge efforts into freeing up A further consideration is that instant structures and processes may be essential,
cash from within the business and have payments currently operate on a the pace and persistence of change means
continued to do so. More recently, the nationwide basis, but it seems likely that that doing this alone is insufficient. Any
global economy has also been picking up, they will continue to evolve to the point changes made must also incorporate a
with global GDP growth of 3.2% in 2017 (up where they also function cross-border. degree of flexibility, so that when future
from 2.5% in 2016) and some commentators Taken to its logical conclusion, this could change is needed (which is highly likely)
forecasting growth of 3.3% for 20181. As a mean that treasuries would be able to treasury can make it quickly and easily with
result, the level of cash on corporate balance mobilise balances in unrestricted the minimum of effort and cost. Agile
sheets has now reached exceptional levels: currencies globally in near real time at thinking and processes are key here to
USD1.8trn in the US and EUR974bn in minimal cost, which compares favourably ensure sufficient futureproofing.
Europe, the Middle East and Africa, while with alternative mechanisms such as This is definitely not a trivial task, but it
collectively the 25 most cash-rich corporates correspondent banking. can be considerably easier if undertaken
globally hold just under USD829bn of cash2. with the support of a banking partner that
At the same time, interest rates in various Internationalisation has the necessary expertise and resources.
countries have started to rise. The US is the Corporate business strategies have been Given the international nature of today's
most prominent in this respect with the Fed another important factor driving the need to liquidity management environment, a
Funds rate now at 2%3, up from 0.25% in late review liquidity management. International global banking network is an important
20154. In addition, the Federal Reserve has expansion of businesses means that many factor here, as are qualified process
signalled that it will raise rates to 2.5% in treasuries are continually having to consultants in technologies such as ERP12,
2018, 3% in 2019, and 3.5% in 20205. A accommodate new countries and TMS13 and SWIFT. Furthermore, this
diverse mix of other countries are also currencies into their liquidity structures, or expertise must be consistent across the
forecast to raise rates by Q2 2019 including remove them in the case of disposals. They whole end-to-end liquidity management
China, Brazil, Mexico, the UK, India, also have to do this while complying with process, from accounts receivable to
Canada, South Korea, Indonesia and Japan6. local regulation (such as thin capitalisation investment of surplus cash and all points
Therefore, treasurers now have high cash rules) and business practices (such as credit between. The same applies to any solutions
levels, plus the opportunity in a growing periods taken by customers). An inkling of the bank may provide. If treasuries are to
number of countries to obtain better yields the pace of this international expansion can futureproof their liquidity management
on that cash. This combination is a strong be seen from Eurostat's data on foreign effectively, they will need consistency of
reason to revisit and update their existing affiliates10 (FATS): between 2008 and 2015, systems across collection, aggregation,
liquidity management practices. the number of FATS in Europe rose by movement and investment of cash - plus
almost a third, an increase representing optimal visibility on all these activities.
Mobilising liquidity: instant payments nearly 70,000 FATS entities. In developing It is all too easy to lose sight of the big
Other factors are also giving treasurers more Asia, foreign direct investment (FDI) has picture here and not cover the entire
reason to undertake this now. As instant risen from USD406bn in 2012 to USD476bn spectrum of the liquidity management
payment systems proliferate and the in 201711. Combining the pace of this process. A good example of how this can
velocity of cash movement continues to rise, geographic corporate expansion with the happen is when setting up bank accounts in
multiday clearing cycles are rapidly external drivers outlined earlier makes a new country. The first step is to establish a
becoming a thing of the past. There are now frequent review and revision of liquidity local corporate entity, which in many
45 instant payment systems in production management structures and processes a emerging markets will involve dealing with
globally, with a further 11 being planned7. priority. a local partner who will handle the
The near-instant capabilities of these incorporation. A common problem then is
systems are opening the door to new that the local partner will often default to
investment opportunities: treasurers will be Solution: revisit, revise, opening the new entity's bank account with
able to invest cash for the short term that a local bank. While this may be acceptable
futureproof
previously would have taken too long to from a day-to-day transactional perspective,
mobilise, and/or be able to access longer, These revisions may have to be extensive, it is definitely sub-optimal when that
better yielding tenors. Individual when one considers that some very large account needs to participate in a liquidity
transaction limits are a hindrance here, but corporates have essentially been using the structure. A far better alternative is to use a
these are becoming less of a problem. For same liquidity structure for 25 years. A suitable global bank instead. Then, when a
instance, the UK's Faster Payments system further internal imperative for treasury (in local account is being opened, it can be

automatically integrated into the recently seen a corporate treasury

corporate's liquidity structure as part of the processing a multibillion dollar transaction
account opening process. Then the account using a mobile phone22, something that
will be immediately visible from central would previously have been unthinkable.
treasury and its liquidity (assuming it is not Millennials' technological capabilities also
in a restricted currency) immediately mean that as their treasury careers progress
accessible at an enterprise-wide level. they will be expecting their banks to show a
serious commitment and investment
in technology23.
Facilitators
Millennials Vendors
Demographic changes in the workforce One of the main reasons that blue sky
are an important reason why corporate thinking for treasury has for so long
treasuries may find revisiting, revising and remained just that has been the lack of
futureproofing their liquidity alignment among the third parties with Conclusion
management easier than they might have which treasurers deal. Happily, this is no
done in the past. longer true: banks, ERP and TMS vendors, A rapidly changing environment is
By 2020, nearly half (46%) of all US cloud computing providers, fintechs and driving the need for treasuries to
workers will be millennials14 and by 2025, clearing systems are currently well- review, revise and futureproof their
this will also be true of 75% of the global synchronised in terms of capabilities and liquidity management. The good news
workforce15.Millennials stand out for their delivery24. The level of co-operation and is that this is now far less of a challenge
use of technology16 and their willingness to partnership among these entities is also than it would have been just a few
adapt to (and drive) change17. They are strong, with SAP's recent announcement of years ago. Technological innovations
technically and psychologically well suited SAP Cloud Platform private edition in ranging from instant payments, to
to the sort of liquidity management collaboration with IBM Cloud being just digitisation, to AI, to cloud computing,
reengineering and change that many one example25. all enable more to be done with less
treasuries now need to undertake. Therefore, the historical problem of a effort, at lower cost and at greater
Digitisation, blockchain and artificial single missing jigsaw piece derailing a spee d. At the same time, the millennial
intelligence are all technologies with which project may no longer apply. Today, workforce is ideally suited to implement
they are comfortable18 19 20. treasuries embarking on re-engineering change26, while vendors are well-aligned
Even though they may still mostly be in and futureproofing their liquidity in terms of their capabilities and mutual
relatively junior positions, millennials may management may be able to do so with far collaboration. There could hardly be a
already be having an influence on treasury more ease and confidence than might once more propitious time to act.
behaviour21. For instance, HSBC has have been the case. ■
Notes
1 https://www.telegraph.co.uk/business/2018/03/14/boom-back-world-economy-put- 19 https://www.nasdaq.com/article/op-ed-why-millennials-migrate-to-blockchain-technology-
strongest-spurt-since-financial/ and-cryptocurrency-in-droves-cm927714
2 https://www.gfmag.com/magazine/september-2017/cash-piles-keep-growing 20 https://thefinancialbrand.com/67833/artificial-intelligence-millennials-digital-mobile-
3 https://www.thebalance.com/current-federal-reserve-interest-rates-3305694 banking/
4 https://tradingeconomics.com/united-states/interest-rate 21 https://www.theglobaltreasurer.com/2018/06/14/make-way-for-the-millennial-accounts-
5 https://www.thebalance.com/current-federal-reserve-interest-rates-3305694 payable-activist/
6 https://tradingeconomics.com/forecast/interest-rate https://www.onedigital.com/blog/tech-savvy-millennials-shaping-21st-century-workplace/
7 https://www.instapay.today/tracker/ https://www.business.com/articles/tech-savvy-millennials-at-work/
8 https://www.psr.org.uk/sites/default/files/media/PDF/A-G-Report-March-2018.pdf 22 https://www.gbm.hsbc.com/insights/consumer-brands/digital-innovation
9 https://home.kpmg.com/nl/en/home/social/2017/12/instant-payments-instant-benefits.html 23 https://www.theglobaltreasurer.com/2018/06/14/make-way-for-the-millennial-accounts-
10 Eurostat defines a FAT as: "A foreign affiliate as defined in inward FATS statistics is an payable-activist/
enterprise resident in a country which is under the control of an institutional unit not resident 24 https://en.wikipedia.org/wiki/SAP_HANA
in the same country." http://ec.europa.eu/eurostat/web/structural-business-statistics/global- https://www.scmp.com/business/banking-finance/article/2140428/hsbc-spends-us23b-
value-chains/foreign-affiliates digital-platforms-ai-and-new-technology
11 http://unctad.org/en/PublicationsLibrary/wir2018_en.pdf https://www.globalcustodian.com/hsbc-outlines-17-billion-technology-investment-plans/
12 Enterprise Resource Planning https://www.finextra.com/newsarticle/32183/citi-spends-more-on-tech-than-all-vc-
13 Treasury Management System investment-in-us-fintech
14 https://www.kenan-flagler.unc.edu/executive-development/custom- https://www.kyriba.com/why-kyriba/treasury-cloud
programs/~/media/files/documents/executive-development/maximizing-millennials-in-the- http://www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/Project-
workplace.pdf Ubin.aspx
15 https://www.ey.com/Publication/vwLUAssets/EY-global-generations-a-global-study-on- 25 https://www.ibm.com/blogs/cloud-computing/2018/06/06/ibm-sap-cloud-partnership/
work-life-challenges-across-generations/$FILE/EY-global-generations-a-global-study-on- 26 https://www.forbes.com/sites/larryalton/2017/12/28/5-ways-millennials-will-transform-the-
work-life-challenges-across-generations.pdf workplace-in-2018/#2695cd24558d
16 http://www.pewresearch.org/fact-tank/2018/05/02/millennials-stand-out-for-their- https://www.nbcnews.com/better/business/7-ways-millennials-are-changing-workplace-
technology-use-but-older-generations-also-embrace-digital-life/ better-ncna761021
17 https://www.entrepreneur.com/article/271741 https://www.forbes.com/sites/quora/2017/10/10/millennials-are-requesting-these-
18 https://yourstory.com/2016/11/millennials-changing-traditional-workspace/ workplace-changes-to-thrive/#2905f3b550be

HSBCDIGIT18 HSBC18 FASTER DEEPER GREATER.qxp_Layout 1 24/09/2018 16:35 Page 41
Global Liquidity:
Faster, Deeper, Greater
L
iquidity management is undergoing a period of major change. Liquidity is
(re)circulating more quickly, major opportunities are emerging in ‘big
data’ analysis and the global economy looks set to push liquidity levels
higher. Nick Powell, Global Head of Commercialisation and Ray Suvrodeep, Global
Head of Deposit and Investments Product Man agement, Global Liquidity and Cash
Management at HSBC examine some of the opportunities arising from this
situation and how treasuries might best maximise them.
payments is triggering 24x7 cash flows at

Increasing Liquidity Velocity
far higher frequencies. Furthermore, this
Instant Payments, Faster Clearing acceleration doesn’t just apply locally:
Liquidity is moving faster. Innovations various SWIFT initiatives mean that it also
such as instant payment systems are pertains to cross-border and global flows
seeing clearing cycles shrinking to the as well. The net result is that the velocity of
point of being almost instantaneous. At liquidity is increasing and is likely to
the same time, the advent of mobile continue doing so.

In general terms this may be beneficial to immediate needs, such as to track balances intelligence. In view of the progress made
corporations, as their cash conversion and transactions for respective customers/ by many corporate treasuries in recent
cycles diminish, along with latency in their entities. This is faster and more efficient years, this is a particularly timely
payment execution and the amount of than opening physical accounts individually development. For some time now the
contingency cash buffer needing to be held and managing/reconciling them on an primary goal for many treasurers has been
in their bank accounts. This could result in ongoing basis. to achieve visibility and control of all
less pressure on cash flow planning and When using ngVAs, all the liquidity is corporate liquidity. While this may not be
forecasting, as well as assisting working automatically concentrated in the single technically possible in some cases, a
capital efficiency. physical account that heads each group of growing number have nevertheless already
On the other hand, this new faster virtual accounts. This makes rapid liquidity achieved this, or made major steps forward.
liquidity environment also throws up some mobilisation far easier to achieve than if As a result, they are now able to take
challenges for treasuries. For treasurers, multiple physical accounts were involved. advantage of the next stage in optimising
getting cash to the right place, in the right Essentially, ngVAs address some of the most liquidity management: using that visibility
currency, at the right time, is a fundamental fundamental liquidity fragmentation and control to deliver insight and
task. However, as payments become faster, challenges by supporting speed of effectiveness. Armed with the right data and
outflows also accelerate, so the response execution, as well as providing an tools, this is now achievable.
times for fulfilling this obligation become architecture that more generally facilitates
more demanding. high speed liquidity management. Deeper insight
Recent years have seen rapid developments
Next Generation Virtual Accounts Real Time Liquidity Management in the science of big data analysis. These
A major obstacle here is liquidity Higher velocity liquidity opens the door to make it possible for treasuries to analyse
fragmentation. An efficient method for the challenge/ opportunity of intraday cash their own data for tasks such as cash
viewing and mobilising liquidity is an forecasting and liquidity management. On forecasting (see page 43 “Revolutionising
absolute must for addressing this. the one hand, this is concerned with making forecasting”), as well as to gain more
Fortunately, such a method now exists in sure that the most effective use is made of general insight into potential liquidity risks
the form of the next generation virtual internal sources of liquidity throughout the and opportunities. Innovations in artificial
account (ngVA). day. On the other, it involves managing any intelligence (AI), such as deep neural
In addition to the traditional advantage external sources of credit on a cross-bank networks, mean that treasuries will in future
of virtual accounts – the ability to improve basis. Given that cash is recirculating faster, be able to detect these risks and
reconciliation rates by giving customers this involves balancing a situation where opportunities quickly and efficiently within
their own dedicated account details to pay there may be relatively few liquidity banks huge volumes of data – a task that would be
to – ngVAs also include a self-service versus payment banks involved. impossible for a human analyst.
element. This enables clients to open/close Dealing with this effectively in a real (or However, analysing just the
virtual accounts quickly to suit their near real) time environment makes access corporation’s own transaction and liquidity
to similarly timely data essential. Some data is just the first step towards all that is
treasuries already poll their banks for actually possible. As a result of their day-to-
intraday statements. Some banks already day role, major transaction banks have
offer an even better real time alternative to access to vast quantities of external data,
this, whereby data is streamed to the client such as cash flowing through the banking
continually. While this offers a great system. The most innovative of these banks
opportunity to improve real time liquidity are looking to make this available to clients
For some time forecasting and management, it comes with so that they can analyse and benchmark
the caveat that the client’s technology their performance in areas such as working
now the primary infrastructure must obviously be capable of capital and liquidity management.
goal for many capturing and processing the resulting data In this respect, it is important to
stream. emphasise the distinctive nature of this
treasurers has data: it is real transaction data, not just
been to achieve Mining for Gold: Big Data survey or sample data. While this makes it
possible to draw far more robust inferences,
visibility and Analytics a key point is the degree of depth and scope
control of all The application of specialised liquidity of the data that is available for analysis. A
management techniques and functions major transaction bank with a global
corporate (partly in response to higher liquidity network will be able to provide clean
liquidity. velocity) is contributing to the generation of banking system data from around the globe
valuable data that can be analysed to in considerable depth and granularity,
enhance treasury-specific processes, as well which will help to support statistically
as developing more general business significant analytical output.

Nevertheless, attractive as this investments must be able to accommodate investment tenor. Anything less than this is
opportunity is, corporate treasuries are sudden calls to cover palpably inefficient in the eyes of lightly-
highly unlikely to have the budget or investments/acquisitions. resourced treasuries that are perpetually
inclination to build their own platform for At present, many on balance sheet bank expected to do more with less.
warehousing and analysing this data. They deposit products tend to fall broadly into The current environment is a good
need a suitable interface through which instant-access/overnight or term example of this high level of expectation.
they can access it that also provides the categories. In an environment where However, while higher liquidity velocity, big
necessary analytical tools. For instance, treasurers are expected to maximise return, data and stronger macroeconomic growth
HSBC has plans to introduce much of this while still retaining sufficient liquidity may seem a daunting prospect, for the most
functionality through a new liquidity agility to cover possibly numerous innovative treasuries they individually and
management portal, which is currently in acquisitions, something that fits between collectively represent an important
development. these two existing poles is clearly desirable. opportunity. More efficient use of working
For example, a suitable notice account capital, better business
Managing Macro Growth product available across multiple markets intelligence/forecasting and enhanced yield
would give treasuries an additional yield on surplus cash are just some of the
Liquidity versus liquidity option, when compared to potential benefits available.
A good problem to have... a typical vanilla term deposit.
The availability of better liquidity insight For some treasuries, rising liquidity Revolutionising forecasting
and forecasting is also a timely development levels may result in issues related to Big data analytics create opportunities for
in a world where liquidity levels are likely to counterparty limits specified in their treasurers to re- engineer their cash
be rising. There are currently signs that a treasury investment policy. They may forecasting processes completely. Common
period of global macro growth is getting simply run out of available appetite for practice today is to send out spreadsheets to
underway. The US and China are two major bank balance sheet. While this is less likely business units asking them to fill in their
engines here, with current GDP growth of to be an issue with counterparty banks projected cash flows. These are then
4.2%1 and 6.7% in Q2 of 20182 respectively. with stronger credit ratings, it nevertheless aggregated at a central treasury level to
The Eurozone also appears to be recovering creates demand for solutions that produce overall forecasts. This is labour-
to the extent that the European Central efficiently integrate on and off balance intensive, slow and for practical reasons can
Bank is talking of ceasing its quantitative sheet investment opportunities. HSBC’s only be done periodically. It is also heavily
easing programme. Many emerging Liquidity Investment Solutions (LIS) dependent upon the varying skill and
markets are also performing well with deliver this by providing automated experience levels of those making the
Vietnam seeing GDP growth of 6.79%3 and investment of cash above a client-specified individual projections.
Indonesia GDP growth of 5.27%4 in Q2 of trigger level with a range of approved third Given the right big data and analytics,
2018. In April 2018, the world’s emerging party asset managers. Automated this bottom-up cash forecasting process can
markets and developing economies grew redemption based on a minimum balance now be replaced by something far more
4.9%.5 Therefore, 2018 could see robust trigger level or risk limits on third party efficient. Recent advances in artificial
growth coupled with low inflation. managers is also supported. intelligence (AI) mean there is no reason
From a treasury perspective, this is likely why techniques such as deep neural
to result in higher liquidity flows. However, networks cannot be applied to tasks such as
in a strong economic environment there is Conclusion cash forecasting, where human judgment
an incentive to invest in businesses, While various products and solutions are and intuition based on previous experience
possibly across multiple markets. available to help treasuries cope in the are currently key factors in making
Therefore, there is a need to be able to current shifting liquidity environment, these forecasts. If AI can replace all or most of this
cover funding demands that could arise in in isolation are insufficient. If global manual process, then clearly cash flow
multiple parts of the world in multiple treasuries are to maximise their liquidity forecasting as we know it today could
currencies. In addition, in a stronger opportunities, the overriding need is for a change fundamentally. The value created
macroeconomic environment, existing bank service proposition that binds could be substantial, not just in operational
businesses may be generating higher levels products and solutions into a single cost/effort saving, but also in automating
of surplus cash. So treasury may have to consistent experience, regardless of and optimising downstream treasury
manage substantial irregular multiple technology, location, currency or decision making and processes. ■
global cash deployments, alongside a
continual supply of revenue generation.
Notes
...and how to solve it 1 USA GDP: https://tradingeconomics.com/united-states/gdp-growth
Managing this situation requires an efficient 2 China GDP: https://tradingeconomics.com/china/gdp-growth-annual
3 Vietnam GDP Growth: https://tradingeconomics.com/vietnam/gdp-growth
deployment model that is well diversified. 4 Indonesia GDP: https://tradingeconomics.com/indonesia/gdp-growth-annual
In addition, currency risk needs to be 5 World’s emerging markets and developing economies total GDP growth
:https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD
minimised and the tenor profile of

HSBCDIGIT18 APAC 3177.qxp_Layout 1 24/09/2018 10:10 Page 44
Liquidity Management in Asia-Pacific:

Change and Opportunity
O
ne of the most fascinating aspects of liquidity management in Asia-Pacific
today is its dynamic nature. Apart from regulatory change within the
region, numerous other factors – such as shifts in US tax legislation and
interest rates – also have a bearing. As Harish Kumar, Regional Head of Liquidity
and Investment Products, Global Liquidity and Cash Management, Asia Pacific at
HSBC explains, these all present corporate treasurers with an interesting range of
opportunities.
Regulatory change in Asia-Pacific is now a However, a critical point here is clarity.

fact of life for corporate treasuries, but This is because regulation in the region
given the right information and support, it has of late been changing frequently and
is definitely not an insuperable problem. often also leaving some scope for

interpretation, such as whether a Pacific more generally.

In-country flexibility
corporate might be deemed to fall in one A concept that could prove invaluable
or another category under a particular set Once corporates have clarity on the in this respect is the next generation virtual
of rules. A further complication is that interpretation of current regulation, they account1 (ngVA). Historically, virtual
regulation in some countries can be issued can respond by making appropriate accounts have been used to improve the
at both a provincial and national level, so adjustments to their liquidity strategy. auto-reconciliation of accounts receivable
ensuring compliance with both sets of Nevertheless, the frequency with which by giving each customer an individual
rules presents additional challenges, regulation in Asia-Pacific can change virtual bank account number to which they
whether or not the bank account is means that treasuries need to be send their remittances.
resident or non-resident is largely sufficiently flexible to respond effectively – However, ngVAs add a self-service
immaterial and the movement of funds is and have banking partners with the right component to this, thereby making it easy
straightforward. This may no longer be the capabilities to assist them in doing so. for treasuries to open/close virtual
case post-Brexit. The tax implications for a For example, a country might introduce accounts as needed. This can be an
particular liquidity structure, or the regulation on cross- border outflows with invaluable tool for treasuries seeking
consequences of an entity moving funds to the intention of preventing onshore greater strategic flexibility in their liquidity
another entity, or to the same entity in incorporated companies from becoming management, as ngVAs can be used to
another jurisdiction, remain unknown. net lenders. The regulation might therefore consolidate liquidity regionally in multiple
limit remittances offshore to the extent of currencies to the single physical account at
repaying existing offshore borrowing, but the top of each group of virtual accounts.
Regulatory clarity and certainty not beyond. Then, as circumstances change, individual
The need for treasuries to seek regulatory This could result in an accumulation of virtual accounts can also be
clarity and certainty in Asia-Pacific is onshore liquidity upon which yield would opened/closed for entities as required.
underlined by the ‘outline’ nature of some need to be maximised, while also ngVAs also facilitate more sophisticated
new regulation. For instance, regulations remaining within the counterparty risk centralised payment mechanisms, such as
may be introduced that tighten or relax constraints of treasury investment policy. Payments On Behalf Of.
certain existing rules relating to cross- For some corporates, situations such as
border inflows or outflows of corporate this would place an onus on their large
liquidity. However, the new regulations international banking partners to deliver a
might not explicitly state the extent to suite of investment solutions that spanned
which the new conditions will apply. the tenor spectrum.
This is the sort of situation where the Some banks have already responded
capabilities of a corporate’s bank can to this type of challenge by launching
make a considerable difference. Some new onshore products to give further
banks have a long and close relationship depth to their existing liquidity product
with local regulators through their range. For example, HSBC has launched
compliance departments. This can be certificates of deposit of multiple tenors
invaluable in obtaining clarification from in China – the first foreign bank to do so.
the regulator on exactly how the regulation At the same time, anything partner banks
applies in practice. As mentioned above, can do to support more flexible and agile
in some countries (and China is a case in liquidity management adds value from a
point) separate regulations may be issued corporate treasury perspective. One
at provincial and national levels. example would be tools, such as HSBC’s
Therefore, the corporate’s bank needs to Liquidity Investment Solutions, that
have good regulatory relations at both facilitate automated investment and
levels and be able to aggregate any divestment across multiple investment HSBC has
discussions to a holistic picture. options and providers from a single
The overriding overall point here is linked header account.
launched
certainty: treasurers need to be confident certificates of
that their bank has been diligent in
developing the most accurate Pan-regional flexibility deposit of multiple
interpretation of the regulation based on The regulatory changes that have driven tenors in China –
its dialogue with regulators at all the the onshore accumulation of liquidity in
necessary levels. If it has, and gives clients China since the end of 2016 have been the first foreign
a single consistent version of this gradually and partially relaxed. This bank to do so.
interpretation, then they can make again underlines the need for flexibility in
strategic decisions with certainty and the design and deployment of liquidity
comfort. structures, both in China and across Asia-

Positive regulation regions such as Asia- Pacific to pay down

external debt. In addition, they are looking
It is easy to fall into the trap of seeing for more efficient ways of investing any
regulation in Asia-Pacific in the negative remaining surplus cash – with automation
light of protectionism, but the reality is of this process a growing priority.
actually very different. Possibly as a An important capability for any tool for
continuing consequence of the 1997 Asian automating liquidity investment is that it
financial crisis, most countries in the needs to cover multiple providers of
region are understandably keen to limit liquidity products (both on and off balance
speculative flows (‘hot money’). sheet) and provide an automated link with a
By contrast, they are typically strongly bank account to which the treasury moves
supportive of legitimate trade and the its surplus liquidity. A tool that can provide
associated financial flows. Some countries this – such as HSBC’s Liquidity
are also embracing the fact that they have Management Portal – will significantly
global corporates in their markets and decrease the corporate treasury’s liquidity
appreciate that these corporates may have a management workload, especially if both
need to repatriate cash. automatic investment and divestment
This has recently been reflected in (based upon cash trigger levels in the bank
various relaxations and/ or increases in account) are available.
permissible transaction limits in the region. Conclusion:
For instance, in the latter part of 2017 South
Korea almost doubled its limit on permitted Liquidity consolidation managing transition
outward lending to USD50 million. The availability of this sort of tool also links In the context of liquidity management,
In addition, a range of countries in Asia- with another accelerating trend in liquidity Asia-Pacific has historically been seen as
Pacific - including Malaysia, Hong Kong, management: the drive to consolidate challenging, with much of this
Singapore and Thailand - are offering balances and banking relationships. A perception relating to the concept of
incentives (not just tax breaks) to encourage growing number of treasuries are ‘trapped cash’. While this still applies in
corporates to move operations such as increasingly aware that in a rising interest some jurisdictions and circumstances,
treasury centres to their jurisdictions. rate environment fragmentation reduces the overall situation is gradually
their leverage in relation to both their improving, with several countries
credit and debit positions. If they adopting a more relaxed stance,
US interest rate rises consolidate those positions and especially in the context of business-
and tax changes relationships, the situation improves - related flows.
The increasingly business friendly attitude especially if the bank to which they While this is good news, it doesn’t
of some Asia-Pacific countries in the context consolidate can offer sophisticated actually make Asia-Pacific any less
of liquidity management is particularly automated liquidity management tools. challenging, but just changes the
timely for US corporations in view of recent This consolidation has an additional nature of the challenge to one of
and ongoing US interest rate rises. benefit in the context of Asia-Pacific managing liquidity in a continually
Previously, low borrowing costs and jurisdictions where currency controls or shifting regulatory and interest rate
similarly low on balance sheet bank deposit other restrictions constrain the movement environment. Staying on top of this
rates meant that many US corporates could of funds for liquidity management. Under situation is considerably easier if one
take a fairly passive approach to liquidity these circumstances, a global bank such as can count on the support of a global
management. However, now that US rates HSBC can offer an interest enhancement banking partner that can offer the
have started to rise, borrowing costs have facility whereby balances in restricted necessary regulatory intelligence,
also risen and money market funds have jurisdictions can still be taken into account network, products and tools to facilitate
become increasingly active in offering at a global level when calculating overall a flexible and responsive liquidity
enhanced returns. At the same time, credit interest compensation and/or management strategy.
changes to US tax legislation have offsetting against debit interest. ■
introduced a one-off tax break for the
repatriation of corporate cash at a rate of
15.5 per cent (for cash holdings, 8 per cent
for less liquid holdings), rather than the
usual 35 per cent2.
This combination is motivating the Notes
1 1 HSBC intends to launch next generation virtual accounts in Asia
treasuries of US multinationals to take a 2 https://uk.reuters.com/article/us-usa-tax-repatriation/corporations-may-dodge-billions-in-u-s-taxes-through-new-
more proactive approach to repatriating loophole-experts-idUKKBN1F035Q
surplus cash from overseas operations in

HSBCDIGIT18 EUROPE NEW ASIA.qxp_Layout 1 24/09/2018 11:05 Page 47
Liquidity Management:
Is Europe the New Asia?
F
or many treasurers, Europe has historically been a benign environment for
liquidity management. In contrast with regions such as Asia or Latin
America, consistent regulation and unrestricted movement of funds has
made for comparatively straightforward liquidity management. However, a variety
of recent and forthcoming changes, includin g Brexit, bank ring fencing and the
second Payment Services Directive (PSD2), will make Europe far more demanding
over the next few years. Nevertheless, as Adnan Ahmed, Regional Head of Liquidity
for Europe, Global Liquidity and Cash Management, explains, these changes are
considerable opportunities for those treasuries that act now to ensure that their
businesses, banks, systems, infrastructure and pr ocesses are agile.

the movement of funds is straightforward. Historically, UK banks have used the

Brexit This may no longer be the case post-Brexit. funding raised from small/mid-sized
Brexit represents one of the greatest The tax implications for a particular business and retail customers to fund their
challenges for European liquidity liquidity structure, or the consequences of loan books, with large corporates being
management because of continuing an entity moving funds to another entity, major consumers of this loan capacity.
uncertainty over the form it will ultimately or to the same entity in another After ring fencing, that pool of deposits
take: ‘hard’, ‘soft’ or somewhere in jurisdiction, remain unknown. may no longer be available to fund this
between. At present there is no sense of Some more advanced corporate and lending.
linear progression to a predictable other client treasuries are already This has two significant implications:
outcome, which makes planning future undertaking considerable scenario scoping the cost of large corporates’ borrowing will
liquidity structures near impossible, to devise strategies that have the flexibility increase, but so will the value of their
especially in the context of rules relating to to cover the broadest possible array of deposits, possibly quite considerably.
cross border transfer payments in Euros. Brexit outcomes. Much depends on the These pricing implications are already
For example, there may be implications size, complexity and location of becoming apparent in the market place
for treasuries regarding the creation of operations. For instance, a corporate that is and this trend is likely to become more
intercompany positions and the mostly European-focused with minimal pronounced as January 2019 approaches.
movement of funds in relation to their UK operations, but with a UK-based As regards deposit rates, an important
corporate tax positions. At present, liquidity structure, may have more at stake distinction is whether large corporate
whether or not the bank account is resident in terms of Brexit outcomes than one with deposits are being placed with a ring
or non- resident is largely immaterial and mostly UK-based operations. fenced or non ring fenced banking entity
A key consideration in Brexit and the credit rating of that entity1. A non
preparations is that a treasury’s banking ring fenced entity may be perceived as
partners will be able to support the higher risk and have a lower credit rating
broadest range of possible contingencies if and so will have to pay higher rates to
changes of bank account domicile and/or attract deposits. However, it may be
ownership are needed. Those banking content to do this if it can deploy the
partners will therefore need to be able to resulting deposits at a better return.
demonstrate both network range as well as Therefore corporates’ treasury investment
depth, plus a consultative relationship policies will need re-examining to
approach to devising the optimal post- determine what is or is not acceptable in
Brexit liquidity strategy and structures. terms of risk/reward when choosing
Furthermore, they must also be able to whether to place deposits with ring fenced
offer the necessary tools for corporate or non ring fenced bank entities, or a
treasuries to have maximum visibility and mixture of both.
mobility of their liquidity both within The ring fencing rules are likely to drive
Europe, as well as globally. some notable shifts in banks’ liquidity
There is one very important upside to positions and therefore the rates they are
the very considerable demands of post- prepared to pay to attract deposits. Some
Brexit represents Brexit liquidity preparations. Many of the that were previously flush with liquidity
one of the greatest other changes due to affect the European may have to compete aggressively in the
liquidity landscape over the next few years corporate deposit market to retain it and
challenges for are much more definite in their outcome vice versa. One area likely to see
European than Brexit. Therefore, developing appreciable change is the large corporate
processes, systems and structures that are Euro deposit market. Previously many
liquidity sufficiently flexible to cope with the broad banks have avoided accepting Euro
management range of post-Brexit outcomes will also deposits because of the negative credit
implicitly deliver a more general interest rates involved. However, post ring
because of competitive edge that will be of value in fencing, some banks may feel they are
tackling these other challenges. nevertheless worth attracting as it may
continuing now be possible to use the Euro deposits as
uncertainty over a source of funding and redeploy them
Ring fencing profitably.
the form it will As from January 2019, major UK banks From a practical perspective, this fluid
ultimately take. have to ring fence core retail banking from situation will place a premium upon the
investment banking. This represents a ability to (re)deploy surplus liquidity
fundamental change that affects large without incurring a large additional
corporates’ liquidity management. manual workload for treasury.

Therefore, tools that provide a single implementing any necessary changes, is also likely to be applicable to banking
automated interface where liquidity especially if the bank can offer in- country relationships as well. In the past, changing
investment/divestment can be certified specialists in enterprise resource banking partner might have taken perhaps
accomplished across on/off balance sheet planning (ERP) systems and/or SWIFT. three years because of the lengthy
instruments and ring fenced or non ring In addition, depending on their choice implementation times. As technology
fenced entities adds appreciable value. of banking partner, treasuries may also develops, these timelines may fall
have access to a new aid to liquidity agility dramatically, making more frequent
and flexibility, in the form of next reviews of banking relationships feasible.
Regulation and agility generation virtual accounts. Historically, Despite some recent examples of
The Second Payment Services Directive virtual accounts have been used as a protectionism, globalisation is still likely to
(PSD2), which largely took effect from means of improving accounts receivable remain a major theme in 2023, with
January 13th 20182, should deliver further reconciliation by giving each customer businesses growing faster beyond their
opportunities for corporate treasuries to their own specific virtual account to which historical geographic boundaries. The
enhance their liquidity management agility they make remittances. However, some internet has already had a major influence
in Europe. By opening up banking client leading banks have reinvented them to here in terms of both speed of expansion,
data (subject to client authorisation) it will include an important element of self but also the size range of entities
be possible for non- bank third party service, whereby clients can open/close expanding globally, with smaller
providers to offer additional services. In virtual accounts as they require for companies now able to leverage the
many respects this mimics the situation individual corporate entities, potentially in internet to establish a global presence with
with mobile phone networks, where only a differing currencies. All the liquidity in the relative ease.
few companies actually own physical individual next generation virtual accounts
networks, but multiple virtual network is centrally visible and controllable via the
operators still leverage these to provide single physical account that heads each
their own separate services. group of next generation virtual accounts.
The requirement under PSD2 for banks By also automatically concentrating
to publish an application programming liquidity from each group of virtual
interface (API) that third party providers accounts into this physical account, rapid
can use to deliver their services has and efficient liquidity mobilisation is far
important implications beyond those easier to achieve than if using multiple
services. One of the most striking of these is physical accounts. They are therefore a
the reduction in implementation timelines valuable tool for treasuries looking for an
for new services. These are likely to decline extra agility edge to cope with a rapidly
significantly under PSD2 from perhaps changing European liquidity management
years to just months or even weeks, and environment.
apply across a number of areas including
data management/mining and payments.
This is a major opportunity for 2023: all change
corporate treasuries to become It appears likely that by 2023 the process of
technologically far more agile than they are managing liquidity in Europe will have
today. Switching to the best provider of a changed radically. In addition to the
particular service or product need no regulatory changes outlined above, there
longer be a painful and protracted process, will also be broader shifts to
which also means that providers can no accommodate. There are already signs of a Switching to the
longer rely on inertia as a client retention growth cycle developing in the Eurozone3,
technique. Nevertheless, if treasuries are to so treasuries may well find themselves with
best provider of a
extract the maximum benefit from this, considerably more surplus Euro liquidity particular service
they may need to revisit their investment to manage by 2023. It is also not
policy more frequently, and their own unreasonable to assume that there will be
or product need
internal technology and processes will also greater political certainty regarding the no longer be a
need to be sufficiently flexible. Suitably final outcome of Brexit. At the same time,
qualified banks can assist clients in there is likely to be a far greater range of
painful and
reviewing the entire scope of their third party technology and service protracted
investment policy, including re- examining providers for treasurers to choose from by
counterparty risk policies, permissible then, as well as far lower barriers to process.
investments and yield objectives. These switching among them.
banks can also help in reviewing internal This opportunity to move quickly and
treasury technology and processes and relatively painlessly among these providers

Even if just some of these changes have

come about by 2023, it seems reasonable to
suppose that the business environment in
Europe will be more benign than it is
today. However, this does not also imply
that the liquidity management
environment will be any more benign. In
fact, partly due to the factors already
mentioned, it is likely to be even more
volatile and challenging. Furthermore,
despite new technological advances,
corporate treasuries will also have to find
ways of optimising liquidity for the new
business environment. Inertia is not a
strategy, so to maximise any potential
benefits, treasuries now need to be
preparing for change by ensuring that they
have the right partners to help them
develop and maintain the requisite agility
to cope in increasingly changeable
conditions. ■
Conclusion: network and relationship

There is the possibility of a more benign European business environment emerging over
the next five years. Nevertheless, the number of changes affecting liquidity management
are likely to see the region morph from one that was once almost ‘set and forget’ from a
liquidity management perspective, into something altogether more volatile. This
necessitates a fundamental transformation in the way corporate treasuries approach
European liquidity management.
As mentioned above, agility and flexibility are vital if treasuries are to succeed in the
new environment, but points of certainty and stability are essential in helping to achieve
this in terms of future proofing. Core banking relationships are a good example of this. If a
transaction bank can provide comprehensive network coverage across the UK and Europe,
as well as globally, then the effort required for liquidity management activities such as
opening/closing bank accounts in response to external changes will be materially reduced.
If that same bank also offers solutions such as next generation virtual accounts, then
It appears likely treasury’s workload drops by a further order of magnitude.
Analogous to this network stability is relationship stability in the context of
that by 2023 the consultancy. Most corporate treasuries simply do not have the resources to research the
process of consequences of every possible factor that might affect their liquidity management
activities. However, a major network bank that works with numerous global corporations
managing is able to share that collective perspective and insight to deliver a consultative relationship
liquidity in thatsupports treasury in achieving the agility and flexibility it needs.
Europe will have

changed
Notes
radically. 1 Unlike small/mid-sized businesses and retail customers, the ring fencing rules do not specify whether large corporate deposits
should be inside or outside a ring fence: https://blogs.treasurers.org/what-do-treasurers-need-to-know-about-bank-ring-
fencing/
2 https://www.paymentsuk.org.uk/policy/european-and-uk-developments/second-payment-services-directive-psd2
3 https://www.bloomberg.com/news/articles/2017-11-13/from-lost-decade-to-golden-years-euro-economy-picks-up-the-pace

HSBCDIGIT18 NORTH AMERICA.qxp_Layout 1 24/09/2018 10:12 Page 51
North American Liquidity:

Change, Challenge, Opportunity
O
ver the past year, the interest rate environment in North America has
been markedly different from that in regions such as Europe. Coupling
this with potential cross-border cash efficiences associated with NAFTA
trade growth and the availability of innovative balance sheet investment options,
means that treasurers in the reg ion are not short of opportunities. Michael
Havraniak, Regional Head of Liquidity, Global Liquidity and Cash Management,
HSBC outlines these opportunities and examines some of the ways in which
treasurers can maximise them.
have recently been following a very

Interest Rates different trajectory. In the US there have
Interesting Times been six rate rises over the past 22 months,
While interest rates in regions such as with Federal Reserve officials projecting a
Europe have remained low (and in some steeper path for rate rises in 2019 and 20201,
cases negative), rates in North America while in Canada there have been four

increases in the policy rate since July 20172. coupled with lessening emphasis on into cash to meet their liquidity needs for a
Corporate treasurers in North America security – will result in treasuries extending 30 calendar day liquidity stress scenario5.
have been quick to respond to this in their the number of banks they are prepared to This effectively means that large
expectations of the credit interest rates they place deposits with, or whether they will corporates’ deposits that can flow out a
are seeking from their banks. There is now simply increase the risk limits on banks with bank within 31 days (and that are not
much more emphasis on maximising yield which they already place cash. linked to transactional products) have zero
across the maturity spectrum of surplus liquidity value to any bank accepting the
corporate liquidity. This is the most recent deposit. As a result, banks have minimal
development in the way treasurers’ attitudes Changing Buckets incentive to attract these deposits.
to liquidity have evolved over the past Apart from interest rate rises, another Growing awareness of this among
decade. Back in 2008, the Association of interesting liquidity dynamic at present is treasuries has had two consequences.
Finance Professionals (AFP) annual the change in treasury behaviour in Firstly, as mentioned above, treasuries are
Liquidity Survey3, made it very clear that relation to segmentation of liquidity. re- examining the way they bucket their
treasurers’ emphasis was overwhelmingly Historically, many treasuries have tended liquidity. More specifically, they are
on security and far less on yield or liquidity. to allocate their liquidity into three considering how much of it they can re-
However, based upon HSBC client ‘buckets’: short, medium and long term. allocate to beyond 30 days. Secondly banks
discussions, it is evident that treasurers are Allocation across buckets has usually been are launching products to target this shift:
now also looking to maximise yield and done on the basis of availability for instance, HSBC has introduced a 31 day
liquidity. Consequently, there is a lot of requirements. Short-term liquidity would notice account to extend its liquidity
pressure from North American corporate need to be instantly available for working product offering, which offers client an
treasurers on banks to pass on any central capital, while long-term liquidity might uplift in yield over shorter-term products.
bank rate increases in their entirety. only need to be tapped very occasionally
A further incentive for treasurers to and so could be placed in instruments
maximise yield is that corporate liquidity such as 90-120 day notice accounts. NAFTA
levels continue to rise. According to It appears that this behaviour is now Notwithstanding current political
annual research by S&P Global4, US changing in two ways. Some treasuries are uncertainties over NAFTA, the fact remains
corporate holdings of cash and short- and retaining the same three bucket model but that it accounts for very substantial trade
long-term liquid investments hit a record are reassessing the segregation of cash value: USD1.1tr in 20166. From a treasury
USD1.9tr as of year-end 2016. In some across the buckets. perspective, this means that NAFTA-
cases this liquidity increase is causing Others are considering adding new related trade can easily result in substantial
treasuries issues with the credit risk limits buckets to achieve a more granular liquidity balances accruing that are
allocated to their banks in their treasury approach to their liquidity investment. In distributed across several currencies in
investment policy. both cases, maximising yield is a core several different countries. Given
As yet, it is unclear whether this – objective. treasury’s fundamental task of ensuring
An important factor behind this shift is that the corporation has the right liquidity
Basel III. While a few banks, such as HSBC, in the right place in the right currency at
were quick to draw the attention of their the right time, this can represent a
treasury clients to the implications of the considerable challenge.
forthcoming regulation for efficient liquidity
management, others were not. Cash concentration
As a result, a considerable number of Dealing with this effectively requires an
For longer-term corporate treasuries have until recently efficient method for cash concentration.
cash where yield is tended to assume that Basel III was an While it is perfectly possible to accomplish
issue purely for banks, and failed to this manually, this is inefficient in that this
an important appreciate the knock-on effect on their sort of low level transactional activity diverts
objective, some own liquidity management. treasury resources from more important
This situation is now changing and strategic concerns. This applies in two
corporate more treasuries now understand the important respects: the actual individual
treasuries may significance for them of Basel III measures, instructions for moving cash, but also the
with the Liquidity Coverage Ratio (LCR) tax-compliant and accurate administration
start to look at a being an important example. The purpose of any resulting intercompany loans.
broader range of of the LCR is to support the short-term Automated solutions are available for
resilience of the liquidity risk profile of running cash concentration structures. All
instruments. banks by ensuring that banks have an the treasury has to do is specify the
adequate stock of unencumbered high necessary balance thresholds and
quality liquid assets that can be converted sources/destinations for sweeping cash.
easily and immediately in private markets The necessary movements of funds then

take place automatically without requiring HSBC account above a certain trigger Next Generation Virtual Accounts9
further intervention. If there is a need to level into off balance sheet money funds Next Generation Virtual Accounts (ngVAs)
adjust any of the parameters, the treasury offered by a range of investment are attracting considerable attention in this
can simply log in and make the necessary managers. (Automated fund redemptions respect. They build upon the existing
adjustments - other than this, operating an can also be made if the bank account accounts reconciliation advantages of
automated cash concentration scheme of balance falls below a trigger level.) This virtual accounts to add a self-service
this type is a comparatively low gives users the convenience of a single element. This enables clients to open
maintenance affair. process for managing on/off balance multiple new virtual accounts beneath a
sheet investments. single physical account. The administrative
Intercompany loan accounting overhead of opening a new virtual account
The same degree of automation can also be Further along the curve? is considerably lower than that involved
applied to the accounting process for any Apart from the quest for greater yield, when opening a new physical account.
resulting intercompany loans. A large another factor that could cause a shift in This makes it relatively trivial for
international corporate operating in treasury investment behaviour is possible treasuries to achieve a greater degree of
different locations across NAFTA is likely to regulatory change in relation to money control and flexibility, by being able to
have different legal entities operating across funds (daily liquidity funds). At present, a create sophisticated account structures
that geographic base. If funds are flowing great deal of research is being undertaken using ngVAs, while still benefiting from the
across the organisation and internal sources by asset managers and fund houses into visibility, control and reporting advantages
of liquidity are being used, then that will what product changes they may need to of an equivalent physical account structure.
inevitably result in intercompany lending. make in response to regulation. At the same time, ngVAs give treasuries
Historically, many corporate treasuries In some respects, this situation is not the chance to increase the centralisation of
have opted to handle accounting for this dissimilar to that which applied their operations. Using ngVAs, they can
themselves in-house. They have tracked the immediately after the framework of Basel build structures that represent (for
loans, calculated and applied the relevant III was first agreed upon in September example) sets of business units or
internal company interest rates to those 20108. Just as then, treasuries do not as yet subsidiaries that can be managed centrally
loans, and settled them across the bank have sufficient concrete information to by treasury, such as to conduct payments
account. As with issuing individual payment understand the full investment on behalf of (POBO) or receivables on
instructions with a cash concentration implications for them of the forthcoming behalf of (ROBO). This sort of structure can
structure, this is hardly the most efficient regulatory change. provide the transparency needed at the
approach – especially if a reliable Nevertheless, one possibility is that for entity or subsidiary level, while also
automated alternative is available. HSBC’s longer-term cash where yield is an delivering a centralised process for central
inter-company solutions offer this facility, important objective, some corporate treasury, plus being potentially more cost-
freeing up treasury resources for more treasuries may start to look at a broader effective to operate.
crucial strategic tasks. range of instruments, beyond bank deposits
and money market funds. Furthermore, if
continued high (or even increasing) levels of
Off Balance Sheet Investments excess liquidity persist, more liquidity may
Maximising return and capacity limits start being assigned to the longest-term
As mentioned earlier, North American liquidity bucket. This in combination might
treasuries are highly focused on result in a willingness to look a little further
maximising return and they currently have along the yield curve for investment
North American
high levels of cash upon which that return opportunities. However, even if this specific treasurers have
must be generated. scenario does not arise, the easy and
In some cases, the sheer volume of this automated availability of a broader
been quick to pick
cash is running up against the deposit spectrum of investment products via a up on the
capacity limits they may have in place for single platform will still be of value.
their various banks. This combination of opportunities that
circumstances is driving many of them to
Innovation financial
reconsider their off balance sheet options.
The ideal here is to have a process that In an environment of rising interest rates technology
integrates on and off balance sheet and high liquidity levels, sophisticated companies
investment, so treasury doesn’t have to corporate treasuries are looking to their
take on another separate manual process. banks for innovation. Much of the (fintechs) can
This was one of the driving factors for the expectation here focuses on the automation offer.
creation of HSBC’s Liquidity Investment and streamlining of liquidity processes that
Solutions (LIS)7. This enables users to have historically been laborious for treasury
automate the sweeping of cash from an to execute manually.

A central point of liquidity control If they are using HSBC’s inter-company

While treasuries increasingly expect solutions they could amend the inter-
liquidity management innovations from company interest rate that is applied, or
their banks, they also expect a convenient adjust borrowing limits between entities if
means for controlling those innovations. they are breached to ensure sweeps are
Having to log onto multiple separate not affected.
systems in order to accomplish individual
liquidity-related tasks is inefficient. By Plug and play banking
contrast, being able to log onto a single North American treasurers have been quick
interface where (for instance) ngVAs can to pick up on the opportunities that
be opened, or trigger levels for money fund financial technology companies (fintechs)
(de)investment changed, streamlines day- can offer. More specifically, they are
to-day activities and frees up treasury time interested in any possible openings that will
for more important strategic activities. increase their flexibility and agility. For
Conclusion
This need for centralised liquidity instance, a corporate may have complex It is increasingly apparent that North
control has been one of the drivers behind cash management and liquidity structures American treasuries are not looking for
the creation of a new liquidity in place. These have often been time anything particularly complex to help
management portal that HSBC is consuming to implement, but if there are them manage their liquidity. They are
developing. This is intended to enable changes to the corporate’s lending or simply in need of innovation that helps
granular control of a broad spectrum of revolving credit facilities, it may be them to self-service as efficiently as
potentially automated liquidity necessary to make substantial changes in possible. This not only opens the door to
management related activities. These order to switch some or all ancillary better visibility and control of liquidity, it
include an interface to LIS whereby users business to another bank or banks. also removes low grade transactional
can adjust the managers they invest with, Using conventional methods, this would activity that adds no value from their
as well as the liquidity levels at which typically be a painful and disruptive process workflow.
investments and redemptions are for treasury. To avoid this, corporate In view of the way that developments
automatically made. HSBC’s new portal treasuries are now looking to fintechs to such as instant payment systems are
will in due course be connected to the provide plug and play banking, by boosting the velocity of liquidity, the
bank’s Global Liquidity Engine. This will effectively acting as a consistent form of need for this streamlining of workflow
deliver much more than just information banking middleware. Under this model, the becomes ever more imperative.
presentation. It will also enable clients to corporate is connected to the fintech via a Treasuries need to be increasingly
interact directly with HSBC systems to single consistent interface that essentially responsive and agile in terms of liquidity
make settings changes for their liquidity doesn’t change. However, on the other side, management, while operating in ever
management themselves, rather than the fintech has connectivity to multiple shorter timeframes. Solutions that
having to ask HSBC to make the changes banks. If the corporate needs to switch incorporate self-service and/ or facilitate
for them. banks, or add banks to cover a new faster and less costly change
For example, in the context of a jurisdiction, the fintech will simply management are therefore welcome.
sophisticated cash concentration structure disconnect/connect the relevant banks on The good news is that much of the
(such as those used across NAFTA by many the treasury’s behalf. However, the change needed to deliver this objective
North American treasuries) clients will be corporate connectivity to the fintech will is already underway. The caveat is that
able to log in and adjust the frequency of remain unchanged, thereby minimising there is so much change and innovation
sweeps or target balances. cost and disruption for the treasury. ■ that for treasury to keep abreast of all
developments and pick the most
appropriate to adopt is a major
workload in its own right. This is where a
bank capable of acting as a trusted and
consultative partner in a truly global
network context helps add real value. It
Notes will be able to offer support based on a
1 https://tradingeconomics.com/united-states/interest-rate
2 https://tradingeconomics.com/canada/interest-rate
detailed understanding of the client’s
3 2008 AFP Liquidity Survey business, plus its possible evolution and
4 https://www.spglobal.com/our-insights/US-Corporate-Cash-Reaches-19-Trillion-But-Rising-Debt-and-Tax-Reform-Pose-
Risk.html
objectives. It will thereby assist in
5 https://www.bis.org/publ/bcbs238.pdf maximising the client’s chances of
6 https://www.cfr.org/backgrounder/naftas-economic-impact
7 An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation making the right decisions about the
(FDIC), any other government agency or HSBC. liquidity technology and strategy it
8 https://www.reuters.com/article/us-basel-banks-text/announcement-of-basel-iii-bank-rules-idUSTRE68B1W420100913
9 HSBC is planning to launch Next Generation Virtual Accounts in North America. adopts.

HSBCDIGIT18 LMP.qxp_Layout 1 24/09/2018 10:13 Page 55
Liquidity Management Portal:

Finance at Your Fingertips
P
oor visibility is one of corporate treasury's greatest challenges and a major
obstacle to more efficient liquidity management. It also consumes precious
treasury resources that could be devoted to more valuable strategic
LMP delivers activities. HSBC's new Liquidity Management Portal (LMP) has been developed
with the specific aim of resolving these issues an d maximising liquidity visibility by
the tools to give streamlining the underlying data management. Nick Powell, Global Head of
users the best Commercialisation, Liquidity and Investment Products and Ray Suvrodeep, Global
Head of Deposit and Investments Product Management, Global Liquidity and Cash
possible insight . Management at HSBC explain how LMP can transform liquidity management for
the better, both immediately and in the future, as well as suppo rting treasury's
strategic participation.

HSBCDIGIT18 LMP.qxp_Layout 1 24/09/2018 10:13 Page 56
support, as well as providing the

Data, data, data functionality to facilitate this. One example
Liquidity is only manageable if it is visible. of this might be the development of
Even if that visibility is achievable, for treasury's own internal thought leadership
many treasuries it remains a resource on the current financial situation of the
hungry process. Traversing multiple bank organisation, along with the potential
platforms to download data, emailing challenges and benefits of various possible
subsidiaries for spreadsheets of cash future strategic options. Coupling this with
positions, then aggregating and its liquidity management functionality,
normalising all the resulting information, means that LMP can help treasury to
before trying to analyse, forecast, decide become more effective and efficient in
and act. executing both its traditional and new
By automatically aggregating the responsibilities.
necessary information across investments,
cash, liquidity structures and providers,
LMP radically improves this situation - but Speed and flexibility
instant data management is only part of the The data associated with treasury activities
picture. LMP also delivers the tools to give has changed significantly in recent years in
users the best possible insight into their the context of time. Bank and clearing
liquidity data. From that solid basis, they systems that once operated on an end of Conclusion: future
can move on to take the best possible day batch basis, now function in (or close
liquidity decisions and actions for their to) real time. This opens the door to faster,
possibilities
business. better decision making, but only if the As it stands today, LMP represents a
available analytical tools can take major step forward in liquidity
advantage of streaming as well as historical management and strategic decision
New look treasury: intelligence data. In this respect, LMP's database and making. However, even more advanced
and self-service user interface technology do not suffer capabilities may become possible over
The coupling of holistic data aggregation from the limitations of the previous the next few years. The high quality
and user- configurable reporting tools in generation of treasury analytics. By taking data management implicit in LMP lends
LMP results in a digital solution of advantage of modern cloud technology itself well to the use of artificial
considerable flexibility. As a result, there is that also embeds extensive big data intelligence and machine learning
little practical limitation on how treasurers capabilities, the processing and mining of techniques, where access to robust,
might choose to slice, manipulate and huge volumes of data in real time could be comprehensive data is a key enabler for
analyse their data across multiple criteria, possible. As a result, treasury's analysis can tasks such as automated cash
including regions, countries, banks (or be far more proactive and timely - as can forecasting. A possible further
other providers) and currencies, among any resulting actions. extension of this information-rich
many others. Nevertheless, some clients may prefer to environment is that in due course it
This means that treasurers armed with have access to the comprehensive data sets may also be feasible to build
LMP's actionable analytics are empowered underpinning LMP, but use their own tools anonymous benchmarking data sets for
to make faster and better decisions. for analysis (which also corresponds with individual industries or geographies.
Furthermore, because LMP integrates the move to open banking in Europe as Therefore, in this and many other
connectivity with other HSBC liquidity represented by the Payment Services respects LMP is not just an exceptional
solutions, such as cash pooling and Directive (PSD2)). As a result, HSBC is step forward for liquidity management
automated investment solutions, those looking at ways in which the same data today. It also opens the door to the
decisions can be immediately translated accessible via LMP might be delivered via treasury of tomorrow.
into action. A key point here is the high API into clients' own systems. ■
level of self service implicit in LMP: many
tasks can be directly undertaken from
within the environment, without having to
contact bank staff to request changes.
This autonomy fits well with the way
that the role of treasury has changed to a Treasurers armed with LMP’s
more consultative one that the business
looks to for strategic advice. LMP helps
actionable analytics are empowered to make
treasurers make faster and better liquidity better and better decisions.
decisions, but in doing so it also frees them
up to devote more time to business

For Professional clients and Eligible Counterparties only.
All information is subject to local regulations.

Issued by HSBC Bank plc.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Registered in England No 14259
Registered Ofﬁce: 8 Canada Square London E14 5HQ United Kingdom
Member HSBC Group

Global Liquidity and Cash Management Corporates Guidebook For Treasurers

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Global Liquidity and Cash Management Corporates Guidebook For Treasurers

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Global Liquidity and Cash Management

Corporates Guidebook for Treasurers

DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS

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LIQUIDITY MANAGEMENT: A WHOLE NEW WORLD