Global Liquidity and Cash Management Corporates Guidebook for Treasurers

60 Pages·2017·7.39 MB·English

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
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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
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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
Lance Kawaguchi
urban infrastructure and services. The city its debt facilities and review its banking
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
HSBC’s extensive
regulatory changes within the region, shifts future-proofing”.
in US tax legislation and interest rates all HSBC’s journey with AkzoNobel began global footprint as
present corporate treasurers with a wide in 2007, when the company embarked on a
well as some of its
range of opportunities. treasury transformation project called One
Cybersecurity is frequently at the top of Finance, a demanding project entailing innovative
corporate treasury agendas and in Latin changes to its banking infrastructure,
product
America it is a ‘fast-growth priority’. This treasury policies, technology and
booklet examines the current cybersecurity relationship with business units. In view of developments are
landscape in the region and explores some our extensive network, HSBC was
highlighted in the
of the best practices for cyber risk appointed as its primary banking partner in
mitigation. Indeed many of the articles on many regions and countries, and was range of areas
this subject demonstrate how HSBC, with subsequently also awarded the sole
covered in these
its breadth and depth of security expertise mandate for trade finance activities. Since
and ability to effectively operate globally then, the relationship has grown articles and
across all client sectors, can offer significantly: AkzoNobel’s Head of Treasury
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
recent case studies
Partnership with our clients is of continue to explore opportunities to expand
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
clients.
solutions available to our customers. One guidebook will prove to be a long standing
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. (cid:0)
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Digital Innovation in India:
The Road Ahead
AN HSBC INDUSTRY VIEW
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 Forumhosted by Lance Kawaguchi, Managing Director, Global Head –
Corporates, Global Liquidity and Cash Management, HSBC in Mumbai.
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DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS
Enabling business over 400 million consumers in India are
connected to the internet. The country is Forum Host:
transformation through digital
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
Moderator:
On the back of these co-ordinated back end of our business has been digital
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
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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 A pathway to greater strategic
of the 'Big Three' strategy consulting fund industry is that liquidity tends to
focus
firms (MBB). tighten at certain points in the cycle – such
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. Ltdhas 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.
Corporates are treasury function. We’ve also attempted a This has helped in reaching a specific
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
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DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS
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
We can now be
companies can no longer ignore. Not only doing this, and this is a totally new arm of
can businesses leverage these market shifts our business strategy – but one that is much more
to speed up collections, as some of the proving to be highly effective.
accurate with our
panellists have already discussed, but they
can also turn them into strategic marketing Digital disruption: threats and cash forecasting
and sales tools, as well as competitive
opportunities and more
bargaining chips. If, for instance, one
microfinance institution (MFI) can only strategic with
disperse a small ticket loan of say, INR Eleanor Hill, TMI: What emerging digital
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?
excess cash.
today, it’s clear which MFI will have the And how can they embrace the agility of
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?
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DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS
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.
It is far better to embracing digital innovation or disruption
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
along your and processes, enabling companies and trends such as chatbots, which will be the
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
journey, or in your Srinivas Jain, SBI Mutual Fund: service interactions will be handled by bots.
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. (cid:0)
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