20 June 2016

Treasury efficiencies from innovation in the Resources & Energy Sector

How technology allows for treasury processes to be faster, cheaper and better.

The pressure to innovate is present everywhere in the financial industry. For the corporate treasurer, this means evaluating existing practices and systems to ensure that they not only fit the standards of today, but that they are ready to meet future demands as well. As such, technology will always be a key consideration.

The treasurer that manages to successfully address this transition will create efficiencies that will be felt across the business. Those that are left behind will be stuck with systems that are out of touch with the increasingly sophisticated demands of clients.

"Corporates in the Resources & Energy sector are usually overlooked when it comes to adoption of technology, but quite the opposite is true. Especially with the current downturn of commodity prices, these corporates are looking for innovative ways to optimize production and make the most of existing resources and infrastructure which is where Technology and Digitalisation comes in the picture" according to David Andrada, HSBC’s Regional Sector Head – Resources and Energy Group, Global Liquidity and Cash Management

Hosted in Singapore by Lance Kawaguchi, Managing Director, Global Sector Head – Resources and Energy Group, Global Liquidity and Cash Management at HSBC, the second session discussed the next generation of treasury innovation in Corporate Treasury with panelists from Kyriba and HSBC’s Singapore Innovation Lab.

The topic of innovation can seem daunting at first, but it can be reduced to a few basic goals that are easy to appreciate and strive towards. "Faster, cheaper, and better. This is what innovation boils down to," according to Sathya Ram, the Head of HSBC’s Singapore Innovation Lab. "It is not necessarily very technical, nor is it all about flashy gadgets designed to grab your attention."

Mr. Ram was speaking at a client event in Singapore, where he explained how the entire payments system is undergoing dramatic change. As the person in charge of HSBC’s regional strategic space for financial technology, Sathya is highly qualified to comment on this topic, as he collaborates with corporates on a day-to-day basis to develop the next generation of digital and mobile banking services.

One of the biggest changes relates to how treasurers are thinking about payments, which have traditionally been considered in the way that the money arrives in the beneficiary’s account. Nowadays, there is a convergence where all the different kinds of payments are coming together, and treasurers are considering the process more in terms of the most efficient way to complete the transaction - taking into account the company’s liquidity position, as well as the particular needs of the business.

There is an issue of convenience, and recent improvements in the experience of retail customers can provide some insight. In many markets today, an individual can make an instant transfer of money to a friend or a business via online banking services that are available on a desktop computer or mobile device.

Yet in the corporate space, payments remain a cumbersome process, which may leave a corporate treasurer wondering why a large multinational business cannot complete its transactions as quickly as an individual. Of course, a higher standard of risk management plays a part, but it is also due to the fact that the corporate world still uses legacy systems that do not talk to each other.

And there is plenty of work to be done to ensure that treasurers are able to know their cash position - something that is particularly difficult for a business that operates across multiple geographies, with various subsidiaries using different currencies. The aim is to reduce the time it takes for a treasurer to know exactly how much cash is available, thus putting them in a position to make decisions more quickly. 

Technology plays two roles here. On the one hand, it helps set high expectations. The prevalence of mobile devices – such as smartphones and tablets – means people are now used to having easy access to whatever information they want. Data has to be available on their choice of channel, at the time they want it. The legacy systems in many treasuries clearly do not meet these standards, and Mr. Ram highlighted how HSBC is looking at the information flow to understand better ways of delivering products and services.

At the same time, technology is also a solution. Application Programming Interfaces (APIs) are facilitating a smoother flow of information between systems, compared to legacy systems where the process was much more laborious. This leads to the possibility of automation, with payments systems communicating with each other in such a way that they are able to make decisions on-the-go, according to parameters that minimize the chance of error.

The need to improve legacy systems is just one of the many demands that a corporate treasurer faces. There are also challenges from the changing regulatory environment, while each industry has its own particular issues that need to be addressed. Technology cannot be ignored, since it provides efficiencies across multiple areas of the business; while the difficulties of managing the process can be addressed by working with the right partner, whether it is a bank or a financial technology company.

The banking industry is working to meet the evolving client expectations by better understanding the user experience and building their products accordingly. HSBC’s Innovation Lab in Singapore fits into this journey as a point where the bank can interact with clients, understand the areas where there are problems, and work with them to create a solution.

For the Resources and Energy industry, Mr Andrada referenced using the HSBC Innovation Lab to address real treasury problems by collaborating with banks and financial technology companies. "The HSBC lab is focused on delivering tangibles to clients, and addressing the real problems that they face and co-create solutions."


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