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The Business Times: Centralising treasury operations for greater efficiency and control

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Modernising its liquidity and cash management processes has allowed Blackmores to better support its growth and expansion in Asia-Pacific.

BLACKMORES
Australian health company Blackmores worked with HSBC to adopt digital solutions that would give the group real-time visibility over group liquidity. PHOTO: BLACKMORES

AS AUSTRALIA’S top vitamin maker with a presence in 13 markets across Asia-Pacific, Blackmores oversees hundreds of payments and transactions a day.

For the longest time, the group – which manufactures and distributes vitamins, minerals and nutritional supplements – was operating on a decentralised treasury model, where it held multiple banking relationships with different banks in the region.

But it soon realised that its existing set of banking arrangements was hardly optimal for its expansion plans in the long run.

The group had little oversight of its cash, most of which was left at the country level to support local working capital requirements.

“There was a lack of real-time cash visibility within our Asia subsidiaries. From a management reporting perspective, it’s not an ideal solution,” said Shaun Egelton, global treasurer of Blackmores.

“Given our growth trajectory and aspirations in the region, it was therefore important to have that real-time cash visibility.”Using different banking platforms was also an administrative hassle, as it meant having to navigate an array of protocols, systems and interfaces, Egelton added.

For instance, it was time-consuming to change access authorisation levels for employees across different business units in the group, he said. It could take at least two to three weeks for a new user to be granted access, as this was a process that could only be done manually.

Shaun Egelton
Shaun Egelton, global treasurer of Blackmores, says that by implementing digital solutions from HSBC, the company can now better track its day-to-day cash activities and needs, ultimately strengthening its overall working capital management. PHOTO: BLACKMORES

According to Deloitte’s 2022 Global Corporate Treasury Survey published in November last year, the top three priorities for treasury executives in the 12 months ahead were enhancing liquidity management, improving cash forecasting capabilities and optimising capital structure.

However, 72 per cent of the survey’s respondents said they lacked the knowledge on how to implement new technologies and utilise them fully. Meanwhile, 39 per cent of respondents said they faced difficulty selecting the right solutions provider.

In 2020, Blackmores began working with HSBC to modernise their liquidity and cash management processes in Asia-Pacific.

Real-time visibility over cash positions

The group’s first order of business was to rationalise its bank accounts. So it went onboard HSBCnet, a digital banking platform which provided a real-time overview of its total cash and liquidity balances across markets.

At the same time, the group was able to integrate its enterprise resource planning system with HSBCnet, enhancing connectivity and allowing it to process large volumes of its account payables and receivables securely.

By implementing these digital solutions, Blackmores is now able to consolidate its total statements across markets on a daily basis. As a result, the group can now better track its day-to-day cash activities and needs, said Egelton, ultimately strengthening its overall working capital management.

In addition, the group no longer has to juggle between multiple tokens, passwords and bank accounts. This enables it to better safeguard against digital threats that arise more easily with the use of various banking systems.

“We’ve got a few smaller markets with not a lot of staff on the ground,” said Egelton. “It’s important for security to have a solution that’s less open to fraud.”

HSBC also had a team of transition management advisers on hand, to provide Blackmores with advisory services and assist in addressing any internal complexities or challenges that cropped up.

Enhacing interest yields

In today’s high interest-rate environment, it is even more crucial for corporates to have full oversight of their cash positions and manage rising costs from external borrowing.

By taking on HSBC’s Interest Enhancement solution for its key Asia markets, Blackmores has been able to earn greater yields on its surplus cash in the region, said Egelton.

The bank’s Interest Enhancement solution works by basing interest on a total relationship balance across international markets. There is no movement of funds, which all remain in their original currencies. All interest is calculated and where allowed, applied in the original currency of their respective accounts.

Being able to manage interest conditions centrally has given Blackmores greater control over the management of its funds. Today, Egelton receives daily reports of the interest rate applied daily to the balance in each of his group’s accounts in Asia-Pacific.

“It’s very visible, seeing what yields are applying in each of the countries. Now we have a clear framework on the calculation of interest in each of the regions,” he said. “It’s great to have that information at our fingertips.”

Gaining economies of scale and managing risk

As multinational corporations scale and enter new markets, they should review their operational efficiencies to make sure they can match the needs of their new corporate footprint.

Firms working with multiple banks could incur higher costs, as each bank may levy individual fees and charges that may not be as preferential. The treasury team may also need to invest in additional technology or staffing to manage their various banking relationships.

Then there is also the possibility of being exposed to the risk of errors and fraud, if proper precautions are not taken.

“Treasury management is a key enabler for businesses to expand internationally,” said Winnie Yap, managing director and head of global payments solutions at HSBC Singapore.

“Scaling and streamlining the working capital process is a vital component, and our partnership with Blackmores in Singapore is testament to how HSBC can support their growth ambition.”

By consolidating its accounts in Asia-Pacific to one primary banking partner, Blackmores has achieved “greater operational efficiency as well as improved visibility and control of their treasury function, ultimately delivering an optimised liquidity management structure”, said Yap.

Still, a lack of visibility into global operations and exposure to risk remain the biggest pain points for corporates in the areas of liquidity and cash management today, Yap noted.

“Many organisations are looking to enhance their liquidity management, with a focus on building capabilities to enhance their visibility to cash and financial exposures, and to optimise working capital,” she said.

It is therefore no surprise that digital transformation and technology are higher on the agenda of corporate treasurers more than ever before – an observation consistent with what HSBC has been hearing from its clients.

“By remaining status quo, companies would not be able to gain economies of scale with their banking partners and manage their risk effectively,” said Yap. Continued poor liquidity management will also lead to a higher cost of borrowing and lower interest return on surplus cash if it is not consolidated, she added.

Corporate treasurers, therefore, play a critical role in helping their companies to optimise their cash position and maintain healthy financials in a rapidly changing business environment.

“Treasurers should look to optimise the allocation of liquidity within their organisation, and adopt tools to automate the transfer of funds between accounts or to offset balances,” said Yap.

"Treasury management is a key enabler for businesses to expand internationally. Scaling and streamlining the working capital process is a vital component, and our partnership with Blackmores in Singapore is testament to how HSBC can support their growth ambition."

Winnie Yap, Managing Director and Head of Global Payments Solutions, HSBC Singapore

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