Pearson Education partners with HSBC to elevate global liquidity management

A subsidiary of the international corporation Pearson plc, Pearson Education (Pearson) is a leading provider of educational materials and services in more than 55 markets worldwide. As part of its business, it provides online education courses to a wide range of students across the globe.

Pearson’s finances are strategically managed by its central treasury team in the United Kingdom, supported by various local finance teams in key markets. Under this arrangement, funding is centralised from the United Kingdom, while local teams manage domestic cash forecasting, payments, and collections in their respective markets.

The Challenge

Under Pearson’s existing setup, each market had a single account per currency for payments and collections on their global enterprise resource planning (ERP) system, Oracle. This created a variety of challenges for global and regional teams, especially those in Singapore, one of Pearson’s key hubs in Asia.

As part of their day-to-day operations, Pearson’s team in Singapore typically received a significant volume of USD payments from students across Southeast Asia participating in online courses. These funds then had to be converted manually to support local SGD payments, such as payroll and supplier payments, often through multiple FX transactions to manage risk given the typical transaction values.

As a result, the Singapore team spent significant time monitoring FX rates and cash flows across currency accounts to ensure sufficient funds were available for payments. The use of a single consolidated account per currency for payments and collections also made it more difficult to track incoming and outgoing transactions for cash forecasting and end-of-day reconciliation.

The Solution

With the aim of increasing day-to-day automation and improving visibility of cash positions and transactions, Pearson engaged its banking partner, HSBC, to orchestrate a significant transformation of its domestic cash structure in Singapore.

First, Pearson introduced a new local account structure, centered on segregating accounts for payments, collections, and payroll within its Oracle ERP. This gave Pearson greater visibility of transactions, improved the team’s ability to forecast inflows and outflows across currencies more accurately, and simplified transaction reconciliation.

Pearson then further automated the movement of funds across currencies and accounts through the use of cross-currency sweeps. Through its engagement with HSBC on best practice and recent developments in liquidity management, Pearson designed an innovative cash pooling structure that leveraged HSBC’s cross-currency cash concentration solution to allow onshore USD balances to be automatically converted and concentrated into SGD.

Target balances were set as needed on all active accounts, enabling automated funding across the Singapore bank structure. These include automated pre-funding of SGD payment accounts ahead of payment runs using USD liquidity, as well as automated funding of sudden shortfalls across currencies.

By eliminating the need for teams to constantly monitor account balances and market rates for FX conversions, the solution has delivered significant time savings. It has also reduced the time spent on reconciliation, as SGD is now the only currency the team needs to manage for the Singapore market.

To make the cash pool a reality, Pearson was provided with a dedicated onshore project manager in Singapore who coordinated documentation requirements between the global and local teams and actively collaborated on technical design, testing, troubleshooting, and next steps. This allowed the solution to be tailored to Pearson’s needs and delivered in a timely manner.

Key Benefits

• Transparent transaction tracking: Full visibility of payments and collections by currency.
• Greater analytical capability: Segregated views of transactions give Pearson the ability to deploy AI tools for cash forecasting.
• Streamlined currency management: The solution serves as a proof of concept that could ultimately help Pearson reduce currency management to a single currency per market.
• Scalability: Pearson can implement a similar arrangement in other markets where cross-currency sweeping is available.
• Increased capacity for internal self-funding: Surplus funds can be swept automatically to meet onshore funding and payment needs more quickly than before.
• Significant time and cost savings: Reduced FX conversion costs and less administrative effort in moving funds between accounts.
• Continued collaboration: As a next step, Pearson and HSBC are looking to introduce automated cross-border sweeps to streamline cross-border funding and enable similar automated cross-currency sweeps in other key hubs, such as Hong Kong.