Case study: Centralising and digitalising cash management for an e-commerce giant
S Group, a technology-driven online retailer that also operates in retail, logistics and health, aims to become the top player in its space specialising in supply chain management.
Already a Fortune Global 500 company, S Group has quickly expanded the business to overseas. However, this has led to multiple offshore funds and accounts held by subsidiaries located in different regions.
To create centralised and systematic account and fund management operations, BOCHK provided S Group with various digital channels and cross-border cash management solutions with a high level of automation. The outcome is improved operational efficiency, lower cost and accelerated its business expansion.
Setting up a treasury centre in Hong Kong
To enhance visibility, control and liquidity, S Group chose to set up an offshore treasury centre to manage all the accounts of its subsidiaries worldwide, in a centralised platform. This is authorised to perform transactional activities on behalf of its subsidiaries, including account enquiries, payables and receivables as well as fund allocation between subsidiaries.
Considering the geographical location, maturity of financial markets and professional services in Hong Kong, S Group set up the treasury centre through a group member in Hong Kong and partnered with BOCHK to establish an all-in-one platform to centralise the management of accounts and funds – with the goal of gaining economies of scale and process efficiencies.
Utilising digital transaction banking platforms as a medium
As one of the strongest transaction banks in Hong Kong, BOCHK has developed diversified digital channels for different business needs.
After a thorough assessment of S Group, BOCHK formulated tailor-made solutions for the organisation, including a cross-border transaction banking platform and host-to-host (H2H) connectivity solution. These two channels work together to provide full spectrum of transaction banking services including account enquiry, collection and payment, payroll, liquidity management, foreign exchange and trade finance via a single point of access.
To date, S Group has centralised around 200 accounts of different subsidiaries worldwide by integrating the company’s enterprise resource planning (ERP) system with BOCHK’s banking system. Through the secure and seamless H2H solution, S Group can simply access its global BOC group accounts and facilitate account and transaction enquiries in real time. It also allows payments to be submitted in bulk and encrypted in its ERP system directly, instead of by inputting it manually via digital transaction banking and therefore potentially creating a higher risk of human error.
As a result of the automation and straight through processing driven by the H2H solution, BOCHK has collaborated with S Group to help it reduce its operational cost, improve its efficiency in cash management and optimise its risk management.
Establishing cross-border RMB cash pooling
The People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have rolled out a series of policies and regulations relating to cross-border cash pooling. The goal is to facilitate China enterprises to enter international markets or attract foreign investments into China. As a result, multinational corporations (MNCs) can better manage their funds within and outside China.
Benefiting from its close relationship with Bank of China (BOC), BOCHK cooperated with BOC to assist S Group in establishing four cross-border RMB cash pools - in Jiangsu, Beijing and Shanghai free trade zones for different business segments. Through these cash pools, the company can now mobilise working capital between Mainland China and Hong Kong easily and then further distribute the funds overseas to support its daily operations, enhance business development and reduce unnecessary financing cost.
Previously, S Group had to seek PBOC approval for every cross-border transaction, incurring significant time and manual work. Now, with its cash pooling arrangements, the flows of fund between two sites can be managed in more efficient manner. In addition, the funds can be swept in both ways automatically at a scheduled time or by manual initiation, as necessary, to increase flexibility.
With the above centralised treasury solutions, BOCHK has assisted S Group to achieve several goals successfully:
1. To ensure visibility, controllability and operability of its overseas capital by enabling centralised control in the corporate treasury centre (CTC). This is further achieved due to:
- Unified management and settlement of all subsidiaries by the treasury hub, for higher level of efficiency and security.
- Centralised and standardised payment process with minimal manual operations.
2. To optimise onshore and offshore funding and improve internal liquidity, as a result of:
- Manual and automatic allocation of idle funds.
- Enhanced efficiency for cross-border fund transfers.