Transcript
Speaker: This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
Speaker: Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
Speaker: A heads up to our listeners that this episode has been recorded remotely, therefore the sound quality may vary.
Speaker: Thank you for listening.
Speaker: We're joined in our virtual studio today by Jared Smith, Global Head of Corporates, Global Liquidity and Cash Management, HSBC.
Speaker: Jared, welcome.
Speaker: How are you?
Speaker: I'm very well, Eleanor.
Speaker: Thanks for having me.
Speaker: So, Jared, we're going to be talking today about Treasury in 2021, but let's focus on the here and now for a moment.
Speaker: So the pandemic has prompted organizations to question pretty much everything they thought they knew.
Speaker: How do you think that business model changes and operational rethinks might actually impact Treasury in 2021?
Speaker: So that's a really good place to start.
Speaker: And that's the big question, right?
Speaker: And I think if we just start with what we've seen out of necessity going into this pandemic or coming out of the pandemic or wherever we happen to be now is really an accelerated adoption of new things.
Speaker: So we've seen an accelerated shift towards digital services.
Speaker: And in many cases, the corporates are making that switch almost out of necessity, right?
Speaker: Our clients and our own employees are now working from home across the globe.
Speaker: At one point, about 90% of HSBC's employees were all working effectively from home.
Speaker: But the reality is there's a continued pressure for corporates to conduct business as efficiently as before.
Speaker: And that means making do in this new sort of remote environment.
Speaker: So where we've been pressing our clients over time and introducing new ideas around digital regionalization, cashless, there's lots of things that we've always thought were critically important to continuing to grow business for them and for us.
Speaker: we're finding that they're having to make these changes on the fly.
Speaker: So if I talk, say, moving to cashless, for an example, from doing a business perspective, companies can no longer use checks or physical cash in many places where they may have before.
Speaker: And it's causing them to have to rethink their entire collections operation.
Speaker: In some cases, they couldn't get into a facility in order to issue files.
Speaker: So they're having to reconsider everything and it's all contributing to a shift towards something.
Speaker: The positive news there is we've had the services within the industry.
Speaker: We've had this shift happening ahead of any of these changes.
Speaker: So it's really an acceleration.
Speaker: I think one thing to note is this is not temporary in my view.
Speaker: And I think we have to learn to operate in a more fluid working environment, whether it's a necessity or maybe by choice because people have become used to it.
Speaker: So in this new world, it's the new contingency that I think is really critical for our customers.
Speaker: And
Speaker: By that, I mean moving from what was historically perhaps a just-in-time to now a just-in-case operation, where in the event there's a wave two of the pandemic or some other subsequent supply shock, they're prepared for it.
Speaker: So we have found that our corporates are reevaluating their supply chains.
Speaker: In many cases, they're looking to move operations closer, and they have to consider logistical items that may be new to them, such as how do they ensure that their treasury staff have all the tools to work from while approving monitoring transactions from home.
Speaker: Yeah, absolutely.
Speaker: An awful lot to take in, but some positive shifts as well and get a bit of checks would be a big step forward, I think.
Speaker: We've been trying for a long time, so we'll get there and there's no looking back.
Speaker: Absolutely.
Speaker: And so, Jared, you mentioned shorter supply chains there.
Speaker: And as businesses look to sort of source more regionally, what do you think the impact on Treasury might be from a sort of cash management liquidity point of view?
Speaker: Initially on in the pandemic, there was a lot of talk around relocalizing.
Speaker: So that's true.
Speaker: And many of our corporate clients have definitely been reviewing their supply chain arrangements.
Speaker: They've been considering whether they should be shifting operations closer to avoid major disruption in the future.
Speaker: That being said, we don't believe there's going to be a total reverse in globalization.
Speaker: On many fronts, we've seen trade openness and liberalization have continued and are expected to continue.
Speaker: So I wouldn't say that there's going to be a massive retrenchment to the regions.
Speaker: Instead, what I think we'll start to see is more awareness around the concept of resiliency and how proper risk management can support that resiliency.
Speaker: To be totally frank, I believe the treasurers are now going to receive greater support and budget considering their demonstrated role in keeping businesses going during a crisis and for managing the risk around local, regional and global challenges.
Speaker: Treasurers may engage now suppliers and customers a little bit differently, opting to involve them in any financing or revenue mitigation arrangements that their banking partners offer.
Speaker: So that could be a shift to help them keep more close to the supply chain and keep the supply chain moving.
Speaker: Definitely.
Speaker: Resilience and making sure everyone is kind of in a good place, like you say, to keep things moving.
Speaker: So one of the things you mentioned there, Jared, was the rise of digital treasury.
Speaker: I'm wondering, how do you think the shift towards virtual real-time treasury will change the playing field for corporates?
Speaker: Also, what kind of digital innovations are your clients embracing here?
Speaker: Sure, sure.
Speaker: And maybe in the context of centralization or access to data.
Speaker: So, yeah, we talk a lot about virtual.
Speaker: We talk a lot about real time, whether digital, mobile, lots of different words around it.
Speaker: But it's the kind of activity we've been interested in and engaging in terms of innovation for a long time.
Speaker: So I think these things will be hugely impactful in terms of centralizing activities and gaining access to information for more effective decision making.
Speaker: corporate treasurers have long wanted to centralize information flows, though historically they've perceived challenges around it in terms of maybe transforming their approach, potential disruption to suppliers and customers, costs and barriers to corporate centralizing the treasury functions in the past.
Speaker: Some corporates have a perception that centralization comes at the cost of their ability to be flexible.
Speaker: And so they resist the benefits of treasury centralization in favor of entrepreneurial benefits and sort of a decentralized approach.
Speaker: I'd say, however, here, forced transformation of activities and advancements in technologies are really very rapidly changing the treasury landscape, and they're eliminating some of these barriers quickly.
Speaker: So innovations coupled with current economic and cost pressures are going to force corporates to consider centralization in ways that they may not have been able to in the past.
Speaker: As examples, our clients are rapidly moving towards virtual accounts and APIs.
Speaker: And those are into some new to some have been around for a bit, but they're rapidly becoming very common advancements that are going to allow them to increasingly be able to sort of cherry pick certain benefits of centralization a la carte without having to suffer large time consuming or costly transformation programs.
Speaker: And that in itself will continue to accelerate the process.
Speaker: Excellent.
Speaker: Sounds like music to treasurers.
Speaker: You mentioned one of the sort of buzzwords that we're hearing a lot more, which is resilience.
Speaker: So how can treasurers look to build that resilience into their operations for 2021?
Speaker: And what do you feel HSBC's role is here?
Speaker: So I think that some of the good news is that many have demonstrated that they had a certain level of resilience and were able to go into and come out of some of this pandemic.
Speaker: And the banks, I believe, in many cases, have done a very good job here as well.
Speaker: In this case, I'd like to think in terms of the treasurer's decision making, particularly around working capital.
Speaker: As working capital becomes increasingly constrained, the treasurer's engagement here will have to take on additional resiliency considerations.
Speaker: More than ever before, information reporting control, I think, are very crucial.
Speaker: And treasurers are going to need on-the-go, real-time visibility over their global funds for enhanced liquidity planning.
Speaker: They'll need real-time global reporting and cash flow forecasting.
Speaker: And this is, in survey after survey, becoming one of the most critical things that are being considered.
Speaker: So utilizing data analytics and artificial intelligence to be able to enhance cash flow forecasting, I think, is going to be critical to help treasurers to navigate uncertain and declining flows in many cases.
Speaker: That said, in today's environment, digitization is about more than just visibility and control.
Speaker: It can also help companies accelerate collections through real-time payments.
Speaker: It can help them keep cash on hand longer by extending payments through things like virtual card programs.
Speaker: And with many corporates, they're now coming to grips with digital banking at scale for the first time.
Speaker: It's important that the client experience continues for them to be simpler, safer, and faster.
Speaker: I'd say over the past few months, corporates have seen factories shutting down.
Speaker: We've seen some disruptions of global commerce.
Speaker: Some cases order cancellations and requests for delayed deliveries, while some customers have demanded price reductions and longer payment terms.
Speaker: In some industries, we see higher levels of demand, while in others, we see reduction in order levels.
Speaker: And this is creating revenue shifts that really materially impact the company cash flow and earnings.
Speaker: This increases the importance of treasurers being able to effectively manage changing cash flows at short notice, which I think really underpins the value of data analytics.
Speaker: Through all this, risk management is the most critical piece.
Speaker: So clearly right sizing risk management to be commensurate with the material change in operating business models has been front and center for this year.
Speaker: It had been in the past more so now.
Speaker: And as companies needs may necessitate exposure to new risks, treasurers are going to need to consider other things like the impact of foreign exchange, interest rate and price volatility, just to name a few examples.
Speaker: I think to your second piece with regard to our role here, it's always been our view as a provider to our customers that it's our role to assist clients and
Speaker: help them move along their line towards their own digital journey.
Speaker: So to some of the benefits I've just shared, we've got services in place to facilitate each of these things, whether it's leveraging real-time payment schemes anywhere in the world, mobile collections, cash flow forecasting, or other biometrics, fraud prevention, cybersecurity is becoming quite an important topic now.
Speaker: It's really our role to be able to advise on these types of things.
Speaker: And the good news here is we have been advising our clients on this for some time now, and now there's an increased interest in it.
Speaker: So I think we get to move along into a more effective environment quickly.
Speaker: Excellent stuff.
Speaker: And Jared, you mentioned data analytics there.
Speaker: So let's take a moment to step back and think about data.
Speaker: How do you think treasurers can sort of make more out of the data that's held within their own company and also with their banking partners?
Speaker: That is a big question and a really important one.
Speaker: And I think, you know, we see ourselves in many ways as, you know, we are a payments and cash management organization and we help clients with visibility and we help them with access to clearing systems.
Speaker: But behind it all, in many respects, we're a purveyor of information and data.
Speaker: And so we're often talking to customers about just that.
Speaker: Managing large quantities of data is going to seem really daunting to most.
Speaker: It's really more about finding the relevant and reliable pieces that contribute towards your data strategy in a more dynamic way.
Speaker: The speed at which we're doing business now on a daily basis, even through challenges, has increased exponentially.
Speaker: It's important to ensure that there's a real-time medium of data exchange between companies and their banks.
Speaker: So open APIs come into play, and this can fulfill this need as they allow treasurers to bring external data into their internal ecosystems at ease, and then they can get access to and pick the data that's important.
Speaker: The second piece here is ensuring that once the data gets into the company, it's then efficiently centralized for proper analysis.
Speaker: Until recently, I'd say data was very siloed within many corporations.
Speaker: So if it wasn't in your department, you didn't have access to the data.
Speaker: Now, the ability to centralize external data into a single dashboard is going to become more and more critical towards ensuring that you've got the proper insight to make decisions in real time.
Speaker: Treasurer should increasingly be looking to evaluate their banks on the ability to provide these types of solutions.
Speaker: And recall earlier, I talked about the increased importance of a treasurer's role and the likelihood that there'll be more investment in this space because they have access to this data, they can make these decisions quickly.
Speaker: Yeah.
Speaker: For us within HSBC, we have recently launched our cash flow forecasting tool that is fully integrated with our eBanking portal HSBCNet, making it immediately accessible and available to our client base, arguably at the time they need it the most, given the increased or continued uncertainty around COVID-19.
Speaker: Lastly, although it's been talked about before, what we're ultimately seeing is that data moves in kind of a cyclical manner.
Speaker: So companies that receive the data from banks and other sources then use that data to make decisions and transactions, after which even more data is generated.
Speaker: So companies need to review their existing operations and identify at which point they can make improvements to drive data in a more centralized and controlled manner across the organization.
Speaker: Makes absolute sense.
Speaker: And it's good to hear about your cash forecasting tool.
Speaker: And I know some of our listeners will be keen to hear a little bit more about that.
Speaker: But Jared, could you maybe tell us about your priorities for your team over the coming year and how clients will benefit off the back of those?
Speaker: I'd say, Eleanor, that our priorities haven't really changed, although it might be a little bit more challenging in order for us to deliver them.
Speaker: So we're staying very focused on that.
Speaker: And we've always wanted to be an effective and efficient and accessible to our clients with regard to our services and information.
Speaker: So I'd say, first off, we're looking to remain very flexible, but accessible within the current environment, which is very new to everyone.
Speaker: It has been an extremely difficult year for a lot of our clients.
Speaker: And even though we've been working remotely, we feel that we're as connected to clients as we've ever been.
Speaker: In fact, I'd say that we're even more connected, given the logistical aspect is simplified and commuting is removed from that equation.
Speaker: So although Zoom is a new way to engage, it's certainly effective in terms of having access.
Speaker: So the aim for us still remains to engage with our clients in a very thoughtful and empathetic manner, a word not often used, right, in order to aid them in effectively navigating the treasury landscape post-COVID-19 or into another wave.
Speaker: I also think that we need to remain very focused on promoting digitalization.
Speaker: And as I said earlier, it may be fairly easy to do because clients are now perhaps being forced into some of this kind of activity.
Speaker: Yeah, yeah.
Speaker: As I mentioned before, a lot of companies are now having to adopt digital services quickly out of necessity.
Speaker: And while historically the change may have been very uncomfortable, now maybe it's less so, or maybe it's just the speed at which they need to adopt it because it's going to happen anyway.
Speaker: We'd like to see that trend continue as it's not only helpful to bring our clients further along the curve of operational efficiency, which we've been promoting for some time.
Speaker: It also helps to protect them from future shocks in the market.
Speaker: And I think everyone's starting to realize that more and more.
Speaker: Absolutely.
Speaker: So this brings together cybersecurity, resiliency, planning, risk management.
Speaker: And for next year and into the future, I would expect us to remain at the forefront of advisory and advising our clients to help them leverage technology, new innovations, and to really practice resiliency to ensure that their treasuries are fully future-proof in every sense of the word in terms of everything we've talked about today.
Speaker: Excellent.
Speaker: Jared, brilliant advice there.
Speaker: Some great insights.
Speaker: Thank you so much for joining us.
Speaker: Appreciate you taking the time out.
Speaker: And also I wanted to quickly say for anyone listening, wanting to find out more about anything that we've spoken about today or the cash forecasting tool that Jared mentioned, please don't hesitate to get in touch with HSBC.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint Banking and Markets.
Speaker: For more information about anything you heard in this podcast or to learn about HSBC's global services and offerings, please visit gbm.hsbc.com.
