Robotic Treasury: Seizing Digital Transformation in ASEAN

HSBC’s recent Global Liquidity and Cash Management Forum held in Singapore captured the spirit of digital change that is sweeping through businesses, governments, and treasury in the ASEAN region.

The digital revolution is having a clear impact on the way that businesses interact with their customers, subsidiaries and treasury functions. In ASEAN this is felt particularly keenly, as a young, growing and technologically savvy population is ready to seize the opportunities being presented by the Fourth Industrial Revolution, or Industry 4.0.

Opening the latest Global Liquidity and Cash Management Regional Treasury Forum, Tony Cripps, Group General Manager and CEO, HSBC Singapore, commented that the world is facing an economic power shift that is creating numerous challenges, alongside rising trade tensions. “Treasurers must support their companies as they expand into new geographies and the way in which they deploy fresh business models has to be adaptive and agile,” he noted.

Cripps also explained how more and more corporates are setting up operations in Singapore, leveraging it as the financial centre for ASEAN – attracted in no small part by the nation’s advanced digital connectivity. The establishment of smart cities, digitising trade, and building integrated systems are all on the agenda to develop ASEAN further, Cripps noted, and Singapore is driving the momentum behind these goals.

Treasury 4.0 in ASEAN

Next on stage was an HSBC representative. He described how Industry 4.0 is happening now, across the ASEAN region. Moreover, Industry 4.0 is converging with Treasury 4.0, the representative explained. “Next generation treasury functions will be automated, data-driven, real-time, forward-looking, and increasingly strategic. The challenge for treasurers is to look beyond the hype, towards practical, real-world applications of disruptive technologies,” he said.

Building a Smart Nation

The HSBC representative then introduced Kwok Jia Chuan – Deputy Director, Citizen & Business Projects at the Smart Nation and Digital Government Office (SNDGO) in Singapore.

Kwok said the Smart Nation initiative is about Singapore taking full advantage of technology to create new jobs and new business opportunities, as well as making the economy more productive and lives more convenient. Technology is being used to achieve considerable transformation in Singapore in three broad areas:

Kwok said the government is looking in particular at transformational changes that focus on citizens. “Hot topics at the moment include artificial intelligence [AI], machine learning, and data. These all hold great promise for the government to continue to transform lives for people and businesses,” he said.

To achieve large-scale change, the government has introduced a series of Industry Transformation Maps, across 23 different industry sectors. The Government has also recently set up Digital Industry Singapore (DISG) to make sure that SMEs can also continue to accelerate their digital efforts.

In addition, SNDGO has also published the Digital Government Blueprint (DGB), which aims to make the Government “Digital to the Core” Kwok said: “Government has to ensure that citizens find its services easy to use and seamless. Businesses must find the services secure, reliable and relevant. Public officers need to be digitally-enabled and confident to take advantage of the opportunities that technology presents.”

As the economy and the Government continue to digitise, there are six Strategic National Projects being advanced as part of the Smart Nation drive:

Kwok finished by saying that the Singapore Government is committed to the Smart Nation drive. “This is not something that will take a day, month, or even a year, but I am confident that this drive will keep Singapore relevant and globally competitive,” he noted.

Preparing for Treasury 4.0

HSBC’s Lim kicked off the debate by explaining that Treasury 4.0 is essentially next generation treasury. “Treasury has always moved with the needs of the business and new technologies offer the opportunity to further enable treasury transformation,” she said. Technologies that are driving Treasury 4.0 are AI, where algorithms can be built into cash forecasting, application programming interfaces (APIs) that allow for instantaneous exchange of information and seamless transaction flows, and robotic process automation (RPA). Blockchain technology also has a role to play, such as R3’s Corda and IBM’s Hyperledger Fabric, she commented.Picking up the themes from the first HSBC representative's earlier address, a panel of industry experts then discussed how corporates can prepare for Treasury 4.0.

Sembcorp’s Thoh added anything that is repetitive in nature and involves taking information from other systems into the treasury management system (TMS) represents an opportunity for RPA. Sembcorp recently spent eight weeks simplifying one of its processes with a robot named Steve. As Thoh explained: “Robot Steve helps treasury download its cash information and cash projections from other systems and compile them into the daily position, which treasury can then use to plan its funding for the day. By doing this, Robot Steve has saved 1.5 hours per day for the team. This time can now be spent on tasks that perhaps cannot be automated, because they are not of a consistent or repetitive nature.”

At Microsoft, meanwhile, AI is a focus for Singh – with a particular emphasis on improving collections and accelerating cash application. “With AI, the conversation focuses on intelligence around dollar velocity. Treasury uses an ‘intelligent collections’ model – to study payment behaviour patterns among customers. The model predicts if there might be any erratic behaviour in terms of delayed payment or partial payment, and enables the collections team to call the customer beforehand and essentially change the customer’s behaviour.”

Giving another example, Singh said his treasury used AI for forecasting because the company has at least 450 subsidiaries around the world. Microsoft handles more than 90 currencies in over 190 countries, so forecasting is very important for FX hedging. With a machine learning model, which has been overlaid on the data inputs that treasury receives from local finance teams, accuracy has been improved by 6%. This resulted in a 25% reduction on other income on the profit and loss statement (P&L).

Cargill’s Misra then explained how her treasury has been able to use blockchain to enhance certain processes. The journey began around three years ago, when Cargill sat down with the trade team from HSBC to examine the trade flow journey and identify where the pain points, manual processes and the physical documentation requirements were.

Today, the company has completed three blockchain pilot projects, each increasingly complex and with added functionalities, to help alleviate the pain points of paper-based trade through digitisation. Misra added that having a supportive regulator in Singapore has helped immensely with the kind of new technology journey that her treasury has been taking.

R3’s Lewis echoed this, explaining how the whole concept of money in Singapore – and globally – is changing. He highlighted three types of digital currency to be aware of:

“People are starting to think about what money is and how it works, particularly in this era of low and negative interest rates,” said Lewis. Some digital currencies will be used for cross-border payments and some will be used domestically, he explained. “Project Ubin, driven by the Monetary Authority of Singapore [MAS] is a good example. This involves Singapore dollars being issued by MAS and recorded as tokens on blockchains to see what benefits may arise as both banks and corporates use them.”

Lewis also highlighted another interesting trend – notably the closeness of fintechs and corporates. Until now, most collaboration has happened between banks and fintechs, but he sees a tighter relationship between corporates and fintechs going forward – with the latter providing bespoke solutions.

HSBC’s Lim agreed that the co-creation of solutions in the Treasury 4.0 era is extremely important. “The premise is that no one party has the best answer – this allows all parties to open themselves up to ideas and learn through the process. It also requires honest conversations – in certain scenarios if a bank does not think they can provide the solution that a corporate is looking for, they need to be open about that and refer it on to a niche partner. Or a hybrid solution could work, such as a bank bringing in a fintech to help with the last mile of the solution they are developing,” she noted.

With this in mind, Misra made the point that the role of the treasurer today is becoming more of a technologist. “Ten years ago, the technology choices were around which FX execution platform to use or which payment or treasury system to run. Today those choices still exist, but treasurers also have cryptocurrencies, cybersecurity, and payment and collection mechanisms – complete end-to-end digital technology solutions – that they need to be familiar with.”

Although this may be daunting, it is also a huge opportunity: “Banks are spending billions of dollars on these solutions, so how does a treasurer draw that back to their business in a way that [shows] they are not just looking at treasury solutions but rather at business solutions? Co-creating solutions with fintechs and with your business units creates more opportunities,” she said.

To conclude the discussion, TMI’s Robin Page asked each of the panel what their best advice to the audience was in terms of embracing Treasury 4.0, and why treasurers should be taking action sooner rather than later.

Like with all projects, Microsoft’s Singh advised the audience not to start without a ‘why’. He added that “the culture of the company is important as well – companies need to have a culture that encourages people to present and try ideas, perhaps some will fail but you can come back with more”.

Thoh advised that if treasurers make time for only one thing during a treasury transformation, it should be change management. “In order to marry processes and technology, you need to understand every challenge that your people are facing in great detail. Only then can you make a transformation that really makes a difference to everyone’s work life and processes. It is critical to get buy-in on the transformation project from all of your staff – not just the C-suite. Companies succeed in change management when they hunt as a pack with a single goal,” Thoh said.

Endorsing the points made by the other panellists, Cargill’s Misra added that people are critical. “When hiring, don’t just look at treasury experience, but look at experience in areas such as data engineering and technology companies, for example. Young college graduates also tend to be more naturally technology friendly – they are open and eager to learn and implement new technologies.”

In addition, Misra advised corporates to further leverage their bank relationships. “With banks spending billions of dollars on technology, companies should look to see what can be co-created.” Not all technology projects are expensive or time-consuming, she added, you can find something meaningful that can be done on a small budget and with a minimal time commitment that can reap rewards.

Lim closed the panel discussion by sharing her hope that “in the near future, when banks like HSBC are co-creating with treasury departments, they can also go to the company’s business units and commercial arms to highlight the different avenues that they can work on together. Treasury 4.0 has to be about Business 4.0 too”.

Tools to build Treasury 4.0

Following the engaging panel discussion, Alson Ong, Head of Solutions Consulting at Blue Prism took to the stage to discuss how RPA has evolved into intelligent automation.

Ong described RPA as when a software robot or digital worker mimics a human action in a robotic fashion. “Software robots are very good at doing high-volume, repeatable, rule-based tasks diligently, without introducing the manual errors that can creep in when these tasks are being done by humans.”

He described how RPA can be used in combination with AI to automate processes such as payment and settlement. This enables treasurers to reskill existing staff so they can carry out more interesting and value-added activities.

RPA can also be used to audit, govern and manage the digital workforce. “With RPA, IT becomes HR – leaders can look at the digital workforce to monitor performance and bottlenecks, thereby providing tremendous operational insight.”

It is also possible to infuse certain humanistic skills, such as vision perception –intelligent character recognition (ICR) and optical character recognition (OCR) with RPA to enable the robot to digest semi-structured digital content or documents and to extract relevant data. “The goal is to build an autonomous digital workforce,” said Ong.

The infusion of these different technologies is where the true potential of intelligent RPA lies. As such, Blue Prism has launched Digital Exchange (DX), which is like the Apple App Store or Google Play Store and integrates AI services with RPA. “The idea behind DX is to let users join the RPA journey without worrying about emerging technologies. DX has AI integration with services such as Microsoft Azure, enabling the provision of intelligent automation processes – all in one place.”

In terms of treasury, Ong sees RPA being used to consolidate global payment processes, leveraging APIs, to create a single robotic enterprise framework around payments. He also sees RPA offering greater visibility into cash balances, and regulatory and compliance requirements. “RPA can authenticate and sign in to any third-party payment partner gateway or system, and consume the data into the payment transactions. In real time it can understand interest rate or currency fluctuations and reduce the exposures associated with cross-border transactions,” he explained.

Finally, with corporates sitting on a vast amount of data, this can be exposed to enterprise business intelligence software that will interrogate and aggregate the data to provide meaningful business insight and operational. This will enable treasurers to make better-informed decisions in the future, within a quicker time frame.

Treasury 4.0 from theory to practice

Following the RPA presentation, attendees heard from Toshiaki Ichida, General Manager, Treasury, at Ocean Network Express (ONE) about the company’s journey towards Treasury 4.0. Among the world’s largest container shipping companies, ONE has its global headquarters in Singapore.

In April 2019, ONE established the Digital Container Shipping Association (DCSA) with A.P. Moller- Maersk, Hapag-Lloyd, and MSC. The goal of the new association is to pave the way for interoperability in the container shipping industry through digitisation and standardisation. Then in July the company joined TradeLens, a society to digitise the global supply chain by improving the precision of tracking shipments in real time.

Ichida said that these two milestones are representative of the company’s commitment to Treasury 4.0. “ONE is accelerating its growth by using digital technologies, employing big data analytics and digital capabilities to improve the customer experience. There is a focus on channel and operational digitisation, enhancing existing business models with digital technologies. As well as using digital technologies to develop new services for the existing market, digital business convergence can create value in new markets too,” he said.

Treasury’s digital transformation journey at ONE began in July 2017 when the company was formed from a merger between K Line, MOL, and NYK. Ichida and his treasury team had just nine months to establish a global cash management set-up for ONE. “Due to the company’s global operations, our cash transactions are widespread across the world. This resulted in a dispersed and complex operating cash flow. To remedy this, we were keen to put in place a single-bank strategy and a centralised cash management scheme in order to achieve better cash visibility and greater cash efficiency,” he explained.

ONE selected HSBC as its global partner, to help automate and centralise its cash management. The two organisations have since worked together on ONE’s digital transformation journey, so far achieving four technology milestones. First is the enterprise resource planning (ERP) link technology. “This enables us to swiftly recognise and directly control the cash in all the operating bank accounts, even under a local entity’s name. We now have control over 85% of our whole operating cash, the majority of which sits with HSBC,” said Ichida.

Second is the auto-sweep. “This has allowed us to merge our corporate cash flow and our business operation cash flows in the same currency into one cash pool. This makes it easier for us to minimise the excess cash in each currency because now we can monitor only one cash pool in each currency. As a result, we have successfully reduced the excess cash in each currency by 50-60% and, we have also successfully reduced the FX transaction volume by netting our internal buy and sell requirements in each currency.”

Third is the liquidity dashboard – HSBC’s Liquidity Management Portal. “This shows our bank balance in a bar chart for all the ERP-linked bank accounts, regardless of the currency. On this dashboard, all the foreign currency bank balances are converted into our designated currency. This helps us to easily identify the country/currency where the excess cash is accumulating – and enables us to take timely steps to remedy that,” said Ichida.

Fourth is robotics. “Before using RPA, it took around 40 minutes per day to manually extract data from many data sources and produce our cash position summary. Now, this is automated and the team can shift that 40 minutes to analyse the past cash flow trend or produce a more accurate cash flow projection instead.”

Thanks to all four of these technologies that ONE has implemented, 90% of global cash is now placed under the control of Ichida’s treasury team in the global headquarters in Singapore. He said that treasury now places most of this cash in fixed deposits, which has considerably improved the non-operating cash flow.

Kee Joo Wong Managing Director – Regional Head of Global Liquidity and Cash Management, Asia Pacific, HSBC

Looking ahead, Ichida said the plan is to build on treasury’s achievements so far by automating more tasks. The auto-sweep will be extended to other currencies with the aim of reducing the excess cash by adding more currencies to the single cash pool.

Within the liquidity dashboard, Ichida said treasury is working with HSBC and ONE’s internal IT team to develop a new cash forecasting model linked to the HSBC banking system. “The bank has all of the past cash flow data via ERP link. The plan is to combine the historic data and the cash flow forecasting model into a single package, so that treasury can verify and identify the cash flow trends.”

RPA will also be applied to other recurring tasks, so the team can concentrate on more productive tasks, such as analysing or planning. Ichida said treasury also aims to implement an FX platform to automate manual tasks such as journal entry or bank clearing, remittance arrangement or logging of FX transaction history.

Finally, ONE plans on using HSBC’s automated inter-company loan system later this year. Ichida commented that this should help treasury put any cash in the bank accounts of subsidiaries to better use in the global headquarters. It will also help streamline inter-company loan administration tasks, both at headquarters and within the subsidiaries.

Ichida’s team will also closely monitor three key performance indicators (KPIs) to better gauge ONE’s cash efficiency as a result of digital transformation. These are ‘Wider ERP coverage’, ‘Minimising operating cash’ and ‘Minimising affiliates’ corporate cash’. “All of these will result in more concentration of cash to global headquarters,” Ichida concluded.

Keeping pace

Just before the networking cocktail reception opened for delegates, Kee Joo Wong, Managing Director – Regional Head of Global Liquidity and Cash Management, Asia Pacific at HSBC, shared some closing remarks. 

“Digitisation in ASEAN is opening up remarkable opportunities for business, banks and governments alike. Understanding and adopting digital strategies is critical to future success and competitiveness. Leading treasurers already recognise this and are taking advantage of technologies to create efficiencies – from Sembcorp’s Robot Steve to Microsoft’s Intelligent Collections.”

Wong cautioned, however, that while the pace of change of technology is “amazing”, it is important to note that “ecosystems need to develop in order to keep pace”. This includes the way that treasurers work with their internal and external partners, he explained. “Through digital transformation, treasury can become even more strategic, building a solid bridge to the business. At the same time, the possibility for corporates to co-create solutions with their banking partners is a powerful proposition – one that can no longer be ignored.”