- Managing Cash Flow
- Improve Efficiency
- Make the best use of cash in hand
Driving automation, efficiency, and cost savings with HSBC’s scalable cross-border cash concentration and multi-currency notional pooling solution.
Marsh & McLennan Companies, Inc (“Marsh McLennan”) is the largest insurance broker in the world, generating a revenue of USD19.8 billion with operations in more than 130 countries and a market capitalisation of USD79 billion.
Particularly for Marsh McLennan operations in Asia, the company wanted to centralise liquidity in the region and within the Asia time zone in an automated manner, optimising their self-funding requirements and achieving operational efficiency in managing their cash.
Historically, excess liquidity from Asia was being manually swept to participate in a global notional pooling structure. Manual transfers are inefficient, Plus, funds were managed on a forecasted basis in Asia with residual balances being left in country – all of which meant Marsh McLennan could not fully optimise their cash.
As part of the international pooling strategy designed in 2021 to operate more efficiently and automate liquidity management, it was decided to move to a zero-balancing structure with a multi-currency notional pool at the Treasury entity level. The Asia region was chosen to be the pilot for the new pooling strategy.
Working with their international banking partner, HSBC, Marsh McLennan set up a domestic and cross-border cash concentration structure that pooled funds to a central location in Singapore. The regional cash concentration structure centralises balances to a multi-currency notional pool in order to optimise liquidity management within the Asia time zone for same day value, eliminating the need for unnecessary FX conversions and maximising the use of company funds to get the most competitive interest outcome.
All intercompany interest positions are automatically accrued and posted. The automated nature eliminates the need for manual transfers, forecasting of payable activity and inefficient residual balances being left in-country.
Combined with a HSBC’s Liquidity Management Dashboard, which provides a reporting tool for real-time visibility of liquidity across all accounts, Marsh McLennan implemented:
- Zero balancing sweeps (including multi-tiered sweeps) from participating accounts in Japan, Hong Kong and Singapore into the accounts of a newly established Treasury entity in Singapore to participate in the notional pool. 36 entities and 76 accounts participated in this initial set up.
- Intraday limits on the operating accounts to facilitate payment activity.
- A single-entity multi-currency notional pool in Singapore for the Marsh McLennan treasury entity in JPY, HKD, SGD and USD.
- Dynamic intercompany interest rates for all entities/currencies in scope, linked to the pricing on the pool, with automated interest computation and posting. This included handling of withholding tax, where applicable.
- Standardised reporting on balances and intercompany positions that are fed directly into Marsh McLennan’s systems for automated reconciliation.
As a global business, we partnered with HSBC to establish an automated zero balancing liquidity structure with a multi-currency notional pool at the Treasury entity level. This has been an effective and scalable tool to support our operations around the world.|
This new international pooling strategy sets the foundations for Marsh McLennan’s potential future in-house bank. Asia being the pilot region for this global pooling strategy rollout also paves the way for future implementation in more restricted markets such as Malaysia, Indonesia and Korea, aligning with Marsh McLennan’s geographic footprint in Asia.
This highly scalable structure allows more entities and accounts to be added easily, all supported by HSBC’s global liquidity engine so the experience for Marsh McLennan is consistent across the region and reporting is standardised. With this, Marsh McLennan has maximised the use of internal cash to meet their funding requirements.
- Centralisation of all eligible participating balances into the multi-currency notional pool in Singapore allows Marsh McLennan to maximise the use of internal cash to minimise borrowing costs.
- Automated zero balanced cross-border sweeps on an end-of-day basis, where possible, eliminates the need for manual transfers and inefficient residual balances left in country.
- Automated accrual and posting of intercompany interest, with consistent intercompany reporting that can be integrated into Marsh McLennan’s systems, eliminates the need for manual resources to capture the intercompany positions and manage the rates, accrual and posting activity. It also helps the company comply with arms’ length regulatory requirements for intercompany positions.
- Centralisation of cash into Singapore allows Marsh McLennan to manage liquidity within desired time zones.
- Reduction in surplus cash balances in the included countries.
- Eliminating manual activities by automating the entire structure equates to savings in terms of full-time employees/resource.
The landscape of transaction banking is changing.