Sony: Implementing Cash Management Solutions for a Global Treasury
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In 2001, Sony Corporation was looking for a regional cash management bank in Asia as a business partner for its inhouse bank, Sony Global Treasury Services (SGTS). The regional cash management bank was required to propose and implement a regional solution, which included an appropriate account structure, and treasury services and payment services, to enable SGTS to manage proxy payments (on behalf of Sony’s operating companies), inter-company funding, risk management, and regional liquidity management on behalf of all Sony’s affiliates in Asia.
Through detailed discussions with Sony, HSBC gained a clear understanding of SGTS’s business requirements and thereby commenced partnership with Sony. The consultative approach adopted by HSBC, focusing on both SGTS’ present and future business requirements, was imperative for the success of the project.
SGTS’s regional cash management mandate was awarded to HSBC in August 2001 covering 12 countries: Australia, Hong Kong SAR, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, South Africa, Taiwan, Thailand and the United Arab Emirates. By winning this mandate, HSBC became effectively Sony’s tier-one core bank in Asia.
HSBC’s solution covers the following:
As part of Sony’s plan to streamline its corporate treasury activities, SGTS was established and positioned as a shared service centre for all the operating companies (Opcos) handling their finance, treasury and banking
activities across the entire group, as well as coordinating financial risk management services for the group companies worldwide. As a result of this operational integration, Sony globally controls and hedges the group’s overall foreign exchange (FX) exposure, and the expected netting effect should allow more efficient hedging.
SGTS is headquartered in the UK, and has branch offices in Singapore and Tokyo. The SGTS Singapore branch handles the implementation of the seven Southeast Asian countries and South Africa, while SGTS Tokyo manages the implementation of the four North Asian countries.
SGTS is envisaged as an “internal bank” to promote greater efficiencies for individual companies within the Sony group. In line with its new role, SGTS set up a web-enabled integrator (an in-house web-enabled front-end banking system) that serves as an intermediary for Sony’s legacy enterprise resource planning (ERP) companies in the region. Using the Hexagon ABC delivery channel, the inhouse web-enabled front-end banking system is the main communication medium. As Hexagon ABC supports the file structures needed by SGTS’s ERP system, including standard formats such as Edifact and Swift, integration costs are minimised. The Edifact Paymul (multiple payment order) format is used for effecting payment instructions.
As the internal bank, SGTS was established to offer the following seven pillars of treasury services to Sony group companies:
The Start of the Implementation Process To meet Sony’s objectives, HSBC worked with SGTS implementation team to implement the following solutions:
Working as an operating bank for SGTS, HSBC adopted a partnership implementation approach to ensure Sony’s objective of setting up the global shared service centre by 1 April 2002 was achieved. As partners, both Sony and HSBC shared a common set of objectives.
To minimise the impact of change while simultaneously striving to achieve the required milestones, a phased implementation process was introduced:
Simultaneously, at the in-country level, as a back-up to SGTS’ proxy payment service using the host-to-host connection, HSBC engaged its in-country cash management specialists to evaluate Sony’s domestic requirements. HSBC thereby worked with the local Opcos to implement in-country cash management solutions.
As with any implementation of such magnitude, a series of challenges were faced. The following points summarise the major challenges and how they were overcome.
One of the major challenges faced was the aggressive timeline for the roll-out of the solution in the first three countries. This had to be achieved by 1 April 2002 to coincide with the launch of the Sony in-house webenabled front-end banking system. It was further complicated as SGTS had to “sell” its services to its Asian Opcos in stages. SGTS was thus only able to provide HSBC with the required information for the implementation, sometimes just two months before the live date.
Given the time constraints to implement the required account structure, to arrange for the domestic and cross-border sweep, and to set up the host-to-host delivery channel plus user acceptance testing, it was a tremendous challenge to set up the tasks correctly and in a timely manner. Some tasks may be viewed as simple in isolation, but implementing a combination of tasks within a tight timeframe, coupled with regulatory requirements in some countries, was a real test for the project team. To overcome this challenge, weekly conference calls involving the main stakeholders of the project tracked the progress in each country. Senior management in both organisations were fully engaged throughout, and working committees were formed in different countries chaired by dedicated HSBC managers assigned to look after Sony.
In late 2001, HSBC launched a major training initiative for its team of implementation managers, designed to equip them with the skills, knowledge, and tools to undertake projects of this size and scope. Many of the tools and techniques introduced were directly applicable to this project and enabled the HSBC team to identify considerable efficiency gains, which greatly assisted the team in meeting the aggressive timelines set.
A significant challenge presented by this project was the concurrent and co-dependent systems development initiatives taking place at Sony and HSBC. Sony was developing its in-house web-enabled front-end banking platform at the same time as the cash management solutions were being implemented. The turnkey aspect of the cash management solution was the host-to-host interface between the banking platform and HSBC’s Hexagon ABC delivery channel. Sony was looking to send payment instructions for multiple payment types across multiple countries, and to receive balance and transaction reporting information in specific formats. This required developments within the in-house web-enabled front-end banking system as well as in the bank’s host computer.
The synchronisation of this process was a challenge. It was addressed through the creation of a methodical project plan and close cooperation between the development teams at Sony and HSBC.
One of the major benefits that Sony sought from this initiative was the identification of “best practices” as it implemented the cash management solutions. In order to identify enhancements to Sony’s existing processes and practices, it was essential that the bank gain an in-depth understanding of these practices at the outset. HSBC dedicated a team of experienced cash management practitioners to visit Sony offices. They mapped out their existing processes so that an overall best practice picture could be developed. This differed from country to country depending upon local market conditions and practices, as well as the needs of the local Sony companies.
This was, and is, not a static exercise, given the dynamics inherent within Sony’s operations. HSBC therefore remains closely engaged with Sony across the region to ensure that the services provided remain “best of breed”.
Adopting a phased approach for this implementation presented a challenge in ensuring that the respective HSBC offices understood the importance and dynamics of this project, and that a consistently high level of support was extended to Sony’s local entities in the respective countries. At the same time, it was also imperative that HSBC’s overseas offices were equipped with the relevant knowledge and experience to participate in the setting up of the host-to-host delivery channel and underlying services.
To address this challenge, key personnel were identified within each HSBC office to act as local managers for the implementation. HSBC’s regional implementation team in Singapore created a comprehensive
information package, which was distributed to the local implementation managers. Following this, the Singapore team hosted a series of detailed briefing sessions to ensure local managers were fully up to speed.
Documentation is a given and a “necessary evil” in any implementation. Sony also has a stringent internal policy to vet rigorously all legal agreements of its bankers. This was further complicated in that there were a number of parties involved at Sony with respect to the review process. Documents had to be reviewed in Singapore, Tokyo and London; some were reviewed in parallel and some sequentially.
To simplify the documentation review process, HSBC used its Global Account Opening Documentation, comprising a core set of standard account opening documents covering multiple countries, supplemented by a simple set of country specific terms and conditions. This ensured that Sony would not have to complete a different set of documents for each country, thereby greatly streamlining the review process.
A detailed service level agreement was also required, as was a comprehensive contingency plan. HSBC was able to leverage its experience in entering into similar arrangements with other clients to put forward initial sample documents, which were then tailored to match the needs of the project.
Although the overall implementation of the mandate is still ongoing, many of the countries are now live and the provision of high-quality customer support is an important requirement.
As SGTS Singapore office is the control point for Sony, HSBC has provided a one-stop customer service point for Sony through its Singapore customer service centre where responsibility is taken for coordinating Sony’s support needs regionally and locally. Local customer service support is provided to Sony Opcos in each country through the customer service teams established in each local HSBC office. Each customer service team operates to the same quality standards and uses sophisticated customer service tracking systems to ensure that the services provided to Sony are consistent across the region.
As part of the ongoing support from Asia, HSBC extended its assistance to Sony in Canada, implementing cash management services such as account opening, high-value payments, domestic sweep and MT940 reporting to SGTS Plc and Sony Canada.
HSBC continues to maintain close working relationship with Sony even though implementation is considered completed for Singapore. The bank continues to identify opportunities and has been successful in implementing add-on services, such as cheque outsourcing for SGTS Singapore branch. The successful implementation of the specially tailored cheque outsourcing service in Singapore means the arrangement will now be rolled out to the other countries in South Asia.
As with any large project, the early stages are crucial to ensuring the overall initiative is successful. The formation of the joint working team comprising representatives from Sony and HSBC facilitated the development of a detailed project plan to which all stakeholders were committed.
Parallel systems development effort by both Sony and HSBC contributed an additional degree of complexity to the project. These were overcome by the development of a mutual understanding of the overall objectives to be achieved and the step-by-step tasks that comprised the whole.
Ongoing progress reviews were vital to ensure milestones were achieved and alternative solutions were developed as issues arose. The ability to ensure the commitment of the respective Sony and HSBC local offices was also vital both in identifying best practices as well as developing a close working relationship that will continue after the implementation is complete.
The implementation project is ongoing as the footprint of the solution expands to encompass the full range of countries in Asia Pacific. Both Sony and HSBC are continuing to work in partnership to refine the ongoing customer service support and to explore new opportunities to extend their business partnership.
Co-author: Lynn Lee, assistant vice president, Global Payments and Cash Management, HSBC, Singapore.