HSBC's Guide to Cash, Supply Chain and Treasury Management in ...

Connectivity: Make or Break in a Global Market
In the current global environment, this means that financing banks that cannot physically reach out
and touch both the supplier and buyer ends of the supply chain are of limited use. This connectivity
is essential because rising compliance and regulatory requirements (such as those relating to money
laundering and terrorism) are putting increasing pressure on banks to conduct rigorous due diligence on
each participant in the supply/sales chains they finance.
That requires high quality bank connectivity in two areas. Firstly, in terms of the technology needed
to support the day-to-day operation of increasingly complex supply chains. Secondly, as regards
connectivity and networks in disparate global markets to deliver the requisite local intelligence to satisfy
regulatory/compliance requirements. The bank should also be able to leverage this local intelligence and
deliver it in a manner that makes it easy for its clients to stay abreast of regulation that may affect their
own business in existing and new markets.
Neutral Connectivity
As larger corporations look to leverage their supplier base in order to meet their own working capital
targets, this is raising the need for neutral connectivity. This situation arises as a result of increasing
supply chain fragmentation and diversity. As companies look to tap a wider range of suppliers in
the interests of cost, risk and efficiency they reach into new territories where the attitude of smaller
companies to technology differs from developed markets. These smaller companies are not investing
in the technology often associated with supply chain processes: a small company in Vietnam is unlikely
to invest in a full-blown enterprise resource planning (ERP) system to oblige even the largest Western
multinational customer.
As a consequence, large corporations now place heavy emphasis on single-stream, neutral technology.
The functionality of bank platforms was a competitive differentiator 10 or 15 years ago; today the
neutrality of the bank technology is the key selling point as corporations look for technology that will
facilitate the onboarding of new and diverse trading partners.
Pragmatic Connectivity
While neutral connectivity goes a long way towards facilitating the extension of new and more complex
global supply chains, there are some practical limitations. In most developed markets, technology is
part of everyday consciousness, so there is a natural
tendency to default to technology as a means of
In some cases, the local infrastructure
makes mainstream technology
impractical: for example, parts of
certain countries in Asia do not have
a complete electricity grid.
improving efficiency and reducing cost. However, in
many developing markets the drivers are very different.
In a country where the majority of an individual’s
income is spent on food, there is a pressing need to
maintain the fullest possible employment. Labour
rates are also low, so the need to reduce costs through
technology and automation is less pressing.
For example, in Vietnam a small percentage of the letters of credit that HSBC currently issues are
requested electronically, the vast majority of requests come via fax or in the post, because that is the
approach the market and clients prefer rather than using the latest technology. In some cases, the local
infrastructure makes mainstream technology impractical: for example, parts of certain countries in Asia
do not have a complete electricity grid.
HSBC’s Guide to Cash, Supply Chain and Treasury Management in Asia Pacific 2012 37
The New Economic
Landscape