Photo of Ivone Hodiny, DBS and Conny Hayashi, TCC Group.

The solution profiled here is referred to as a multi-tier net group structure which pools funds from Hong Kong and Singapore and centralises them at the end of each day. The solution benefits from best-inclass cut-off times and intelligent bank documentation which has drastically reduced the account opening process.

The challenge

The company faced the following key cash management challenges:

Regulation

In the past, many shipping groups would use a separate legal entity to play the role of a fund manager to receive charter hire incomes from customers. Due to more stringent anti-money laundering regulations, more customers now tend to pay ship-owner companies directly.

Improve efficiencies

Approximately 80% of the local payments made in Singapore are completed via bank cheques, and the majority of payments made in Hong Kong are the same.

Sustainability

Typically, there is a long lead time between the placement of orders and the delivery of new vessels. Market value of vessels is dropping and more cash is required to be tied up at the loan retention account as a top-up security against falling secured vessel value. This is a common issue that all shipping groups face in the current environment. As a result, businesses need to maintain a low leverage ratio and optimise their liquidity and working capital to support the business through economic volatility.

Tony Lam, Group Treasurer says, “Efficient cash management has become much more important than in the past to shipping groups like TCC Group.”

The solution

TCC Group selected DBS over its incumbent cash management bank to implement a cash management solution called the multi-tier net group structure. The solution pools funds from Hong Kong and Singapore and centralises them at the end of the day. It can also accommodate local payments via DBS’ electronic banking platform, IDEAL.

The tailored solution comprises:

• A “safety net” capability for automated overdraft (OD) coverage, providing assurance that all operational payments will be fulfilled without any surprise. TCC can maintain the pooling OD facility at the second level pool header, instead of maintaining the pooling OD facility at the top level pool header where cash is concentrated.
• Best-in-class cut-off times for cross-border pooling.
• A flexible e-banking reporting function that allows each user to schedule reports from banks via an email.
• Same-day wire transfers in most currencies that the group needs, including RMB, SGD and HKD.
• Intelligent bank documentation and implementation support. This includes prefilling bank documentation based on provided company information, and it allows documentation to be signed off at the group level instead of company-by-company level. This has significantly reduced the time required to open bank accounts for the 19 entities involved in the cash pool.

Best practice and innovation

The solution met every aspect of TCC Group’s needs:

• Delivered specific requirements like the overdraft line sitting at second layer of master account, enhancing its ability to move cash within country and across countries faster than before.
• Allowed end-of-day sweeping cut-off time.
• Offered more flexible intercompany transfers and e-bank reporting.
• Achieved a short lead time in account opening for a large number of legal entities with intelligent bank documentation and implementation support.

Key benefits

• Process efficiencies.
• Cost savings.
• Interest enhancement