The challenge

As SAIC Motor expanded into new regions, managing its liquidity and working capital funding across the different markets became increasingly challenging.

Its liquidity structure had become highly decentralised; a result of subsidiaries in overseas markets adding new banking accounts over the years as the company expanded relationships with local banking partners. The structure exposed SAIC Motor to various risks, including a lack of visibility into overall cash movements and the high costs associated with managing disparate bank accounts across markets.

Without a centralised structure to connect global accounts, surplus funds were often trapped in the cash-rich, mature markets of North America that could otherwise be deployed to fund growth markets especially across the ‘Belt and Road’ network.

To support the firm’s internationalisation agenda, SAIC HK, SAIC Motor’s offshore centralised treasury centre (CTC), sought a solution that would allow it to improve visibility and strengthen the CTC’s controls over offshore cash.

The solution

SAIC HK mandated J.P. Morgan as its new overseas core cash management bank and implemented a liquidity structure to centralise SAIC Motor’s funds from a regional and global perspective. It did so by:

• Implementing a physical cash concentration structure in the US that connects SAIC Motor’s US, Hong Kong and Canadian entities.
• The US header account is further integrated into the CTC’s cross-border cash pool in Hong Kong. Using an ‘against-the-sun’ model, the structure facilitates the cross-border sweeping of consolidated surplus funds from the US to Hong Kong without any loss of value in liquidity, even for cash coming into Hong Kong after cut-off hours (which get back-valued).
• With surplus cash pooled in Hong Kong, SAIC HK can now automatically sweep funds to meet working capital needs across markets, as and when required.

Best practice and innovation

By consolidating surplus cash across its overseas markets in its CTC, SAIC HK was able to centralise control and manage the firm’s liquidity and working capital in a single location to drive greater efficiencies.

With excess cash from the US and Canada pooled into the CTC, the solution allows SAIC HK to optimise surplus liquidity across the firm by using it to meet working capital requirements in growth markets and regions such as India and the Association of South East Asian Nations (ASEAN).

What’s more, the liquidity structure leverages an against-the-sun model that facilitates the cross-border sweeping of consolidated surplus funds from the US to Hong Kong, without any loss of value in liquidity, as cash coming into Hong Kong after cut-off hours are back-valued.

Key benefits

• Rationalised liquidity structure by consolidating multiple banking relationships across regions.
• Against-the-sun mechanism that enables cash received after cut-off times to be backdated to ensure no loss in value of funds.
• Optimised use of funds by utilising excess cash in the US to fund other growth markets as working capital.
• Enhanced visibility and control of global liquidity through a centralised liquidity approach.
• Improved yields, as surplus funds are aggregated to maximise returns.