The challenge
As the company expands its data solutions to corporate customers globally, managing its growing liquidity and operational risks has become more challenging than before.
At the regional level, particularly in key markets like Hong Kong, Australia, Singapore and the UK, China Unicom Global’s reconciliation processes were rather inefficient. With invoices manually matched against customer payments received via multiple channels, the process was prone to errors, yielded low invoice match rates and a rise in customer complaints has been observed.
There is a need for the company to improve visibility and gain greater control of its liquidity across markets and currencies. Due to the decentralised model, large sums of local currency balances were sitting idle in accounts in Australia, France, Japan, the Netherlands, Singapore, Switzerland, and the UK where China Unicom Global had sizeable operations, exposing it to significant currency risks.
As China Unicom Global’s offshore treasury hub, the centralised treasury centre (CTC) in Hong Kong sought to replace manual workflows and instil tighter control of its liquidity to optimise cash globally.
The solution
China Unicom Global has collaborated with J.P. Morgan to overhaul its manual and decentralised treasury practices.
On a macroscopic level, China Unicom Global adopted the bank’s virtual reference number (VRN) to automate reconciliations. Having successfully piloted VRN in Hong Kong, the solution was quickly extended to Australia, Singapore, and the UK.
J.P. Morgan has joined hands with China Unicom Global to implement a multi-entity, multicurrency cash concentration structure, consolidating cash in seven major currencies and ten entities across APAC, EMEA and North America.
An EMEA header account has been set up in London to consolidate cash balances in euro and USD among the company’s four European entities; any excess balances are subsequently swept to the CTC account in Hong Kong at the end of the day via cross-border sweeps.
An automated dual-channel funding model has been established for its APAC and EMEA entities, where domestic entities are primarily funded through the CTC’s multicurrency accounts. Additional local cash needs are further supported by an intraday automated cross-currency sweep through the entity’s in-country USD account.
The solution uses an ‘against-the-sun’ mechanism that facilitates cross-border payments and collections to and from the UK to Hong Kong without any loss of value due to time zone differences, even for payments to Hong Kong received after the cut-off time which would get back-valued.
In order to streamline the management of its primary cash currencies in USD and HKD, the company has also implemented J.P. Morgan’s virtual account management solution and opened virtual accounts linked to its existing physical accounts, segregating incoming and outgoing flows. Connection with the bank has also been established through application programming interface (API) so as to access valuable treasury information and increase operational efficiency. With access to real-time transaction details, China Unicom Global has also been able to capture, manage and process data to further evaluate its exposures to credit, FX and payment risks, and thus, determine steps to effectively manage them.
Best practice and innovation
With a rapidly growing global business, China Unicom Global has overhauled its highly decentralised treasury structure by automating manual invoice matching and reconciliation processes for its in-country entities, Moreover, a tailored cash concentration structure that improves transparency has been further deployed at the CTC level to optimise liquidity and working capital globally.
By hedging FX risks at the global level, China Unicom Global has successfully reduced its currency exposures by 90%. The solution has also allowed the company to rationalise its banking structure by 15% to improve cash visibility and drive greater liquidity and operational efficiencies globally.
Key benefits
- Straight through processing with a match rate over 90%.
- Lower risk of errors.
- Improved transparency.
- Better risk management.
- Limited loss in value of funds.
- Enhanced visibility and control of global liquidity.
- Improved yields.
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