The challenge

IHH Healthcare Berhad (IHH) has grown through several high-profile mergers and acquisitions resulting in a sub-optimal level of integration and non-standardisation of systems and processes across the group. The treasury function lacked clearly defined treasury policies, and the proper tools and structures to ensure better visibility and control of group cash to support the company’s next phase of growth. There were hundreds of accounts held with various banks, multiple e-banking platforms, and nine different enterprise resource planning (ERP) systems being used across the region. There were large amounts of idle funds, and intensive manual effort was involved in consolidating and deploying funds to meet business needs. Each company effectively operated independently of each other in different markets and were unable to lean on a group construct to support their ever-evolving funding and hedging needs.

The solution

To drive continued global growth, IHH made the strategic decision to address these issues by embarking on a significant treasury transformation project which has, to date, implemented the following measures:

1. A formalised set of group level policies, process workflows, a financial risk measurement framework and a new treasury operating model with segregated roles and responsibilities have been established. This empowers the treasury team to drive better co-ordination and consistency between treasury and in-country finance functions, and ramp-up a newly incorporated entity to act as an in-house bank (IHB) for the group.

2. IHH took the key step of initiating an RFP process to select an international cash management bank to design and implement a bespoke regional account structure and liquidity solution. A bank account register is currently being created to gain visibility of all accounts, with a view to rationalise them to a bare minimum.

3. Harmonised systems by implementing host-to-host (H2H) connectivity between banks and accounting/payroll systems, beginning with HSBC. This created a level of standardisation for payment execution and reconciliation, and a robust and secure channel to communicate with banks. This has provided IHH with a vital blueprint in driving greater degrees of standardisation, centralisation and automation of daily payments, collections and reporting across geographies.

4. A multi-currency notional pooling (MCNP) structure covering five currencies has been established in Singapore, allowing surplus liquidity to be aggregated for intercompany funding, debt repayments and strategic investments. Consolidated balances across all currencies can also be drawn down in any currency. This has given IHH access to surplus liquidity to systematically pay down debt at a critical juncture when interest rates have been on the rise.

Best practice and innovation

Due to the sheer number of pre-existing bank relationships and ERP systems involved, and lack of formal group-wide protocols and controls prior, the evolution of IHH’s Group Treasury function in a relatively short time from being mostly performed independently by each in-country entity to a more centralised IHB structure is a highly notable achievement.

Key benefits

• Cost savings – in half a year, over SG$100m has been deployed by IHH’s IHB to investments and towards paring down debt.

• Number of banking partners/bank accounts reduced – bank accounts will ultimately be reduced from approximately 700 accounts held with 30 banks, to less than 50% of that number held with key relationship banks.

• Process efficiencies.

• Improved key performance indicator (KPI) metrics.

• Increased automation.

• Tools to monitor and manage key financial risks.

• Improved visibility.

• Catalyst to reduce manual processes by charting a roadmap to roll-out digital platforms.

• Increased system connectivity.

• Future-proof solution.

• Industry accreditation by Singapore’s Economic Development Board (EDB) – IHB awarded the Financial Treasury Centre (FTC) scheme along with the commensurate tax incentives.