The Treasurer’s Guide to Digitisation 2016

Liquidity management reimagined

Published: Sep 2016

Imagine if every time your business had excess liquidity to invest a digital solution did it for you. For corporates using HSBC’s Liquidity Investment Solutions that is now a reality. The product not only has the potential to save treasurers’ time and potentially boost their yield pick-up, it also demonstrates the transformative power that digitisation is having right now in the treasury world.

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Jennifer Doherty

Global Head of Commercialisation – Liquidity and Investment Products

A decade ago, the short-term investment of surplus liquidity was a relatively straight forward task for corporate treasury departments. Corporate cash balances were typically low and when investment was needed, there were plenty of deposit and investment options available. Fast forward to today and the landscape looks somewhat different.

A period of record-low interest rates persists; the regulatory environment is shrinking the range of on-balance sheet investment options available; and this all comes at a time when corporate cash piles have reached record highs, causing a headache for corporate treasurers tasked with looking at new ways to manage this excess liquidity.

It is against this backdrop that it made perfect sense to develop a solution that could provide clients with alternatives to bank deposits and also automate the flow of cash between on- and off-balance sheet solutions, notes Jennifer Doherty, Global Head of Commercialisation – Liquidity and Investment Products at HSBC. The result: HSBC’s Liquidity Investment Solutions (LIS).

Elegant innovation

LIS is elegant in its simplicity, but highly innovative in its design. In essence, it lets users automate the daily, weekly or monthly allocation and investment of excess cash. It works by automatically investing cash balances above an agreed level from an operational account into a range of off-balance sheet solutions – AAA rated sterling, US dollar and euro money market funds (MMFs) from HSBC Global Asset Management Group, BlackRock, Goldman Sachs Asset Management and J.P. Morgan Asset Management – defined by the treasury based on its investment policy. Should the cash levels in the operational account fall below the agreed level, some cash will be divested to bring this back to par.

“Most corporates will have a pre-defined investment policy and traditionally it has been incumbent on the treasury department to manually invest surplus cash in accordance with this,” says Doherty. “But due to increasing cash balances and shrinking investment options this has become a far more challenging task, especially to carry out manually. As a trusted partner of our clients it is imperative that we find ways to alleviate this burden, freeing them up from the daily process of cash investment and allowing them to focus on adjusting their investment policies to seamlessly navigate the changes brought on through changes in the landscape.”

LIS is elegant in its simplicity, but highly innovative in its design. In essence, it lets users automate the daily, weekly or monthly allocation and investment of excess cash.

Corporate Case Study

Anderson Childress

Senior Treasury Analyst

Investing surplus liquidity was a manual and inefficient process for eBay which saw them gain very little returns on their investment cash. Here, Anderson Childress, Senior Treasury Analyst at eBay explains how implementing HSBC’s LIS has revolutionised their short-term liquidity management process, delivering multiple benefits to the organisation.

Like most corporate treasury departments, the management of short-term liquidity at eBay has traditionally been a very labour-intensive process. Cash was swept from multiple accounts into an operational account that was used for payroll and other working capital needs. Any excess cash needed to be put to work. “To do this we manually pushed surplus funds from our operating account into a savings account which returned less than favourable yields,” says Anderson Childress, Senior Treasury Analyst at eBay.

For a time, this process, whilst not ideal, was manageable for the eBay treasury team. However, changes in the short-term investment landscape would soon demand a fresh approach. “After numerous discussions with our senior management team we decided that it was necessary to invest time into looking at products and services that would better suit our cash management and short-term investing needs moving forward,” notes Childress.

The eBay treasury team went out into the market to see what products might fit its needs and HSBC’s LIS solution quickly caught their attention and that of senior management. “The places to park cash and pick-up favourable yield have become increasingly sparse, so to hear of a solution that could offer this and do so in an automated fashion seemed to tick all the boxes,” he adds. “Because of these factors and the company’s pre-existing relationship and SWIFT connectivity with the bank – which the solution is built upon – it made it an obvious choice to adopt the product.”

Holistic benefits

Implementation of the solution took just one month and eBay’s treasury were quickly able to begin using the solution to automate the investment of surplus liquidity. “Having entered our various risk parameters, cash trigger levels and selected the funds that we wished to invest in, the product began to work instantly,” says Childress.

“For the first few months we kept a close eye on our cash levels and investment, which are available on a consolidated basis through HSBCnet, to make sure that our parameters were correct and that we didn’t incur any unnecessary fees or charges. But since then we have been hands-off and let it run in the background – the product is essentially self-maintaining.”

With the solution up and running, eBay quickly began to realise the benefits and almost instantly were saving significant manual intervention previously dedicated to managing this process. LIS has also reduced the effort spent generating analysis reports for senior management or investment policy committee as these are automatically generated in the system. What’s more, yield pick-up also increased thanks to the ability to capture the more favourable returns offered by the two MMFs eBay had selected.

The solution also helped deliver some unexpected benefits to the eBay treasury team. “Whilst implementing LIS, we realised that we could also rationalise our account structure at the same time and maintain just a single operational account for our working capital needs,” notes Childress. “This again has helped drive efficiency, as we are no longer required to manually sweep money into the operational account, and also created a substantial saving in bank fees.”


The treasury team and senior management at eBay are all very satisfied with the product and in the few months since LIS has been live, eBay have realised a significant financial benefit. “It has been a win-win for the business,” says Childress. “Not only are we now making our excess liquidity work harder, we have been able to save further costs by reducing our banking fees, and we have also freed up a considerable amount of time in the treasury team, enabling us to focus on more value-add strategic matters. I would certainly recommend that this solution be something that other treasurers look very closely at.”

Step by step

Given that LIS clearly addresses a real pain point, even for a technologically advanced treasury department such as eBay’s, some may wonder why it has taken until now for a solution such as this to be developed. Doherty provides a compelling answer: “The financial industry, led by banks such as HSBC, has done an awful lot of work over the past decade or so to design and build innovative digital tools that can automate a lot of the on-balance sheet activity for corporate treasurers.”

This is just the next stage in the evolution of LIS and HSBC’s drive to digitise. The journey certainly doesn’t end here, watch this space.

She highlights products such as notional pooling, cash concentration and intercompany lending as being solutions that are now taken for granted by many treasury departments. “Developing these has taken a lot of work and we reached a stage around 18-months ago where we had a chance to take stock of all the work we had done and to see what should be tackled next. It quickly became apparent that liquidity was an area that deserved a renewed focus and hence the development of LIS.”

A continuous evolution

And HSBC are already working on making LIS an even more appealing proposition for corporate treasurers around the world. “We are currently working on developing LIS further, looking to incorporate different asset classes so that the product appeals to a wider universe of our corporate clients, as well as offering the solution to companies domiciled in Asia.”

HSBC continue to look at the client journey and with that in mind will strive to continually build and innovate. “This is just the next stage in the evolution of LIS and HSBC’s drive to digitise. The journey certainly doesn’t end here, watch this space,” concludes Doherty.

Published: September 2016. Please note that the views expressed by ebay may not necessarily coincide with those of HSBC. For Professional clients and Eligible Counterparties only. All information is subject to local regulations. Issued by HSBC Bank plc. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England No 14259 Registered Office: 8 Canada Square London E14 5HQ United Kingdom Member HSBC Group.

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