Managing the day-to-day financial operations of
your US subsidiary: Working Capital Strategies
June 16, 2015
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Speakers
HSBC Presenters & Guest Company
Luc Fournier,
National Head of Sales, Global Trade & Receivables
Finance, HSBC Bank Canada
Rahul Sharma,
Regional Head of Sales, Payments & Cash
Management, HSBC Bank Canada
Harold Franks,
Senior Finance Advisor, St. Regis Crystal
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Challenges that come from expansion to the US?
Managing and Optimizing Working Capital
GROW THE
BUSINESS
SAVE COST
ENHANCE
BALANCE
SHEET
RISK
MITIGATION
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Case Study: A Growth Story
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Company MANUFACTURING Plus
Industry: Manufacturing & Distribution
Phase 2
The Overseas
Adventure
Phase 1
The
Great
Expansion
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This case study is an example and for illustrative purposes only
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Phase 1
The Great Expansion
Phase 1
The Great Expansion
Company Profile
• 2005 – 2009
• Sales C$ 10-20 million
• 50 employees
• Established cross-border
contract : export to the US
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Phase 1
The Great Expansion
Phase 1
The Great Expansion
Company Challenges
1. Elongated cash conversion cycle
2. Cash flow management, payment
tracking, manual reporting
3. Foreign exchange risk
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CHALLENGE 1: Elongated Cash Conversion Cycle
SOLUTION: Trade finance provides efficiencies within the supply chain
Phase 1
The Great Expansion
1
Pre-shipment
Finance
Issue purchase order to supplier
Deposit paid to supplier
2
Import
Finance
Shipment made by supplier
Manufacture
Invoice issued to buyer
3
Receivables
Finance
Collect payment from buyer
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CHALLENGE 1 : Paying your supplier before you are paid?
SOLUTION: Access to funding through Trade Finance
Phase 1
The Great Expansion
Pre-Shipment Finance
Letter of
Credit
• Structured
Confirmed
PO
• Financing up to 100%
• Up to 90 days
Credit
Insurance
• Recourse financing to
the exporter
Finance manufacturer’s
work-in-progress needs
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CHALLENGE 1 : Elongated Cash Conversion Cycle
SOLUTION: Understanding Payment Risk Ladder
Phase 1
The Great Expansion
Exporter
OPEN ACCOUNT
Least Secure
Importer
Most Secure
COLLECTIONS- DA
COLLECTIONS - DP
LETTERS OF
CREDIT (LC)
CONFIRMED LC
ADVANCE PAYMENT
Most Secure
Least Secure
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CHALLENGE 2 : Cash Flow Management
SOLUTION: Integrated cash management solutions to manage liquidity
Phase 1
The Great Expansion
Managing Liquidity
Collections
Payments
Information Reporting
 Optimize cash flow and ease collection of receivables
 Obtain real-time account information on all accounts under one platform
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CHALLENGE 2 : Manual Reporting
SOLUTION: Effective and efficient cash flow management via HSBCnet
Phase 1
The Great Expansion
HSBCnet - Single global log-on 24/7
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HSBCnet services are provided in Canada by HSBC Canada. HSBCnet features and functionality vary by country. Subject to Canadian sanction regulations.
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CHALLENGE 3 : Foreign Exchange Risk
SOLUTION: Direct link to trading floors to benefit from fast and efficient trading
Phase 1
The Great Expansion
HSBCnet eTreasury
• Hedge your known exposures as
they arise – 24hrs a day, 5 days
a week
• Mitigate the impact of currency
fluctuations on your bottom line
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CHALLENGE 3 : Foreign Exchange Risk
SOLUTION: Understand and protect your exposure
Phase 1
The Great Expansion
Without a clear understanding of your foreign exchange exposure,
you can be running significant risks
Understand your exposure
What is an FX risk?
Risk / Exposure
Protect your exposure
What is hedging?
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CHALLENGE 3 : Foreign Exchange Risk
SOLUTION: Mitigate your risk quickly and efficiently by trading on eTreasury
Phase 1
The Great Expansion
HSBC is a leading market maker globally with product
offerings in 40 currencies
Spot &
Forwards
• Spot – fixed “rate of
exchange” between two
currencies
• Forward Contracts –
agreement to exchange two
currencies at a fixed rate on a
specified future date
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eTreasury
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Phase 2
The Overseas Adventure
Phase 2
The Overseas Adventure
Corporate
HQ
Subsidiary
B
Subsidiary
A
Company Profile
• 2011- Present
• Annual sales C$ 35 - 50 million
• 100 employees
• Opened 1 foreign subsidiary in
USA
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Phase 2
The Overseas Adventure
Phase 2
The Overseas Adventure
Corporate
HQ
Subsidiary
A
Subsidiary
B
Company Challenges
1. International accounts + overseas
payments
2. Extended payment terms with
numerous global buyers
3. New relationships with foreign buyers /
suppliers
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CHALLENGE 1 : International accounts & Overseas Payments
SOLUTION : Easy & streamlined account opening process
Phase 2
The Overseas Adventure
Open an account here or abroad, and
manage your business from anywhere in the world
• Simplified & streamlined
process
• Global funds transfer
within HSBC network
• Transparent, fast, and
cost efficient settlement
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CHALLENGE 1 : International accounts & Overseas Payments
SOLUTION: Technology improves transparency and accuracy
Phase 2
The Overseas Adventure
Multiple transactional relationships
Bank D
Bank B
Bank C
Streamlined Payments
Bank E
Bank F
Bank A
HSBCnet
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CHALLENGE 2 : Extended payment terms with numerous global buyers
SOLUTION: Turn receivables into cash faster and improve cash flow
Phase 2
The Overseas Adventure
Receivables Finance
1
3
2
Extended
payment terms
from
outstanding
invoices
Ability to
discount on
day 1 and
access up to
100% of invoice
value
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Faster access
to cash
traditionally
tied up in the
sales cycle
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CHALLENGE 3 : New relationships with foreign counterparties
SOLUTION : Help your business protect its interests
Phase 2
The Overseas Adventure
HSBC’s Global Guarantee Proposition
Help your business protect its interests with solutions for
contract bonding and international guarantees
Benefits
• Accelerates expansion into new markets
• Provides security and reassurance to the counterpart by a
reputable bank
• Potential for buyers to increase capacity under open
account purchases
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Conclusion
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Conclusion
Why Focus on Working Capital Optimization?
GROW THE
BUSINESS
SAVE COST
ENHANCE
BALANCE
SHEET
RISK
MITIGATION
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Conclusion
The HSBC Advantage
We have the people, knowledge and tools
to guide your international business.
 Local on-the-ground presence in over 60 countries
 150 years of trade and supply chain knowledge
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Thank you
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Disclaimer
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Panel Discussion
Luc Fournier - Global Trade & Receivables Finance, HSBC
Rahul Sharma - Payments & Cash Management, HSBC
Harold Franks – St. Regis Crystal
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Thank you
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