21 February 2017

GCC ERP: Diversity and Development

When it comes to ERP (Enterprise Resource Planning) systems and their integration with banking there is an exciting trend happening in the GCC with early signs of regulation directly influencing the way in which electronic payments are made.

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Driven by visionary political leadership and aided by the favourable business environment, businesses in the GCC region have witnessed massive expansion in the last two decades, leading to a growing number of government and family owned businesses looking to technology to facilitate their expanding operations.

This shift towards more comprehensive treasury technology in the GCC region is starting to follow the best practices seen in other markets when it comes to the financial integration of ERP systems. Large multinationals operating in the region have sophisticated large scale ERP implementations that function on a highly automated basis in areas such as payments and receivables. Local and regional corporates are now following suit and replacing the less well known or custom built ERP systems that they have historically used, which have often focused primarily on payments. As these companies expand and grow, they face the same challenges as large multinationals.

"Managing liquidity, reducing costs and improving transaction efficiency and control are some of the key drivers underpinning this trend - reinforced by geographic expansion - whether regional or global,” commented Graham Rule, PCM's Regional Head of Commercial Banking Sales.

Large corporates, and increasingly mid-market enterprises and SMEs, that might previously have operated in one or just a handful of GCC countries are among the most active when it comes to ERP implementations. As these companies grow and expand into new territories they are automating ERP activities, such as payments and associated bank interaction, in order to reduce risks and costs, and gain efficiencies.

ERP systems and expertise

ERP integration demand is increasing. The government and family-owned businesses that are prevalent in the GCC are continuing to expand and grow, and as they do, they are facing the same challenges as large multinationals. This throws up additional challenges because these organisations are not just wishing to connect existing ERP technology to their banking partners. In many cases they also want to upgrade that technology at the same time by migrating from their existing systems to a global ERP system from a major vendor.

This is where HSBC’s Payments and Cash Management (PCM) business in MENA is competitively positioned to provide this customised link for clients utilising the extensive knowledge of PCM’s Regional Integration Team. The Integration team has 15 members with over 160 cumulative years of experience implementing and integrating technical solutions including HSBCnet, HSBC Connect and SWIFTnet. In addition, each team member is a Certified SWIFT Specialist and is an expert in most technical areas. Key members of the team have also received certifications on International Cash Management (Cert ICM) ERP Systems like Oracle and SAP. With a mix of qualified engineers and Chartered Accountants, the integration team combines the right academic background with practical knowledge to help the client in selecting and implementing the right solutions.

With a broad range of options for automating the payment and cash management processes of organisations, starting with simple, quick-to-rollout file upload based integration to the most advanced HSBC CONNECT platform based host-to-host connectivity, the HSBC implementation team is able to efficiently address the requirements of SMEs as well as large corporates with complex operational requirements. With a consultative approach, HSBC works closely with the key client stakeholders to provide the most effective solution for their business needs. Secure straight-through-processing to derive maximum efficiency and cost reduction is one of the key drivers for many clients to choose our solutions.

Data formats and quality

Probably one the greatest challenges confronting corporates in the GCC region seeking to automate payments is their vendor master data. In some cases, potential issues relate to local language characters, which have to be translated. Some customers will do this manually or outsource it to a third party vendor, while others will use middleware or simply look to their bank to sort it out.

A common obstacle is maintaining data such as account numbers and bank codes in the format needed for particular payment types. This is particularly prevalent when a corporate is making a mixture of international and local payments and some require IBANs and BICs while others do not. This makes multiple rounds of testing with the bank essential before going live.

A further challenge is that even with the right vendor data in place, it may then have to be massaged into various formats. Unlike the common XML standard that applies under SEPA in Europe, corporates in the GCC countries still find themselves having to deal with multiple proprietary bank data formats when submitting electronic payment files. Corporates that are multi banked therefore have to be able to support multiple data formats.

The way in which corporates in the GCC countries cope with these challenges varies enormously. At one end of the spectrum are multinationals such as the global airlines, which have already achieved very high automation levels and are very much in the forefront of driving change and innovation.

Drivers of change

Many corporates, in close partnership with some of the leading banks in the region, are driving this dynamic shift away from manual and towards more electronic processing or processes. Couple that with many government entities in the region realising the benefits of electronic processes and actively promoting these benefits to businesses and individuals alike then it becomes apparent why there is a major transition underway in MENA towards optimised business and banking processes. Nevertheless, the ease of this transition depends heavily upon the insight of the bank involved.

“Our ability to understand our clients' business requirements and to assist their teams adopt the right tools and technology enables them to demise time consuming, costly and sub-optimal processes. In doing so, our objective is to remove as much of their administrative burden as we can, which frees them up to focus on more strategic activities and to conduct their business in the most efficient way possible,” commented Noor Adhami, PCM’s Regional Head of Client Management.

This quality of detailed insight is especially important when supporting corporates in their compliance with local regulation. For instance, Governments in the UAE, Kuwait and Bahrain have mandated that payments to employees must be made electronically and also specify a purpose code (e.g. salary, expenses etc). These purpose codes are a regulatory requirement and banks are forbidden to process any relevant payments where they are absent. Other countries are following suit, with Qatar introducing similar measure and the possibility that others may follow. In the case of the UAE, the requirements for electronic payments and purpose codes already extend to general commercial payments as well and it is believed that other GCC countries will also follow this path in due course. Assisting clients in complying with these requirements, without disrupting the smooth running of the corporate's other banking and finance activities, requires in depth understanding of clients' businesses.

Conclusion

Some corporations in the GCC region have already found ways to manage their payment and cash management processes more efficiently with high levels of security, transparency, speed and lower costs. As more companies in the region start to do more business cross-border it seems reasonable to assume that this number will continue to increase.

However, turning this intent into reality is not necessarily straightforward. One of the most crucial pieces in this ERP jigsaw is therefore to be working with a bank that can provide the necessary technological support (irrespective of ERP system type) coupled with a deep understanding of both local and global payments. With this in place, the chances of a successful migration will be substantially increased.

GCC ERP: Diversity and Development

Disclaimer: This article is not intended to constitute any advice or an offer. Any forecasts or projections are indicative only. HSBC or any of its affiliates accepts no liability, whether express or implied, arising out of or incidental to contents forming part of the article.

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