[0:06]Dear judges, celebrating 160 years of development, HSVC now is not only one of the largest banking and financial services companies in the world, but also a leader in adopting the sustainable initiative. Among your ESG initiative, building resilient and inclusivity is one of the major goal, and we believe that building the building the diversity in our suppliers and also inclusivity of our old stakeholders is the sustainable way to achieve that goal. However, this only make your decision making in the supplier selection more sophisticated, and that is why we're here today. Good afternoon, judges, we are team Tsunami probably representing RMIT University Vietnam with, and myself. And together, we will propose two strategies to help your company to achieve inclusive procurement. So now let us start our presentation with a situation overview, which will be presented by my colleague Hung. Thank you, Khoa. Our company today, HSBC is now at the journey of offering a service of financial and also banking for personal, commercial, corporate, and also international banking. And after years of operating, HSBC always have the strength of a wide customer base and very global reputation. And as a team, we believe that your company has been one of the largest service financial in the market. However, when we look deeper in the situation overview, the context right now is that HSBC is now more focused on the diversity and the inclusion, especially in the ambition of achieving net zero. Specifically, in the procurement and also the supply chain activities, you are now having the supplier diversity portal with two procure with two procurement activities and requests, one from the server rack and also another from the onboarding app. And we believe that the decision of which company for each of the requests is going to be urgent decision right now. This would be a trust in our first key strategy presented later. However, when we look deeper into the journey of HSBC in finding, supporting, and also partnering with the SME supplier, we also see the importance of creating a very standardized and measurement framework in order to see the balance between choosing the supplier that can satisfy both the diversity and also the profitability for your company. From that, we have conceptualized this under a business question: What are the strategies for HSBC to balance procurement diversity and effectiveness? Now, when we look at the framework analysis, we will have the objective to see what factors and issue that hinder the supply chain diversity and effectiveness. By looking at the underlying issues that may occur immediately short term, for example, managing the SMEs companies in the future, and also the issue in the measurement framework of your company right now. Now, when we look at what company specifically for each of the procurement request to cooperate, we have separated into the server racks and also the onboarding. For the server racks, we have set our criteria of also the product risk, the bargaining power between HSBC and the SME, and also the diversity. And from evaluating the first table between the company of TES and FET, we believe that FET as the as a startup right now is a decision for your company as they are heavily dependent on HSBC, and they also have the ethnically diversity in their company. And now, when we look at the evaluation of which company to choose in the onboarding app between Collab or between Zippy, we believe that by having a very complicated regulatory risk in India, choosing the large company is going to be the safe choice for your company right now. So that is why we have chosen Collab. However, seeing the potential of Zippy can also be another potential SME for your company in the portal later in the strategy. From that, when we already see which particular company to partner, we also want to look at the issue where when we collaborate with the SME, they can be a very critical component for your company, for your success, but collaborating with them can face certain challenges, especially when they are newly established firms, collaborating with them can be very time-consuming and costly. That is why we ask ourselves a question: What can be the risk when partnering with SME? And by using the criteria of resource intensive, whether that risk will directly impact on HSBC resources including budget or time and effort,
[5:17]and the second criteria of whether or not the SME risk can impact on the project completion with HSBC. From that, we see certain options of time consuming, costs or SME expertise. And we see that the low level of SME expertise can be a very critical risk when collaborating with them, as they can pass the project, they can delay the project, and they can also impact on HSBC resources very critically. That is why we want to present the first key issue of whether or not the low level of expertise can affect the project disruption with HSBC. And now, when we ask ourselves a question, where can the SME gain more expertise when collaborating with HSBC for your company to reduce the risk, we want to define expertise in this case is that the capability, the knowledge, and the adaptability of the SME in collaborating large projects with HSBC. And from that, we see certain criteria of convenience and also comprehensiveness, whether the method that they gain their expertise is easily accessible for the SME, and also have the indepth knowledge for them to support their expertise when collaborating with HSBC. And when evaluating certain option, direct training can be very comprehensive, but low convenience. The general guideline can be rather convenient but not yet comprehensive. That is why we see the blend between expertise pool where we can create an expertise pool to have a continuous support for them, but also the knowledge there are very relevant and updated. This is also the first key insight of creating an accessible expertise pool. Now, when we look at the first key strategy of supplier development, using the key insight of creating an accessible expertise pool, we are being able to solve the key issue of low expertise level, potentially disrupting HSBC project. Now, when we look deeper into the long-term measurement issue, we see the situation is that the SME would have to register through the diversity portal to have either the approval or the decline of the request from HSBC. However, from exhibit 6, we believe that the portal right now mainly has certain questions that are related to the yes and the no, and there are still limited information to be requested from the SME. From that, we believe that the information can be limited for your company to assess, the information can also have the imbalance between the capability of the SME and also the diversity. And from that, we see the second key issue of the lack of an evaluation framework from HSBC, where you can thoroughly evaluate and assess the SME diversity and capability when registering. So now, our goal is that we want to create and we want to have more information from the SME to understand them more and to see how they are going to support HSBC and collaborate with them in the future. We see that we need more diverse criteria. We need more documents and required information from them. We also need a two-way involvement where SME must know which information that they still miss and which current level that they still at the portal for them to further improve in the portal. And also, more specific criteria on ESG and profitability. This is also the second key insight where we want to have the standardization and more details for the SME framework evaluation. And now, with the strategy of standardized framework, we have set out two strategy of Empower and Embark. And now let over to my first colleague, for first solution. Thank you, Hung. So for the first solutions, we will reduce the project disruptions by the supplier development. This solution, cross-border supplier support will improve the SMEs suppliers' capability and also enhance our connection with our existing suppliers. But before that, we have to look at what are the HSBC strength for us to leverage. We have the global presence and also very diverse supplier base, so there is a wide pool of expertise for us to leverage on. And let's look at the current HSBC supplier network. We see that in our developed market, we have already developed the long-term partnership with various suppliers, and they will provide us with very high expertise. But in the new markets, such as Singapore and or India in the case, we although those SME suppliers align with our inclusive procurement initiative, but we are unsure about their quality. But we see that suppliers in these two markets are non-competing markets, so there is an opportunity for us to connect them for support. So let's us introduce the big idea of cross-border supplier support that will features the supplier ecosystem and also continuous on-demand, continuous support on-demand. So let's look at the mechanism here. So when the new and small suppliers in the new markets want to seek for consultations and whether there is potential delays, we will develop a connecting platform, the HSBC supplier support platform to help them select and also schedule a meeting with our established suppliers in the developed markets so that they can provide consultations for these new suppliers. This is actually inspired by the case studies of Apple supplier responsibility program in 2018 and also the emphasize business model. This will help us to improve the small suppliers capabilities to reduce their risk. And now we have to get the approval of our established suppliers to join our platform, and they are also key selection criteria. The first one is the long-term and frequent collaboration with us, and the second one is the commitment to inclusivity. And we will also provide them with the payment priority, for example, faster payments and also the market specific exclusive contracts, meaning they will have the exclusive contracts in their specific markets. This will help us to convince them successfully to support the non-competing SMEs.
[11:30]And we also have to monitor and measure the effectiveness of this solutions. So we will look at the data from HSBC regarding the lead time reductions and also the delivered project or services quality. And also look at the data from the established suppliers feedback after the consultations to see whether the SME have improved between the consultations or not. This will help us to ensure the strategy effectiveness and also reduce the failed deliveries. Overall, as we reduce the project disruptions by the suppliers development program. Firstly, improve the SME suppliers' capability with the consultation connection platform. And secondly, enhance the connection with our existing suppliers with the payment priority and exclusive contracts. We will be able to ensure the quality of procurement projects with the SME suppliers and also increase the inclusive procurement effectiveness. And now the second solution will be represented by my colleague Khoa. Thank you, Khoa. So another problem that HSBC mentioned in the case is how they can balance between the diversity and the capability to select the right supplier. And this also leads us to our second solution, where we will enhance our supplier decision making by a common standardized framework that we call supplier selection framework, which will not only help HSBC to increase suitable and precise selections, but also ensure the scalability to other market.
[12:53]So let us explain you why. As we have seen in the case that we have a very large supplier portal database from a lot of industries, but the pain point arise when we cannot balance between the diversity and the capability criterias in order to choose which supplier to partner with. So we see that this is a critical pain point for not only HSBC when they select, which is affects their speed and effectiveness, but also affect the SMEs for the chance of being selected. Because they may not fully aware of which criteria, including diversity and capabilities to fulfill with. So we believe there needs to be a one single framework for all so that we can determine the best supplier. This leads us to our big idea, supplier selection framework with two key features. First is a public framework for selection, and second is the tier classifications. So let's look at our framework. What we will have here is we will divide into diversity and capability criterias. In the diversity, we will have planet, for example, like see if that supplier have net zero certificate or the report transparency. And then we will have the people criteria. We will evaluate their their demographic diversity accordingly with the income level. And last but not least, is the profit in terms of diverse ownership and financial transport transparency report with a total score of 35. Accordingly with the capability is the same. We will evaluate the year operation, economic growth, past project performance and also team expertise with the same similar score. So this is the framework criteria. How we can determine the supplier? We will random based on the tier. When we calculate all the score out of 35, if they have more than 25, they can be a partner with us. If among 15 to 25, we can give them the support and let them in a pilot list. And last but not least, if they are under 15, they need to improve themselves more to be supported by us. So in both division, diversity and capability, we also have the ranks, and we believe that in order to select the most suitable with our criterias and requirements, we will add another layer of low product or high product risk. To be more specific, let's look at our example of FET supplier to uh Singapore service racks. So if uh in this case, FET will have high diversity, which is an A, and a little bit lower capability, which is a B. But we consider that the server Rex is a low product risk. So we can compensate their capability and we will prioritize them because they have a higher diversity. However, in the case that we have high product risk, we cannot compensate this and this must have a higher capability. So we also aim to display this into our portal with published framework and with the result display to help all of the suppliers know what they are lacking or what they should do next. And we also see a huge potential to expand this framework to other market when they can localize customization with the needs of their market, of their industry to find not only the best selection, but also to determine when they have to compare between suppliers. So all in all, what we want to do is to enhance the supplier decision making by one common standard framework, which we will not only increase the suitability and the precisions with tier classified framework, but also ensure the scalability of the solution when we can adapt to a lot of markets. Uh to not only increase the selection efficiency, but also balance between diversity and capability. And now to see how the solution come into life, let look at our projection part, which will be delivered by my colleague Khoa. Thank you, Khoa. So, moving to our action plan, for the first strategy, we will spend the first six months for developing our platform and also negotiation with our existing suppliers. Then we have three months of testing and full implementation after the first quarter of 2026. For the second strategy of impact, we also spend the first three months to develop and establish our framework guidelines. Then we will piloting this new framework and also do the modification in other markets before getting full implementation also in 2026. Now, every strategy come with risk. For the first strategy, we consider is that the some specific field, we don't have the established supplier to support our SME in this. So our mitigation is that we will have to prioritize the large suppliers to do these unfamiliar fields to ensure the quality and to develop the the expertise pool later. For the second strategy, there is a risk of the framework adoption by different market may be inconsistent. So we will have to require them to have the verification from our headquarters before the full implementation in that specific market. Now, moving to the impact measurement. For the first strategy, we will look at the numbers of existing supplier in our expertise network and also the consultation efficiency as my colleague has mentioned. For the short term is the satisfaction of the SMEs, and in the long term is the project performance delivered by by those. For the second strategy, is the number of the diverse SME in our pipeline and also our classification status. So for our projection, by year 5 of 2029, we aim to to increase our diver supplier network into more than a thousand of supplier with 25% will be the tier A SME, ready to be partner, 35% will be in the pipeline receiving our support, and 40% of them will be the tier C who needs self self-development. And our key target by 2029 is that we want to have 5,000 of existing suppliers participated in our expertise sharing, 70% of our the satisfaction level from the SME in receiving the guideline for the projects, and also more than 80% of SME projects, the tier A ones to delivered on time and on quality requirement. And more than 60% of new projects will be supplied by these diverse SMEs in the long run. And lastly, regarding the financial consideration, we believe that the total capital expenditure will be around 600,000, focusing on a comprehensive development of our evaluation framework and also the platform development. Regarding the operating expenditures, we believe that 40% of them will go to the expertise cost for the existing suppliers, 25% for the audit and evaluation for the second strategy, and also the platform operation for the first strategy. And we believe that in the first year, 2025, 1.25 million will be the amount of all backs added to your operation. And we we will scale this number to 6.25 million in 5 years. So, in conclusion, with the right strategy and the right innovation, our team believe that HSBC can not only achieve an inclusive procurement in long run and also step of step forward to reach your ESG goal in the long term. And that is the end of our presentation. Thank you for your listening, and we are now open for any further discussion.
[19:58]You may now start the 15 minutes Q&A section. Thank you very much for that. Very uh very, I really liked how you framed that all the way through, so thank you. Um, I'd like to go a bit deeper on the expertise pool and on the uh, the whole delivery mechanism for getting the expertise sharing between the established suppliers and the uh, the SMEs. Could you talk to me a little bit about how you will convince our existing suppliers that this is a good use of their time? I think on one of your last slides, you also mentioned some expertise costs. So could you talk me through that framework, and and how is that going to work from an incentives and an outcome measurement perspective?
[22:04]Thank you for your question. So the reason why we said the tiers is that we believe there are some suppliers, they may fulfill our criterias, but they face difficulty in supplying the documentations or the evidence to show that they are fulfilled. So they will lack some of the criterias to be not in the uh division A. So that is where we will jump in and support them. We will ask them what are their pain points, what they are what challenges they are facing, and we will give them the according support and tailor their journey to support them into our partner in the later.
[22:44]Um, pressing on on the expert expertise pool, because it's it's interesting, we want to dive into the practicality of it. I think similar to Oma's question, what is the metric of success for an SME, for us to demonstrate diversity, but also for the SME itself, because it's very interesting, you talked about cross-border pool. So you're assuming that the contracts are not just local, but, you know, you're pushing them further across border. What is the criteria in assessing what SMEs you're focusing local, what SMEs you're taking cross-border, and how do you measure that success? Thank you for your question. So I think for the impact measurement, for the for the cross-border supporting of expertise, we believe that by collaborating with existing suppliers, we will be able to have the expertise shared from the long-term supplier of ours to the new SME. So we will measure whether the the the SME, they satisfy with the consultation or not. Will they receive insightful impacts or not? And in the long run, it will impacts on their project deliverable, whether they are on time, whether they are met the quality. And I believe that our strategy, we want to, um, primarily focusing on the challenge that they lack of the capability to handle our big projects. And also to they are startups, they are new, they are new to operation, new to regulation, so we will support them further on with our experience.
[24:20]I'm looking at the summary page in terms of what the end goal is. Right, I don't know if it was from the slide before. So is that the target 5,000 suppliers, expertise sharing, and over 80% of SME projects delivered, and then I suppose there's that diversity uh target? Yes, so the 80% of SME project delivered on time is actually the projection for our tier A, the SME that we have been collaborating, we have been, yeah. And 5,000 suppliers on the timeline of sorry, I I missed that the the projection slides, 5,000 suppliers over what period? Over 5 years, so these are 5,000 of existing suppliers participated in the expertise sharing among our markets.
[25:17]Thank you very much for that.
[25:21]Got a question about the framework. You get the put the slide up on the framework. Um my first question on it is, is that a framework to help define where they fit in these tiers? Or is that actually a framework to help us make decisions on goods and services and who we buy them from? Or both? Yes, uh I believe that we want to target both. So we want to develop a framework that you can use with a lot of purposes as possible. So not only you can use this framework to determine the best supplier for the requirement category, but also when you are struggling in decision, when you have to compare between suppliers. Okay, thank you. That's what I I thought it was that. So my next question follows on to that if if it's a if it's a framework that we're going to be using for making decisions on goods and services and who we buy them from, is it deliberate that there's no commercial lens on that because obviously while we do want to focus on making our supply chain more diverse, there is a commercial lens that we must always consider. Is is that separate to this or is is that something that we should you're suggesting we should not consider? Thank you very much for the questions. So we did acknowledge it as one of the risk, so that is the reason why we would say that the local office will have some adjustment to that framework depending on some special situations of their markets. And that framework will be sent back to the headquarters to cross-check it before implementation.
[27:10]Okay, so it sits on top of what I would describe as technical assessments and commercial assessments. It's another layer of scoring, that that correct?
[27:50]Yes, I think our initiative is to incorporate the diversity measurement into the decision-making process of the of the supplier selection. So we will still choose the we will still keep the traditional one of of assessing their capability and also the financial, but I think when we have already like developing our strategy to supporting them, we will have higher packing power, and we also impact the financial side of the procurement. Okay, final final question on this one then and and to put you on the spot, is how much weight would you put onto this compared to a technical evaluation and a commercial evaluation? Would this be first priority or the heaviest weighting or the least? Have you had any thoughts on that? Thank you for your question. I believe it's actually depends on the project and the goal of the HSBC branch. So, for example, we believe in the case that they highlight they really need to enhance the diversity, so in this case, we believe that this framework will be more prioritized. But in certain market that the diversity goal is not very highlighted, we think that the decision can be discussed further in the local team. Okay, thank you.
[29:08]Can we go back to the financial projection slide?
[29:18]So what is your estimated running cost of um building this this network, the expertise pool? So I think in the first year we will spend roughly about 300, 200,000 developing our platform and another 100,000 for negotiating with our existing suppliers.
[29:58]This is a very interesting listing: 100,000. What does that pay in terms of supply negotiations? You mean with our entire supply to get the to get to the 5,000 and to work with the big suppliers, how does that work? Can you walk us through? Thank you. Yes, I think so I think the supplier negotiation here actually to get the connection that we want the about the segment that we want to support our SME. We have to find the suppliers, we have to develop our our expertise sharing segments, and then we develop the connection, and also I think the negotiation can also include the costs for like, um, setting up all the, um, like the infrastructure, the process and to communicate them to the supplier, the existing supplier, whether if they want to join the program or not to receive the benefit that we want to negotiate with them.
[34:01]So I think that is really an implied cost and also a risk to our operation, to to our strategy, and I think that a very interesting point to include. So I think that also including the supplier negotiation. So I think the here are quite like generic and I also agree that there's a lot of implied costs behind. Yeah. Thank you.
[34:25]One quick question. You you mentioned that the uh assessment criteria you're going to standardize it globally. Do you see that as being practical with with all the different markets that we're in? Do you think that's possible? Thank you very much for the questions. So we uh did acknowledge it as one of the risk, so that is the reason why we would say that the local office will have some adjustment to that framework depending on some special situations of their markets, and that framework will be sent back to the headquarters to cross-check it before implementation.
[35:03]Thank you the RMIT University Vietnam for your performance. You may now leave the stage.
