Cash management debate: Participants
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Executive summary
• Increased pressures on corporate treasuries such as centralization of activities are leading to increased demands on banks
• Globalization of corporates in production and distribution require systems that enable centralized control
• Robust partner-bank arrangements are needed to facilitate such things as rapid movements of liquidity
• Sound receivables management demands efficient collection points, efficient information flow and efficient use of funds once collected
• Provisions need to be made to improve the efficiency of working capital arrangements
• Arrangements such as the EU’s Single European Payment Area will bring enhanced efficiency |
JL, J&W: It seems that whenever I meet bankers and treasurers, the one consistent theme is the increased pressures on treasury and the consequent increase in their demands from the banks. Is that still the core driver in this area?
OL, Unilever: Yes. We have to do more with less in general. The centralization of cash management is a direct result of that trend. We leave fewer treasury activities in the countries themselves and we’re centralizing in regional treasury centres.
MS, Dyson: We see a lot of pressure because Dyson’s growing. We’re going into more countries, and more difficult countries, which makes it increasingly complicated. Resources certainly don’t keep up with the level of business, so there is a lot of pressure to do more, more efficiently.
AH, Virgin: We are experiencing an expansion in our traditional roles mainly from the reporting and governance standpoint. We’re also becoming more like business partners, who really need to understand the dynamics of the business. For example, we’ve just taken on corporate credit cards, so we’re working in cross-functional groups to understand and deliver added value products and services.
DJ, Shell: Our focus is on core treasury activities, so we’re not involved in a lot of these additional areas, such as invoicing, cards. We will advise the business on the bank relationships, contracts and pricing, but we can’t add much value to the process. We focus on providing the framework within which our businesses can operate in the banking environment and we manage the risks that apply there.
JL, J&W: So you’re having to do more with less, yet you’ve more responsibilities. What new services do you want from banks?
AH, Virgin: Connectivity is important for us. We are currently running several separate EBS platforms, which is inefficient. How best can we move to one EBS platform, but at the same time receive the same or improved level of visibility and reporting from all of our banks through a single pipe?
NS, Citigroup: Corporate business models are becoming global – production and distribution is being spread across more countries. Our most important objective is to provide visibility, control and risk management capabilities around your customers’ cash flows across the world. Global business models require centralized control, delivered through integrated technology and systems.
MS, Dyson: Being joined up across countries is important. For example, if we make a product in Malaysia which we then sell to a UK company and then through our Canadian company to a customer in Canada, for us that’s one product movement. It makes a value-added proposition from the bank if they can also see that as one continuum and not just as discrete transactions.
BI, ING: If the banks don’t think across product lines they can lose sight of what the client really wants. But that same client forces us to think in products and silos, because if we don’t, we can’t gain the efficiency and pricing that big corporates expect. Clients want the best of both worlds, and that’s the challenge.
DC, ABN Amro: I see a polarization of commodity and consultancy-type services across the supply chain. Banks must try to marry the two in a way that adds value for the corporates.
JL, J&W: What’s the best way to achieve an effective international cash management solution?
MC, Deutsche Bank: The partner-bank proposition has been through its ups and downs, but we’ve now reached a stage where people acknowledge its benefits. Deutsche Bank is a big provider of partner bank services to other banks, but we’re also a user of other partners. The key is what the corporate needs from you as an institution and what it needs from the partner bank. It could be liquidity, in which case you need very close, robust partner-bank arrangements to be able to move liquidity quickly on the same day. It could be collection points, it could be around local needs. Where it’s 10% of the total solution, then a partner-bank proposition may work.
BI, ING: ING stated that banks should not impose their own structures on their clients, but listen to clients to create a workable structure. This can be their own network, but can also entail other banks. If you have your own network with which you can serve the corporate, that’s fine. But if you have to cover countries beyond that or in a country in which the corporate prefers to use another bank, then you must find a solution with this partner bank, but in a way that avoids making things more complex for the corporate. The bank has to have an open attitude as well as open infrastructure and architecture. You have to listen to your client first and then develop or build a solution.
DC, ABN Amro: Yes, I would echo that. The partner-bank approach gives you single-channel access. It allows centralized cash-pool structures, harmonized pricing and centralized billing capabilities. True value, though, comes through building a long-lasting relationship. When there’s corporate access to Swift, it’s logical that you do that with your partner bank. It’s easy to integrate M&A activities into this structure. It gives corporates that flexibility, and the banks also benefit from the higher throughput.