Published: May 04, 2011
Since the financial crisis, increased globalisation, the emphasis on risk, liquidity and operational efficiency, and a transition from crisis management to strategies for growth, have all had a significant impact on corporate approaches to cash and liquidity management.
In this article, we look at some of the evolving requirements that we are helping our clients to address, and illustrate how we at Barclays Corporate are positioning ourselves to support the cash management objectives of our clients in the future.
As companies extend their horizons from domestic to international business, they need to optimise their cross-border payments and cash management activities, and simultaneously support domestic cash management in each of the locations in which they have a significant presence. Not only do they require international capabilities from their bank, they also need partners who have a direct presence, local expertise and experience in managing domestic payments, collections and cash management, often in multiple countries and regions.
In the years leading up to 2008, many corporate treasurers sought a single banking partner to accommodate their international and multi-domestic cash management requirements. In particular, they wanted to avoid the problems of different bank communication channels, integration formats and fragmentation of cash, that working with multiple banking partners can cause. This search typically proved unsuccessful; while a certain number of banks have an extensive global network, the depth of local knowledge and capabilities required in each market can be lacking.
Since 2008, we have seen two key market developments. The first development is the realisation that working with a single, global cash management bank may compromise a company’s credit, concentration, liquidity and operational risk objectives. Secondly, developments in bank connectivity, integration standards and greater collaboration between banks mean that corporate treasurers can now achieve the same degree of standardisation and cohesion working with multiple banks as they originally sought by working with one.
Consequently, treasurers are now more inclined to appoint regional or in-country banks that deliver best-in-class services in the relevant location, and put in place an overlay structure to enable cash centralisation.
These developments have not only changed the way in which corporates construct their group of banking partners, but they have also impacted what they demand from their banks. With process and financial efficiency now primary objectives for treasurers, they are seeking timely, accurate and rich information from their banks to support real-time visibility over cash, across the world and with every bank. Consequently, appointing a single global cash management bank is no longer the primary objective for treasurers - they are seeking a global information bank that can consolidate information and provide it in a form that can be integrated easily with internal systems.
Barclays Corporate has emerged strongly as an information bank for corporates in our key markets in the UK, parts of Europe and Africa, but also in newer markets in which we are making a significant impact, such as India and Pakistan. For many years, we have recognised that the lack of standardisation in integration formats and multiple channels of communication create considerable challenges for corporates. Consequently, we pioneered many of the early developments in open standards, such as ISO 20022, and bank-independent connectivity such as SWIFT Corporate Access. [[[PAGE]]]
In addition, we are supportive of new initiatives launched by SWIFT such as electronic bank account management (eBAM) which leverages the SWIFT network to enable companies to manage account opening, closing and authorities. As SWIFTNet access continues to become more convenient and cost-effective, and the range of services increases, we anticipate that corporate-to-bank communication through SWIFT will become more prevalent among companies of all sizes.
With new opportunities for cash centralisation, bank connectivity and integration constantly evolving, it can be a bewildering prospect to determine what the company’s financial and process management priorities ought to be, alongside the best means of addressing them. Consequently, treasurers recognise the depth of expertise brought by Barclays professionals and seek our advice on how best to prioritise and overcome today’s challenges and how to equip the business for the future.
As our relationship with our corporate clients has deepened, we have expanded our geographic footprint in response to client demand for services and information. For example, Barclays is already well known as the bank best-positioned to facilitate flows between Europe and Africa: however, we are also extending our capabilities across Europe. Our focus over recent years has been to expand our services both through a direct presence in certain markets, and through the development of a cohesive partner bank network, in order to deliver comprehensive pan-European cash management and information services to our clients. This strategy is proving very successful, with our clients benefiting from in-depth in-country solutions and expertise, together with powerful cross-border capabilities. In countries such as Germany, we have invested directly in developing domestic capabilities at the request of our clients, with a deposit-based offering that will be expanded to a full cash management service during the course of 2011. This supplements our existing, comprehensive capabilities in the UK, Spain, Portugal, France, Italy and Ireland, which are supported by partner banks in other countries in Europe.
While we all hope and trust that the next few years will not bring the same degree of market upheaval as we have witnessed recently, there are undoubtedly challenges ahead. Impending regulations such as Basel III, will significantly affect the way in which banks need to operate. This will in turn impact their interaction with corporate clients, particularly with respect to financing. Our aim is to minimise the impact on our clients as far as possible, and we are working to understand and communicate in detail how we will continue to deliver the solutions our clients require in the future. Other industry initiatives such as SEPA will create challenges but also opportunities. We are already working closely with corporate clients to explore not only how to implement SEPA cost-effectively, but also how to leverage the opportunity to rationalise accounts, centralise payments and collections management, and optimise cash management efficiency.
The banking landscape has changed unrecognisably and corporate cash and liquidity management requirements have transformed accordingly. Consequently, treasurers are seeking a banking partner that can act as a trusted adviser and help them to identify and deliver on corporate priorities. Secondly, a bank needs to have a proven commitment to supporting their information needs, both at home and overseas, with a view to optimising integration, process efficiency and cash visibility. Finally, a bank should provide the depth of domestic cash management offerings that its clients require, either directly or through a cohesive partner bank network, as well as comprehensive international cash management capabilities. As Barclays expands its geographic footprint across Europe and beyond, particularly in Africa - which is a core region for us - an increasing range of corporates is recognising our ability to satisfy their cash and treasury management objectives, and fulfil the role of trusted partner for addressing tomorrow’s challenges.
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