Strategic Treasury

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Finding Stability in an Unstable World While 2007 and 2008 saw a tidal wave rush through the financial markets, 2009 is proving to be the year in which every industry is affected by turbulence and uncertainty. We continue our series of executive features with an interview with Pierre Fersztand, Global Head of Cash Management at BNP Paribas, who describes some of the ways that treasurers can create some stability in their company in an environment where uncertainty seems to permeate every part of the business.

Finding Stability in an Unstable World

An Interview with Pierre Fersztand, Global Head of Cash Management, BNP Paribas

While 2007 and 2008 saw a tidal wave rush through the financial markets, 2009 is proving to be the year in which every industry is affected by turbulence and uncertainty. We continue our series of executive features with an interview with Pierre Fersztand, Global Head of Cash Management at BNP Paribas, who describes some of the ways that treasurers can create some stability in their company in an environment where uncertainty seems to permeate every part of the business.

In the current climate of uncertainty, what are the key considerations for corporate treasurers looking to manage their cash effectively?

Back to basics: Treasury Policy and Objectives

Over the past few months, during which time the financial crisis has extended from the banking market to all industries, we are seeing our clients adopt a “back to basics” approach, focused on managing the core financial risks and preserving liquidity. For most treasurers, market conditions have been so far removed from those anticipated in their treasury policies that they are finding themselves in uncharted territory. Consequently, it is a good time to review the treasury organisation and its scope, objectives and priorities and how these relate to the company’s overall business objectives.

Procedures and Technology Tools

In addition to aligning treasury policy with the business strategy, treasurers need to review the procedures and tools which enable them to deliver on the policy and support the needs of the business. During times of significant volatility, treasurers need access to group-wide, real-time information to understand the company’s cash position and to be responsive to changes in the market and changes in the business requirement. To allow this, the right systems, and effective integration between them, are essential to facilitate information flows between business units, treasury and its banking partners. Achieving this improves straight-through processing of transactions, allows more accurate forecasting and permits timely decision-making.

There have been great strides made in recent years in improving corporate-to-bank connectivity, including the development of technical standards, such as ISO 20022, and improvements to connectivity tools. For example, in addition to advanced technology provided by the banks, including web-based and host-to-host solutions, SWIFT Corporate Access, of which BNP Paribas has been an early proponent, is increasingly the connectivity method of choice of large, complex organisations with bank accounts worldwide. Not only are our solutions and services ideally suited to the domestic markets in which we excel, namely France and Italy, but we have invested heavily in our internet banking solutions, SWIFTNet solutions and after-sales support to ensure a consistent approach across BNP Paribas’ geographic footprint.

There have been great strides made in recent years in improving corporate-to-bank connectivity, including the development of technical standards...

Banking Relationships

As part of the review process incorporating objectives, policies, procedures and technology, corporate treasurers should look closely at their banking relationships and banking structures. In some cases, there will be opportunities to rationalise bank accounts and in others, it may be a good time to ensure that the right banking relationships are in place. Criteria for choosing a banking partner have changed considerably in recent months. Cash management is not a commodity product and a banking partner needs to be exactly that, i.e. a partner, which you can trust to provide both the funding and cash management services the company needs. As obtaining credit remains a significant challenge for many organisations, cash management needs to be a priority for every corporate treasurer.

An important element in an effective cash management strategy is to ensure that your bank’s footprint matches that of your organisation. For example, BNP Paribas has built a leadership position in cash management in Europe, Asia Pacific and across the world, but we also have a strong focus on supporting corporate needs in France and southern Europe, including Italy, Spain, Portugal, Turkey and Greece where we have strong capabilities, a flexible best-in-class service offering, and expertise in the cash management, cultural and technical needs in each country. This was recently reflected in TMI’s award for Best Cash Management Bank - Southern Europe, 2008. Consequently, in addition to those companies which work with BNP Paribas globally, many corporations which may work with other banks in the Americas, Asia and other parts of Europe have selected BNP Paribas in the markets in which we demonstrate particular strength and expertise.

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