Cash & Liquidity Management

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Enhancing the Corporate Connectivity Experience With liquidity elevated to a critical priority for every treasurer, Lesley White examines the emphasis on working capital management and the new opportunities provided by new technology. The author also takes a look at the regional, multi-banking model being preferred by many companies, as well as the evolution of SWIFT Corporate Access.

Enhancing the Corporate Connectivity Experience

by Lesley White, Head of Market Management, International Cash Management, RBS

Treasurers globally are constantly striving to improve the way they manage their activities and enhance the value that their department brings to the organisation. While the financial crisis was a catalyst for treasurers’ optimisation efforts, increased efficiency, reduced costs and improved control are long-standing objectives that are constantly evolving as new opportunities through technology arise. An area of particular focus both during and subsequent to the financial crisis has been an emphasis on working capital management, with liquidity elevated to a critical priority for every treasurer. Enhancing operational efficiency and optimising working capital requires an effective means of communicating accurate, timely and complete information with banking partners, to provide a consolidated cash position, and facilitate straight-through processing. In this article, we look at trends and opportunities in bank connectivity, and how the right partner can contribute to an effective bank communication strategy.

Moving on since the crisis

RBS is partnering with IdenTrust to incorporate digital certification into the information transmission process.

Many companies have invested significantly in their technical infrastructure and business processes in the past, in order to enhance their access to information and the efficiency of their payments and collections. However, the financial crisis hampered many treasurers’ efforts to leverage the latest standardisation and connectivity opportunities, and it is only now, with economic stability returning, that we are seeing a renewed interest in acting on the technology plans that were put in place pre-crisis, and formulating new technology strategies.

Supporting multiple bank relationship models

One of the priorities for treasurers before the crisis was to rationalise their banking relationships, with many seeking to appoint a global cash management bank. As counterparty risk became a more prominent issue, a global banking model was increasingly seen as being too high risk, with companies preferring a regional or multi-banking model. This has certain advantages, such as having access to best-in-class banking services in each country in which a company operates. However, the more diverse a company’s banking relationships, the more potential there is for incomplete, inconsistent or fragmented information, the need to maintain multiple systems and interfaces, and the problem of trapped cash. Therefore, treasurers have to strike a careful balance between managing their counterparty risk and maintaining an efficient liquidity management strategy. With recent innovations in bank-agnostic connectivity and standardisation, this balance becomes easier to achieve, with the opportunity to retain banking relationships that add value to the business whilst benefiting from a consistent approach to bank communication and standardised formats.

Bank independent connectivity

The emergence of bank-independent connectivity such as SWIFT Corporate Access, and a standardised approach to information formats, such as ISO 20022 based on XML, reflects a new era in transaction banking. When SWIFTNet (the SWIFT network) was first made accessible to corporates, there was uncertainty as to whether SWIFT would complement or compete with banks’ proprietary solutions. It quickly became clear that there was a demand for both bank-independent and bank-owned communication channels. Banks such as RBS recognised at an early stage that collaboration with customers, vendors and other banks to develop industry-standard connectivity platforms and information standards has the potential to add considerable value to both individual clients and the wider industry. For example, RBS works closely with other banks through the SWIFT Corporate Access Group, treasury management system vendors and customers to develop plug-and-play SWIFT capabilities and become a leader in corporate connectivity through SWIFTNet.

Evolution of SWIFT Corporate Access

As a result of these efforts, we now support over 50 clients who access RBS and other banks through SWIFTNet. In the early days of the SWIFT Corporate Access programme, only the largest corporates with the technical resources to maintain their own connection chose to adopt SWIFT. Over time, as the range and depth of services to corporates seeking to use SWIFTNet has matured, the majority of companies connecting to SWIFT today use a service bureau. Other options for SWIFT connectivity, such as Alliance Lite, also exist, but there has not yet been significant take-up of this option.

RBS launched its service bureau 18 months ago, and since then, we have extended its reach globally, providing the connectivity, convenience, global network and integrated support model that our clients require. The RBS Bureau is a white-labelled solution that includes more value-added features than if you purchased directly. It is branded as RBS and is underpinned by the reassurance of an RBS contract.

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