Published: November 01, 2009
The 3rd BNP Paribas’ Cash Management University, which took place in Paris, France on 8 – 9 October proved a marvellous opportunity for over 200 senior corporate treasury professionals and industry experts to share and explore ideas, case studies and new opportunities for liquidity optimisation and risk management. With both a broad agenda during the plenary sessions and the chance to discuss issues in detail during a series of specialist workshops, there was plenty of food for thought for treasurers, whatever their primary areas of interest. The themes covered in some of the workshop sessions have been previewed in earlier articles in this series; in this article, we summarise some of the key messages and overall conclusions of the Cash Management University.
“A new version of normal” was how Frédéric Surry, Chief Executive Officer, BNP Paribas Asset Management, described the current market situation. The immediate crisis seems to have passed, but companies’ focus on liquidity and risk management has changed fundamentally from two years ago. As Pierre Boisselier, International Treasurer of Publicis outlined, “When liquidity is scarce, cash is king.” Treasurers have been forced to find new ways to finance the business and achieve cash flow efficiency, but they have followed different routes to achieving this. For example, Pierre described how Publicis has focused on the inception of cash, i.e,. collections, as part of a robust working capital strategy, and aligned the interests of the business as a whole, so that sales objectives do not compromise financial objectives by using the company’s balance sheet to finance their customers.
Marcel Kellerhals, Group Treasurer, Panalpina, also stressed the importance of collections, with accounts receivable the largest asset on the balance sheet, and described Panalpina’s vision of a global collections factory in the future. He described the global cash model which is in progress at Panalpina, combining notional and physical pooling techniques to centralise liquidity. Looking ahead, the intention is to achieve greater bank-independence in the payments and cash management processes using SWIFT, to enable a global overview of cash on a daily basis. In addition, there is a greater focus on cash flow forecasting to enable liquidity needs to be anticipated more accurately so that surplus cash can be put to better use.
In addition to internal and bilateral initiatives between corporate treasurers and their banking partners, there are also a variety of external opportunities for improving the efficiency of liquidity and risk management. With SWIFT Corporate Access becoming more prevalent across the corporate community, there is a growing range of capabilities for corporate-to-bank communication, such as eBAM (electronic bank account management) together with personal digital signatures, and the TSU (Trade Services Utility) which banks are increasingly using to deliver trade services to their customers. eBAM was the subject of a presentation by Elie Lasker, Head of Corporate Market at SWIFT, and Gilbert Labbé, Head of Treasury, EDF, who piloted the eBAM initiative. [[[PAGE]]]
Another initiative of which corporate treasurers can take advantage is SEPA (Single Euro Payments Area) payment products with the launch of SEPA Credit Transfers in 2008, and Direct Debits this month (November 2009). As Michael Pechner, Head of Cash Management Sales, Belgium and Luxembourg, BNP Paribas-Fortis. and Franck Lebled, Chief Financial Officer, Parfip Group, outlined, SEPA presents some substantial opportunities both to leverage more efficient, standardised payments and collections across the Eurozone, but also to rationalise account structures. For example, Parfip currently receives around 1.5bn direct debits in 11 formats across a range of countries, resulting in a lack of harmonisation and high in-country costs. With the launch of SEPA Direct Debits and the Payment Services Directive (PSD), both internal processes and external account structures can be rationalised, resulting in lower costs, increased visibility and the ability to centralise liquidity more easily.
While many of the internal and external techniques discussed at the Cash Management University can be highly effective at maximising liquidity and mitigating risk, what happens when liquidity and risk management objectives seem to be contradictory? For example, how does a treasurer balance the need to manage counterparty risk, which could include diversifying activities across multiple banks, whilst maximising cash flow efficiency? Claudio Demolli, Corporate Finance Manager and Group Treasurer of Autogrill Group, summarised the position for many firms: while global cash pooling with a single global bank and centralised financial processes would be the ideal, tax and legal issues, multiple banking relationships created through acquisition and a decentralised business culture mean that compromise objectives need to be set, with techniques such as regional banking relationships, cash pooling across multiple banks, in-house banking and more efficient cash flow forecasting used to encourage greater cash flow efficiency.
Gerd Klevenz, Head of Treasury Operations and Processes, SAP AG, presented one of SAP’s corporate objectives, “See quickly, think quickly, act quickly”. This would seem to summarise the objectives of many corporate treasurers in the current climate. For this to be possible, transparency is key. Treasurers need a clear view of information across the business, to enable them to answer some key questions:
This year’s Cash Management University was a valuable and timely opportunity for treasurers to find answers, ideas and solutions, and participants were enthusiastic in their support for the event. Next year’s Cash Management University will take place in Paris on 25 and 26 of November, 2010, to which all corporates are warmly invited. Following the success of this year’s event, we are already looking forward to some in-depth and innovative case studies, expert insights and involved dialogue. We look forward to seeing you there!
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