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Treasury Strategy & Transformation
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Collaboration for Competitive Advantage

by Michael Spiegel, Managing Director, Global Head of Trade Finance and Cash Management Corporates, Deutsche Bank

Michael SpiegelAs the treasury community converges on this autumn’s events: Sibos in Boston, EuroFinance in Budapest and Shanghai, and the AFP Conference in Washington, we are reminded of the ever-increasing significance of globalisation, with its varying implications. Distribution models are changing as urbanisation and eCommerce develop strongly, supply chains are becoming longer and more complex, and corporations of all sizes are adapting their organisational models to meet these changing demands. 

Globalisation is not a new phenomenon, and treasury departments of multinational corporations have long developed sophisticated skills, treasury organisations, policies, procedures and technology infrastructures to support their global business. In the past, many have adopted the ’80:20’ rule, achieving considerable success in optimising cash, liquidity and risk management in core regions from which the majority of revenue is derived, while the more challenging markets in Asia, Latin America and Africa where flows have been less material has been a lower priority.

All this is now changing. Competitive pressures, lending constraints for banks and the growing importance of working capital means that every dollar is important, wherever it is in the world. Furthermore, markets that have historically been referred to as ‘emerging’ are becoming core growth markets, so it is becoming more important to identify and implement effective cash, treasury and risk management strategies. However, given that exchange controls, liquidity restrictions and diversity across markets can make it challenging, and at times impossible, to replicate familiar cash and liquidity management techniques, there is a growing need for a new generation of treasury strategies and solutions.

Two of the key characteristics of the new, post-crisis regulatory environment are firstly, counterparty risk, which is more important than ever; secondly, new capital requirements for banks that make lending relationships increasingly important as a criterion for corporates’ choice of cash management banks. In the past, many banks were jostling for position as their customers’ global cash management banking partner. Today, customers are far more likely to select ‘best in class’ transaction banks from their lending panel by region or country. While there are a number of advantages in this approach, an important challenge to overcome is the risk that cash and liquidity management could become fragmented. While technology is an enabler to avoid this fragmentation, such as multi-bank connectivity via SWIFT, standardisation using XML ISO 20022 formats and global treasury management systems, corporate treasurers increasingly demand that their banks work together to meet the global needs of their customers more effectively. This could include, for example, consensus on the use of ISO 20022 standards, but this just one step towards greater collaboration between banks.