Corporates worldwide are increasingly calling for fully-integrated treasury solutions.
Dominic Broom, Head of Market Development, Treasury Services EMEA at The Bank of New York Mellon, explores the need for such solutions and how collaborative partnerships between local banks and global providers can make them a reality.
According to a recent study sponsored by The Bank of New York Mellon (Integrating treasury solutions in Asia and Europe – a roadmap for success), 92% of corporates surveyed in Korea say that their local banks lack the necessary skills to provide fully-integrated cash and trade solutions, whereas in Germany, 100% of corporates surveyed disagreed with this view. How can such a dichotomy between two such advanced exporting economies be explained? In brief, the answer to this question lies in the level of treasury service sophistication of their local banks: although why should the degrees of service sophistication differ to such an extent and what effect does it have on trade?
Members of the OECD, once the major exporter economies to both fellow and non-OECD countries, are moving towards becoming net importer economies, chiefly from non-OECD emerging markets.
To answer these questions, let us begin at the beginning. Traditionally, the two key treasury solutions areas – cash management, dealing with cash flow and liquidity optimisation and trade services, dealing with cross-border risk mitigation – have been offered to corporates via two separate banking areas. This divided system worked well while bank-issued letters of credit (LCs) were the method of choice for international trade and treasury departments were solely responsible for cash-flow management, but the game has since moved on. The evolution of trade flows and changes in the role played by corporate treasury mean that maximum efficiency of liquidity and risk management cannot be achieved if cash and trade are not fully-integrated.