Published: January 01, 2000
The onset of the credit crunch has changed the global banking landscape and the fall-out has changed the way banking is executed. Corporates have had to change the way they approach things from strategy, to long-term structural changes, to a change of focus from more traditional home markets to rapidly expanding emerging regions that offer unparalleled opportunities for growth. These changing parameters provide a host of challenges from a treasury perspective.
Before the financial crisis, large companies could look to their corporate bankers strictly as support functions – there to deliver a discrete or specific service. As companies diversify and expand geographically, their treasury function and needs become more complex. And it’s not just additional regulatory frameworks to navigate cross-border transactions, or currency and tax issues, or technology and liquidity issues – all of which one would expect. There are also the simple practicalities of accessing talent in new markets, understanding local business cultures, and even adapting to the realities of managing and controlling risk across time zones.
As companies diversify and expand geographically; their treasury function and needs become more complex.
As a result, a centralised treasury team at corporate headquarters cannot keep abreast of every moving part at the local operating level, at least not every minute of the day. For global organisations (or those that have global aspirations), navigating the landscape today often demands that treasury employ a decentralised operating structure – one that reliably supports the risk management framework, and also meets the demands to collect, disburse and fund locally.
While both internal and external localisation can meet the short-term organisational need to establish an operating presence quickly – it will both complicate control and governance, and make it more challenging to know where to go to get answers swiftly and to resolve problems. This reality is leading treasurers to consider the integrated operating model that covers all aspects of their requirements from meeting their business needs, their day-to-day operational queries, customer queries, billing, legal and documentation. This complexity leads companies to demand a single point of contact from their bank as a necessary ingredient to help them manage an increasingly complex operating structure across different locations.
Of course, to add value, this central point of contact must have a deep understanding of the client, its strategy and its transaction flows, and understand those dimensions both locally and globally for the enterprise. That means that treasurers aren’t just looking for the right individual to work with them. They are asking that the bank has the service infrastructure and capabilities to effectively support their operations in different parts of the world.
Many of today’s leading corporations are centralised from a treasury perspective, and with operations on multiple continents they often struggle to get an accurate and comprehensive picture of what’s happening in each location. This is particularly true for companies that have centralised and consolidated both their treasury and cash management operations in an effort to increase efficiency and overall visibility. Although this may help drive down operating costs, one of the ramifications can be losing quick access to country and market specific information. Having access to the local knowledge and market updates is crucial to the treasurer – eliminating their local offices (or downscaling their in-country operations), as they need their bank to be able to provide this information and comfort to centralised treasury function.
This not only challenges the treasurer’s ability to keep abreast of local subsidiary activity, but can also complicate risk management, and the oversight required to ensure that subsidiary companies adhere to corporate treasury policies. For example, this ‘blind spot’ might manifest itself in unexpected payments processed by a local entity outside of normal payment protocols, possibly resulting in a short or overdrawn position. By leveraging an integrated operating structure, supported by a single point of contact, activity such as this can be flagged quickly and brought to the attention of the corporate treasury.
Or, for clients leveraging a shared service centre, many will start with multiple queries that need to be brought to the attention of the service provider. One common frustration voiced by clients without a single point of contact is trying to co-ordinate information-gathering activity across multiple regions. “Audit and risk management is a daily activity in treasury and when you have several hundreds of accounts across the world, maintaining an up-to-date list of documentation and authorised signatories can easily become a full-time job. The central point of contact becomes a key element in risk management, ensuring documentation is kept updated on a regular basis and across all regions,” said Markus Kortmann, Senior Manager Cash Management, Nokia Treasury in Geneva. “The same also applies to the annual audit. A simple request, made directly by our auditors, can become very cumbersome when dealing with numerous different countries in the world. The central point of contact ensures completion in a timely manner whilst trying to resolve any potential local hold-ups or requirements to avoid undue pain for our people at the shared service centre.” There will be differences in procedure from different branches even within the same banking organisation, sometimes solely due to local regulations. However, having a central contact helps alleviate this frustration. That central contact can navigate the bank on the client’s behalf, gathering information from the different regions and reporting it in a consolidated, consistent format for the client. [[[PAGE]]]
“The central point of contact works very well for us,” confirms a senior executive with a global energy company. “Just recently, we had cargo waiting for delivery pending the arrival of funds. We were able to call our client services contact, who was able to check their systems and confirm that the payment had been received. We were able to deliver the cargo without any impact to the client. This is very important. At the same time that individual – our single point of contact – was able to confirm a second separate query, involving a cancelled transaction due to the beneficiary account being closed. The cases were in different parts of the world, but both were effectively handled by calling one individual in London.”
Having a single person available to navigate the bank on the client’s behalf, ideally in the client’s preferred time zone, is the embodiment of the service delivery model. The right individual, supported by an integrated banking infrastructure, can manage preferences and maintain a global view of all client company activities.
In addition to the concept of a single contact for all client-servicing queries, a bank may provide a single contact for project implementation. That person monitors and reports on all in-progress projects and helps co-ordinate across all local bank teams. This allows the bank to preemptively identify issues that may impact important target dates and project deliverables. By streamlining all reporting and maintaining regular review meetings with the client, the central contact can help the client access resources quickly.
Having a single person available to navigate the bank on the client's behalf, ideally in the client's preferred time zone, is the embodiment of the service delivery model.
In the case of Nokia, the Finnish global telecommunications leader, before its bank implemented a single point of contact Nokia had to track down individuals in many different countries as various issues arose. So when Nokia expanded its XML payments formats to other currencies in Asia, the central point of contact facilitated the implementation and testing, liaising with the different regions, and ultimately enabled the client to go live with multiple countries and regions simultaneously. Collating feedback from the local teams; supplying feedback from the client in a consolidated format; and tracking the overall project status across the bank are some of the ways the central contact ensures that project deadlines are achieved.
“Prior to the bank introducing a central contact for implementation, projects were primarily managed regionally,” says Markus Kortmann. “We could be implementing a new file format in Asia, opening new accounts in EMEA, and setting up automated reconciliation for our Merchant Card service in the US at the same time. Different topics, different expertise, different regions and time zones. Bank of America’s answer to the complexity and demands of our projects was the creation of this new role. It’s really all about better co-ordination, and it has helped us manage change more efficiently.”
A central contact can also play a vital role in mitigating risk inherent to complex implementation projects. When a company migrates to a new bank reporting platform, for example, it is important to follow a structured project plan. Someone is needed to take the lead and communicate across impacted users as each production change is implemented. That central contact not only needs to hold a deep relationship with the client company, but he or she must also be able to access and deploy the necessary resources from anywhere across the bank’s comprehensive platform to get the job done. The central contact for implementation and the central day-to-day client servicing contact are key functions to the management of the client relationship. They provide real-time information to the relationship manager on the status of each project wherever they happen, enabling him to be proactive instead of reactive. [[[PAGE]]]
In this post-crisis era, where a treasurer needs to maintain central control but may also need to gain access and efficiency though a decentralised operating model, a single point of contact at his bank is almost a necessity. For those companies continuing to push into new markets and regions, successful bank relationships will increasingly be defined by the quality and differentiation of service provided. Conversely, for companies needing to wring efficiencies out of mature operations, the right coverage model can reduce their own internal infrastructure costs - dramatically. In both cases, the more ‘gaps’ the bank provider can fill to help bridge the client to the desired end state, the closer and the more valuable the relationship becomes.
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