Published: January 01, 2010
What has been clear to me is that banks – and corporates – are finally recognising the value of relationship banking as opposed to banks simply being suppliers of banking products. For Transaction Banking within Standard Chartered, the move from product selling to a relationship focus started in late 2006, so we are in many ways further ahead than other banks in this cultural evolution. Even before the crisis, we knew that we could deliver a better service and higher levels of customer satisfaction if we worked in close partnership with our clients across their financial activities rather than looking at products as silos. A holistic approach to working capital is critical to a relationship banking model, looking at all the cash flow drivers in the business and delivering solutions to accelerate and strengthen the financial supply chain. However, it takes time, education, a cultural shift and a change to the way that executives are incentivised to make a relationship banking model work, and not all banks have yet equipped themselves to achieve this.
We recognised that relationship banking was the right model whatever the economic situation. We looked back to Black Monday in 1987, the Asian crisis in 1997 and the loss of market confidence following the Enron scandal. Although these events differed from the most recent crisis, they all created issues for corporates seeking to raise funding and capital, with liquidity becoming scarcer and more expensive. Working capital was gaining more attention, with a number of studies illustrating the billions of dollars of ‘trapped’ cash within organisations. We needed to help our clients to unlock their internal source of funding, reduce working capital requirements and find new ways of accessing liquidity when required, rather than always being at the mercy of the markets.
In 2006 however, most banks weren’t ready to talk about working capital: they were focused on products and services, rather than being equipped to discuss how to strengthen a client’s relationships with their buyers and suppliers. At Standard Chartered, we embarked on a business transformation to reposition our business in relation to our clients, which required internal organisational changes, training on how to manage client engagements and education on the priorities, concerns and objectives of a CFO and treasurer. We needed to understand clearly what working capital meant to a corporate treasurer, and deliver solutions accordingly. We first piloted our new scheme in late 2006 and early 2007, which included moving away from recognition of sales people based only on sales to a customer in their own market, and instead recognised sales success across both regions and product lines, which inspired a significant change in behaviour and a focus on what clients needed to manage their business. This was supported by methodical processes of evaluating client needs and potential solutions, scorecards and thought leadership for our clients.
By the time the crisis struck in 2008, the relationship banking model and central focus on working capital was already well-established in our business and we had already seen considerable success in both market share and client satisfaction. For example, in the Banking Sentiment Index conducted by East & Partners of the top 1,000 companies in Asia (including both Asian and foreign companies) identifying their primary and secondary banking partners, Standard Chartered moved from 28.5% market share in 2008 to 31% in 2009, the largest increase in the study, together with being the highest rated in customer satisfaction terms. Furthermore, we have won close to 50 major awards in 2009 across regions and across products.
While these are the outward manifestations of the success that Standard Chartered’s new approach to client relationships has had, more important is the experience of individual clients and how their business has benefited. We have a structured approach to measuring, analysing and providing solutions to clients’ working capital challenges, which creates direct and tangible value to the business. For example, we have built a working capital analyser tool which calculates working capital ratios and benchmarks these against those of other companies within the region or industry, including both publicly listed and privately held companies. We can then provide simulations on the value to the company that could be created by flexing the metrics that contribute to the company’s working capital requirement. Finally, we can look at specific ways of achieving these improvements, such as supplier or buyer financing, or enhancing the collection process. This approach means that conversations with clients are all about creating value rather than selling products.
Absolutely: other banks are now trying to implement a relationship banking approach, but having already undergone this transformation, we know that it takes two to three years to achieve, and requires substantial mindset change to cut across both geographies and products. The investment requirement should also not be underestimated, particularly in the need to educate staff in one region about others. For example, a company in China may be looking to expand in Africa, so the banking team needs to be equipped to provide the right support.[[[PAGE]]]
When I started with Standard Chartered Bank in 2006, I could not have anticipated what a dynamic and intellectually challenging journey I was embarking on, and I believe that this is the experience of many in the team. Our culture encourages and rewards creativity and innovation in solving client issues and our client relationships comprise close dialogue and a mutual commitment to identifying and addressing challenges. Working in Asia brings particular interest as the economies are going through such an exciting period of transformation, and we are helping clients to understand the implications for their business. For example, every one of our China events are sold out, reflecting that clients recognise how important some of these regulatory changes are, and that they trust Standard Chartered to help them through these changing times.
2009 has been an outstanding year for Standard Chartered in terms of new deals, awards, client and staff satisfaction and the degree of enthusiasm I see across the business. This is a testimony to all those who have worked hard to enable this transformation, not only in Transaction Banking but also in Wholesale Banking, a process which started over eight years ago. At that time, we were known mainly as a lending and trade finance bank, operating country by country. Now we can act as a true partner to our clients across all aspects of their financial activities.
We have been hiring throughout 2009 and we have acquired some superb talent with a wealth of expertise gained in both banks and corporates, giving Standard Chartered an even greater ability to anticipate, understand and respond to our clients’ needs, challenges and aspirations. In 2006, we employed around 45,000 people; today this figure is 77,000. The bank has also made important acquisitions in countries such as Korea, Thailand, Taiwan and Pakistan, giving our clients both geographic breadth and depth of capability in these countries.
Clearly, there will always be missed opportunities in hindsight, but 2009 has been a phenomenal year and we take pride that we have been able to support our clients in very tangible, practical ways to survive the crisis and prosper as more settled times return.
The focus that we have seen on liquidity and risk management over the past year or two will undoubtedly continue, even if we move into easier times; this is likely to be a long-term change in mindset rather than simply a short-term priority. Banks and corporates alike are now managing their risk more effectively, even though in some cases it takes time for treasurers to put new policies and systems in place. We have heard talk about enterprise risk management for some time, but an increasing number of companies are now seeking to assess risk holistically across the business. To achieve this it will require greater collaboration both internally and externally and we see this starting to happen. Treasurers will continue to seek more detailed, timely information on their global cash position, and to have access to banking services in all their countries of operation; clearly, both of these are areas in which banking partners can help. Regulatory changes are also helping treasurers to achieve more. For example, pan-African cash management is now feasible, and Standard Chartered is helping clients to implement best practices that they have implemented in other regions, and adapting these as necessary.
A negative market development we have seen over the past year is that some banks have tried to compete solely on price, including what I would term ‘serious price dumping’ in addition to committing future cost freezes. Corporate treasurers want to see value for money, but they are also concerned about the quality of service that they receive and the sustainability of their suppliers/buyers. Consequently, treasurers are largely rejecting this approach, which we hope will lead to banks competing on the value of services and geographic reach rather than on price alone.
The move towards relationship banking and the focus on working capital optimisation will continue; however, as we have seen, it takes time to make the necessary organisational transformation to achieve this. Banks starting now will not see their plans reach fruition for another two to three years, which could be too late for some of their clients. Standard Chartered will continue to reinforce our relationship banking model, expand our geographic breadth and depth, and provide the solutions which our clients need to create value in their organisations.
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
