From Cash Management to Cash Flow Management 

An interview with Arne Borkowski, Regional Head International, Cash Management & International Business, Commerzbank AG

How would you characterise advisory services available from banks today?

While banks have been developing their client advisory services over recent years, this is still predominantly ‘silo’ based, covering specific areas, such as cash management or electronic banking. This approach has some benefit in that it helps clients to optimise a particular aspect of their treasury activities; however, it ignores the wider spectrum of interconnected functions for which treasurers are responsible. Risk management, cash and liquidity management, financial supply chain management, funding and capital structure are all essential priorities of today’s treasury, so advisory services need to recognise these diverse but closely related issues.

What progress has been made towards this holistic approach to client advisory services so far?

Some banks have recognised that their advisory services, and indeed solutions, need to cut across functional silos. However, while this may be a strategic objective, few if any have yet progressed substantially towards delivery of a comprehensive, cross-disciplinary advisory service. The first step for some has been to break down the various elements that contribute to cash management, such as trade, export finance etc. but there is still a long way to go.

What demand for advisory services are you seeing from your customers?

The cash and risk management requirements of multinational corporates today are highly complex, with a wide diversity of countries, currencies, cash flow and interest rate structures to consider. While many treasurers recognise the value of advisory services to manage this complexity, they are often not aware that these services are available from their bank, and therefore they seek support from consultancies. However, this leads to a disconnect between the advice that a company receives and the solutions that they may ultimately implement with their bank. In reality, so long as a bank is able to provide the necessary expertise and inspiration, it is better to seek both advisory services and banking solutions from the same partner to ensure that project outcomes are aligned with objectives.

How can the right advisory services support treasurers’ cash flow management objectives?

While the flow of cash is an important driver within the business, so too is the flow of information. The recent focus we have seen on financial supply chain management, which takes an integrated approach to financial processes from customer collection through to supplier payment, reflects a developing awareness of the interdependency between movements of information and cash. By considering all of a company’s financial management requirements, the right processes, solutions and technology can be put in place that address challenges, maximise cash flow and enable capital structure to be enhanced.[[[PAGE]]]

What has to happen for this evolution in advisory services to take place?

This is likely to be a parallel development in banks’ ability to deliver holistic advisory services, and treasurers’ recognition of these capabilities. One challenge is that those who work cross-silo are typically seen as generalists, while those with a focus on a particular area are considered to be specialists. Both breadth and depth of knowledge and experience across financial processes contribute to an effective advisory service, and we see banks that are leading in the advisory space, such as Commerzbank, rapidly developing cross-functional teams and promoting skill sets that are general in their breadth, but specialist in their depth.

Clients have rapidly evolving needs, whether large multinationals or domestic companies moving cross-border for the first time. The banking community needs to find new ways to support these clients, looking beyond operational issues to address their more strategic objectives. Developing advisory services can be a valuable means of achieving this, whilst still ensuring that clients have access to the tools, processes and information they require to maintain an efficient financial supply chain. While some banks believe that they are already making this change, the knowledge base is often limited, and concepts such as risk management have a very specific interpretation. Cash flow management, as opposed to cash management, has the potential to deliver valuable benefits to corporate treasurers, managing risk, information and cash. Leveraging the right advisory services, which includes a wide diversity of elements of financial management, can help to maximise these opportunities and create competitive advantage.