Published: April 20, 2010
Over the past two years, the financial markets have been affected by uncertainty, instability and a lack of trust. We have seen the banking crisis spill into the so-called ‘real’ economy, with organisations of all types suffering the effects of declining consumer confidence. There have been positive outcomes of the crisis, however. Firstly, we see that cash management has been elevated as a discipline which is critical to the survival of the business. Secondly, in an environment where trust and certainty has been at a premium, some banking players have emerged strongly and proven themselves as reliable business partners committed to investing in their clients’ success.
At the peak of the crisis, we saw that many banks’ attention appeared to be distracted away from their customers and focused internally. Cash management providers were often forced to prioritise issues relating to mergers, write-offs and obtaining government support, which in many cases meant that they could not always sustain a commitment to their clients. In the case of banks headquartered outside Germany, those that had received government backing were obliged to rein in their international aspirations and focus mainly on their home markets. This withdrawal of resources has had an impact on their corporate clients, inevitably resulting in treasurers rethinking and reviewing their banking relationships with regard to both credit supply and cash management services. Consequently, many of these companies have sought an alternative provider that could demonstrate the resilience, long-term commitment and ongoing investment in products, services and geographic expansion that they required.
While the economic signals seem to be improving, many corporates are still experiencing considerable difficulties. At the peak of the crisis, some industries suffered a fall in revenues of 50% and conditions are still far from ‘normal’ in pre-crisis terms, although it is becoming easier to do business. Corporate treasurers’ expectations and demands of their banking partners have changed irreversibly, however, in a variety of ways.
Treasurers increasingly recognise the importance of a reliable partner not only to supply credit but also to deliver services that facilitate the business, such as cash management and trade finance. Reversing the loss of trust that undoubtedly occurred during the crisis is a slow and cumbersome process. There is still nervousness in the market. Even commoditised services such as salary payments are now at the heart of treasury as the reputation risk is high should they not be delivered on time. Consequently, it is essential that a banking partner remains committed to delivering the highest level of efficiency, accuracy and security in its core processes to support its clients’ day-to-day requirements.
While maintaining access to liquidity has become a priority, so too has ensuring that accurate, timely information on the company’s liquidity position is available when required. Communicating with stakeholders such as business owners, shareholders, senior managers, regulators and tax authorities is a key requirement for financial managers. This necessitates a well-developed information system, which is designed to deliver accurate, complete and timely data in a format that can be integrated with internal systems and used for financial decision-making. Achieving a consolidated view of the company’s liquidity is inevitably more difficult if the company works with multiple, disbursed providers, as information has to be brought together from various locations, often in different formats, unless using a single bank communication channel such as SWIFTNet and standard XML formats. Enhancing bank communication, by working with a provider with the necessary expertise and technology solutions, rationalising cash management partners and implementing bank-independent connectivity, has become an important issue for treasurers. Many are relying on Deutsche Bank for expert advice and solutions across each of these areas to enhance the reliability and completeness of information on their cash and liquidity position.
Relationships between corporate treasurers and their banking counterparts have become more intense with regards to risk discussions of all types, not simply credit. Not all banks and markets are available to corporate treasurers, so companies need to maximise access to internal resources and accelerate their cash flow cycle. Banks with the right solutions and expertise can bring considerable value to these discussions, such as looking at ways of reducing days sales outstanding (DSO) which can bring huge benefit, and increasing the resilience of the financial supply chain with supply chain financing. [[[PAGE]]]
Looking ahead, the Payment Services Directive (PSD) and Single Euro Payments Area (SEPA) will bring considerable change to the European payments landscape, and create opportunities for treasurers to reduce risk and complexity by rationalising and simplifying bank relationships, accounts and liquidity structures. To be an effective SEPA partner, a bank needs to have aligned its processes, technology, strategy, pricing and services to the new environment and recognise the impact that SEPA will have on its own business and that of its customers.
Treasurers are tasked with managing a wide variety of risks, not simply market and credit risk, and these also need to form the basis of discussions with banking partners. For example, companies that accept high volumes of card collections need to address the issues of fraud and compliance with consumer protection requirements. These risks could not only lead to direct financial losses but also severe reputational damage. Deutsche Bank’s subsidiary, Deutsche Card Services, therefore invests in designing, implementing and maintaining robust, secure and efficient card acquiring solutions. Enriched with value-added services and seamlessly integrated in Deutsche Bank’s global cash management offering, these solutions help corporates to manage this part of their collections effectively.
Throughout the crisis and beyond, Deutsche Bank has firmly consolidated its position as the leading bank in Germany and has continued to satisfy the in-country needs of our German and international clients while investing in the regions where customers require our services. Few banks have been in a position to extend their network since the crisis, and in most cases, the opposite has applied. In contrast, Deutsche Bank has continued to expand its geographic reach, most recently opening offices in Abu Dhabi and Ukraine.
We are not simply investing in the breadth of our services, but also the depth of capability that we offer our clients. Our technology investment is not only tactical, it is also visionary, as we introduce innovative products and services that drive the banking market forward, by responding to, and anticipating, the evolving needs of our customers. For example, Deutsche Bank has not only been a pioneer in cash management solutions, but, going forward also takes an active role in emerging payment streams, e.g., mobile payments. Many countries in which our customers conduct business have a substantial unbanked population, so harnessing mobile phone technology can be a vital enabler. In mature economies too, mobile payments for utilities, parking, transport, telecoms etc. will bring significant advantages in terms of convenience and accessibility. We see potential for mobile business across many industries, and we are already engaging with a wide variety of firms (both in and outside the mobile phone universe), but particularly those with a stake in the mobile phone industry, to look at ways of delivering new solutions to customers.
The German banking market, and the wider economy, has recently experienced change and uncertainty. As economic conditions appear to recover, companies which have been focused on managing liquidity for survival are emerging fresher, more vibrant and with ambitious plans to do business better, more efficiently and cost-effectively, to position themselves for growth and success. Working with a banking partner which understands, responds to, and invests in these requirements is critical to the success of these plans. Deutsche Bank has proved itself as a reliable, innovative partner throughout the crisis and beyond, with a growing network and strong commitment to facilitating our customers’ business and enabling them to fulfil their potential.
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 […]
