Ireland Scoops Up Post-Brexit Business

The fallout from the UK vote in June 2016 to leave the European Union continues to have an impact on corporate treasurers and FIs. Post Brexit, which came into effect on December 31, 2020, Ireland is of growing interest to corporates, many of which see the country as an attractive location for notional pooling structures and shared service centres.

While liquidity management structures, such as notional pooling, were historically based in the UK “the world changed with Brexit”, says Yann Leray, Head of Cash Management, UK and Ireland, BNP Paribas. “Suddenly the choice of location to host a master account became a topical conversation – one I had never really had with corporates in the decade leading up to Brexit.”

Prior to Brexit, many international banks were headquartered in the UK for the EU passporting system. This system enables banks and FS companies authorised in any EU or European Economic Area (EEA) state to trade freely in any other with minimal additional authorisation. The passporting system is the foundation of the EU single market for financial services.

With the UK out of the EU, many FIs had to adapt their passporting arrangements. The UK was “always seen as one of the key locations for notional pooling”, notes Leray.

However, Brexit is not the only driver of a renewed corporate focus on Ireland. Leray also cites the “almost village-like” atmosphere in Dublin, where “everyone knows each other and proximity is very important”. Over the past four years, this has helped to drive a significant relocation of SSCs to Dublin, primarily among US corporate clients. “It is great to be able to be closer to our corporate clients,” enthuses Leray.

Finally, PSPs are also looking to take up electronic money institution (EMI) licences in Ireland. “All these elements have combined to create an interesting shift towards Ireland over the past few years,” says Leray.

Greg Duffy, Head of Cash Management Ireland, BNP Paribas, agrees that Brexit has transformed the nation’s cash management scene. “When I arrived  in Dublin in 2016, Ireland was a relatively small cash management market for BNP Paribas,” he says. “But that has been totally transformed – slowly at first, but it has really started to accelerate, particularly during the past two to three years.”

Business explodes – but in a good way

To meet this growth in demand, BNP Paribas is investing heavily in Dublin, especially on the product side, to provide liquidity management services. “We are scaling up in terms of operations – investing in people and in product as well,” he says. “Yes, as a bank we have always had the ability to provide liquidity services in Ireland, but where those services were located was typically elsewhere within the bank. While there are various reasons for choosing a particular location over another for the centralisation of cash, there may also be a psychological aspect of being close to your cash and corporates feel that having cash in Ireland is extremely important. That business has seen exponential growth, which is why the bank is investing in product and people.”

Like Leray, Duffy emphasises the importance of proximity in the Irish market. “Ireland is a small environment, and being close to clients really helps. The corporate treasury decision-makers are increasingly in SSCs in Ireland and it’s important to have the proximity – to have face-to-face meetings with them and for local people to undertake implementations for them.” The bank recognises that it is important to invest in talent in Dublin, which is where demand is growing, he adds.

The implementation process begins right from the request for proposal stage through to business-as-usual support, says Paul Blanks, Senior Implementation Manager, BNP Paribas. “By being involved right from the start, we are able to explain our methodology and settle some of the nerves that are associated with any transformation project,” he stresses. “The implementation team has close touch points with the sales and relationship teams as well as the support teams in-country. While an implementation always comes to a natural end, we are still there in the background, supporting local BNP Paribas teams and providing specialist knowledge to support not only our clients but also our internal colleagues.”

Blanks observes that the projects the bank works on with its corporate treasury clients via its Solution Design and Implementation (SDI) team are among the bank’s most complex cash management projects. “There is always a high level of sophistication to the projects. These are multi-country deals that involve many distinct products. For the liquidity and connectivity solutions, we function as a single point of contact on behalf of the bank for the entire process, from scoping and designing to build and through to roll-out.”

BNP Paribas’ implementation projects in Ireland are no mere “lift and shift” of existing structures with an incumbent bank. “We also look for efficiency gains, taking the opportunity to see if there’s scope for rationalisation, process improvements et cetera. We can leverage on our past experience to advise clients,” says Blanks.

Leray says some clients want to implement what they know, rather than being forward thinking about their projects. A good implementation manager, he points out, will try to push the client to be more forward looking.

Blanks agrees, noting that the implementation team must know what the bank’s capabilities are, where the market is moving and be able to deliver a solution that “isn’t just fit for purpose for the next six months”.

He continues: “At the end of the day, the client is investing significant resources to make a change and there needs to be a return on that in terms of benefits and streamlined processes. It is important to keep that in the back of our minds whenever we are designing and implementing a solution.”

Given how quickly the cash management market is evolving, Blanks emphasises it is important for the implementation team to be able to monitor the evolution of the market and ensure that the bank can enhance the products it offers. “We are there to act as an advisory point – helping our teams to deliver the best solutions for our clients,” he adds.

A number of elements go into making a good project manager, notes Blanks. One is that a client “shouldn’t be exposed to the internal mechanics of a bank”. The project manager should be a corporate treasurer’s single point of contact, no matter how many stakeholders are involved within the bank. Moreover, the individuals who work within the client’s treasury team, as well as those who work at BNP Paribas, “should enjoy the collaborative working experience during the lifecycle of the project”.

Maintain a tight rein, get the scoping right

A cash management project is not solely restricted to the client and the bank; third parties such as consultants are also typically involved. “From the implementation team’s perspective, third parties are just another stakeholder that we need to manage as part of the overall project. During the past two to three years, we have seen many more external consultants involved in these projects, but for us it is not a problem.”

Occasionally, an external consultant may leave a project before completion, making it important, says Leray, that the bank keeps a tight rein on an implementation project. “It is possible that an individual within an external consultancy might decide to move on. Also, external consultancy is a significant cost item, as most clients are in a cost-cutting mindset. Managing external consultants is an interesting dynamic.”

Blanks notes that when collaborating with an external consultant, the implementation team makes sure it creates “a statement of work”, that all parties agree upon. “It may sound obvious, but it is important because our clients will have independent discussions with their external consultants about the solution being implemented, and we may not necessarily be privy to those conversations.”

Ensuring a cash management project runs smoothly starts from the very beginning, notes Blanks. “It is surprising the number of clients that have gone through the RFP stage with a high level understanding of what they want, but when it comes to scoping and designing the solution, may not know all the different local specificities that are required.” Gathering such information can take at least a month, so Blanks advises that corporate treasurers are prepared and have that scope upfront, ensuring key stakeholders – including legal teams – are engaged from the outset.

“I would advise clients to create a ‘stakeholder map’, so they know who to go to for key information. Obviously, if a client’s organisation is decentralised, with separate operating companies, they may struggle to have a real grasp of what the business is actually doing on a day-to-day basis,” says Blanks.

The key to success, he adds, is to know the right questions to ask and more importantly, the right people to answer those questions.

He concludes: “We can assist our clients by having meetings with their local teams in the countries they operate. The important factor in any cash management project, in my view, is to get the scoping right. It is complex, but will ensure a successful project outcome that is fit for purpose.”