Reflections on the Conference Season

An Interview with Marilyn Spearing, Global Head for Trade Finance & Cash Management Corporates, Deutsche Bank

This year’s major conferences, Sibos, EuroFinance in Barcelona and the AFP Annual Conference have coincided with some of the most historic events in financial history. To discuss the mood, themes and outcomes of the events, Helen Sanders, Editor, was delighted to interview Marilyn Spearing, Global Head for Trade Finance and Cash Management Corporates, Deutsche Bank.

This year’s Sibos saw the introduction of Alliance Lite (discussed more fully in the interview with Elie Lasker of SWIFT in this edition of TMI) and markedly higher corporate attendance compared with 2007. What do you see as the key trends in corporate connectivity in the coming year?

We see that corporates who work with a number of banks appreciate the ability to connect with their banks through SWIFT. This is reflected in the profile of most of the corporates who connect using SWIFT today and those expressing an interest for the future. SCORE now has over 350 corporate participants (many of whom pre-date SCORE itself, moving from earlier SWIFT connectivity models such as TR-CO and MA-CUGs) but this still reflects relatively slow uptake. We see the trend for SWIFT connectivity continuing to grow amongst multi-banked corporates, particularly large multinational corporates. Other corporates too, such as large domestic players and multinational corporations with fewer banks, are looking to understand the implications of SWIFT in their environment and whether the value of a bank-independent connectivity is sufficient. In many cases, companies are migrating to a lead banking provider in each region. Therefore, with fewer banks, SWIFT connectivity is not such an immediate requirement. Instead, the potential value of SWIFT is the opportunity for greater efficiency as part of an integrated environment including an ERP and/or TMS, so SWIFT connectivity is more likely to take place as part of a wider business change than as a specific project.

Corporates are increasingly satisfied with the quality of advice on SWIFT that they are receiving from their banks, but the varying complexity and time taken to negotiate documentation remains a prickly topic. Do you see a way that this can be resolved in the future?

I see this is a broader issue than simply documentation. It is still early days in the development of SWIFT corporate connectivity, particularly migrating the SWIFT model from bank-to-bank to bank-to-corporate connectivity. In particular, the introduction of a third party, namely SWIFT, into the relationship between banks and their corporate customers represents a fundamental change. It will take time to adapt, and documentation is just one element in that process.

A definite trend is to find ways to make SWIFT connectivity more straightforward for corporates, of which Alliance Lite is one example.

What do you see as the next major developments in SWIFT connectivity for corporates?

A definite trend is to find ways to make SWIFT connectivity more straightforward for corporates, of which Alliance Lite is one example. It is too early to say at this stage whether Alliance Lite will prove attractive, as the corporates who have connected to SWIFT so far are not those to whom Alliance Lite is directed. A major priority is standardisation of financial messaging. Over the years, banks have used the SWIFT message types in a way that was appropriate to their needs. With corporates also seeking to use these messages, the way they use the information and the fields which are important to them is different. Therefore, standards will be vital in presenting information in a way that is comprehensive and reconciles the requirements for all financial players.

There are also other developments in which the Corporate Access Group is engaged, such as electronic bank account mandates, using SWIFT to facilitate setting up new accounts and changing signature authorities. This has the potential to be a very valuable tool for both corporates and their banks; SWIFT is a huge organisation, however, and it will take time to engage all the relevant parties.

What value do you think that Sibos delivers to corporate treasury professionals beyond the EFC and AFP conferences?

One of the most considerable advantages of Sibos is the richness of the dialogue between corporates and their banks, and in particular, the right people within those banks. Furthermore, while EuroFinance and the AFP conferences are very effective forums for discussing treasury-related themes, especially at a regional level, Sibos also covers the broader financial issues which affect companies of all types and in all regions of the world. These discussions are presented by some of the world’s most influential individuals from the banks, regulators and investment houses. [[[PAGE]]]

What were the key discussion topics that your clients raised during the event?

We found that the most pressing issue for corporate treasurers was to ensure the continued availability of long-term funding. Treasurers were worried about what would happen next in the financial markets and how each region would be affected. There were many discussions around liquidity, counterparty risk and where treasurers could place their cash to maintain security and liquidity.

In addition to the issues created by current economic conditions, streamlining connectivity was a topic which many treasurers were keen to discuss.

In addition to the issues created by current economic conditions, streamlining connectivity was a topic which many treasurers were keen to discuss. Many are still evaluating the impact that regional innovations such as SEPA will have on their pan-European liquidity management, but treasurers also want to see where common linkages can be formed across regions to create efficient and cost-effective liquidity structures. We brought Deutsche Bank personnel to the EuroFinance event from North America and Asia as well as Europe and we found that clients really appreciated being able to discuss a global approach to business challenges.

What do you consider to be the most important 'takeaways' from the conferences this year?

I think the message to treasurers is quite clear, namely the importance of going ‘back to basics’ in the financial management of the company. Relationships with the right banks are critical, especially the liquidity aspect of these relationships. For example, companies need to find and release ‘trapped’ cash within their operations and invest cash to ensure security and liquidity, with a minimum of counterparty risk.

To what extent do you think the current crisis is affecting corporate treasurers’ behaviour and in what ways?

We are certainly seeing substantial changes in the way that treasurers manage their company’s cash. In an environment where treasurers cannot be too careful about where they place their funds, there is an increasing interest in government debt. It is difficult to justify taking a riskier choice for the sake of a few basis points upside in yield. Security and liquidity have therefore become the watchwords and yield is far less a priority.

What cash management and working capital issues do you think corporates should be focusing on in the coming 12 months?

Many of the most important issues are those which I mentioned earlier as ‘takeaways’ from the conferences. In addition, however, I would encourage treasurers to maintain a close and regular dialogue with their key banking partners so that both sides understand the other’s situation during these volatile conditions. Overall, I would emphasise the need to focus on the basics: manage liquidity and manage risk.