Published: April 10, 2013
Historically, ‘cash management’ simply referred to the mundane but important business of ‘payments and collections. However, with the introduction of new technologies and the ever-increasing importance of treasury operations – both of which now play a vital role in improving business performance – the domain has made significant advances. As a result, cash management has moved to the centre of corporate concerns and client focus. Therefore, global banks like BNP Paribas now offer significant solution and technological capabilities.
Looking at the largest economy in Europe – Germany – corporate treasurers are facing similar challenges to those faced by their peers in other parts of the continent: the need to optimise liquidity, to monitor and manage risk, and to maximise operational efficiency. Counterparty risk has become a particular issue since the global financial crisis, as companies seek to ensure that their counterparty banks have the necessary financial strength, geographical reach, product depth and commitment to long-term relationships.
As the reputation of treasurers is highly dependent on defining, implementing and executing standardised, efficient processes, as well as for establishing a global approach to both strategy and operations, they need a highly credible banking partner to support their ongoing efforts. The financial status of BNP Paribas, its ability to fulfil demands like Basel III and its deep expertise in helping clients with challenges like SEPA are crucial for long-term partnerships.
Moreover, alongside the strong commitment of the wider BNP Paribas group, BNP Paribas in Germany has a dedicated Cash Management Team with an on-the-ground presence in six business centres across Germany. The teams ensure local support, cultural synergies and domestic, as well as global, solutions for multinational and Mittelstand clients. The German presence is part of a larger European network consisting of 140 business centres spread across 23 European countries, in which access is granted to every relevant clearing system and in which BNP Paribas operates directly, without any involvement from white-label solutions.
For the Einhell group*, working with an international partner is crucial: “Operating with subsidiaries and affiliated partners around the globe and being present in almost every European country, BNP Paribas’ extensive network and range of products fits our group structure.”
Looking at the preparations being made for SEPA, it is obvious that corporates need to have a detailed plan in place to ensure compliance.
Einhell: “One of our current core challenges is to assess our SEPA readiness from a technical and organisational point of view. As a first step, we have defined the scope of our SEPA project and the tasks that will have to be carried out both at headquarters and in our local subsidiaries respectively. A rigorous approach to project management will ensure we allocate the right level of resources and budget, and that we meet the required deadlines.”
The February 2014 deadline for legacy to SEPA migration is now less than a year away. What do clients need to do to ensure they are still able to make payments and receive collections after this date?
Under SEPA, domestic credit transfer (CT) and direct debit (DD) schemes will be phased out in February 2014. Some local legacy instruments have been granted a period of grace until February 2016; however, using new SEPA and legacy instruments alongside each other will no doubt add another level of complexity to the situation.
Some corporate clients may want to streamline and optimise their payment processes across different countries covered by SEPA should they see an opportunity to do so, whereas others – especially given the tight deadline – may simply aim to comply with the regulation. It is obvious that clients will have to take a number of different approaches to SEPA migration depending on their internal organisational structure and available resources.
The following topics at the very least should be addressed within your SEPA migration project:
For Einhell, examining the ‘as-is state’ for each country provides the opportunity to review the existing infrastructure and possibly benefit from harmonising or discontinuing specific payment types which are of negligible importance.[[[PAGE]]]
The migration of the existing legacy payments infrastructure is a difficult task for both banks and corporates. Given the various touch points concerning SEPA-related topics within corporate organisation and the many interactions with external counterparties, a SEPA project requires careful risk management. Attention from the most senior management is not just important, it is essential. One need only imagine the inability to pay employees’ salaries on time due to failure to process SEPA elements like the IBAN/BIC. Similarly, just imagine the inability to match incoming payments with Accounts Receivable Records leading to unjustified reminders. All of this, at the very least, implies a risk to company reputation, not to mention the potential financial impact in addition.
Einhell: “Given the manifold interdependence between parties, close cooperation with all your external partners (i.e. bank and ERP/TMS providers) will be another important factor for a successful implementation of your SEPA project.”
Corporates with operations in several European countries can benefit from the simplification and standardisation that SEPA helps provide. In particular, the adoption of SEPA should be accompanied by a wider analysis of the opportunities linked to organisational optimisation, e.g., in treasury operations. We are, however, forced to admit that country-specific SEPA variations add additional complexity to the overall strategy and may at first make SEPA look like less of a harmonisation than originally thought. Nevertheless, we believe that good preparation and thorough execution of the migration project will enable corporates to greatly benefit from SEPA.
Note
*Company headquartered in Landau/Isar in Germany, developing and selling solutions for the handyman and tradesman for home, garden and recreational use.
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