by Helen Sanders, Editor
With market conditions changing daily, treasurers are caught in a whirlwind to ensure the business has the finance it needs, liquidity is maintained and that they have a firm handle on risk. Banks are changing the way that they assess the risk of their corporate customers, but are we doing the same with our banks? Disaster mitigation and recovery of all sorts has never been more important in treasury than today, not least to ensure that we are working with the right banks and in the event that a bank is unable to process transactions for whatever reason, our business is not unduly affected. With so many pressing concerns, should the issue of bank connectivity be put aside until the market stabilises? Definitely not – in fact, the events which have dominated the headlines over recent weeks should elevate connectivity on treasurers’ list of priorities.
By using SWIFT, treasurers have a back-up solution in the event of business interruption of any sort.
Sibos this year was well attended by corporate treasurers, including those from companies already connected to SWIFT and those considering it. The first day of Sibos coincided with the fall of Lehmans but even then, no-one quite anticipated the level of contagion which would affect the market. Consequently, although unfolding market events were discussed at the plenary sessions, the SWIFT Corporate Forum, a two-day event within Sibos, was more focused on the operational benefits of SWIFT connectivity, including security, operational risk, efficiencies and the cost of maintaining technology. Only a few weeks on, I think that speakers would have a slightly different emphasis. Yes, these things are all important, and the panel discussions and case studies all presented a sound business case for SWIFT connectivity. Today, however, the business case is compelling not only at an operational level, but also at a strategic level. This is what I would refer to as the third movement for SWIFT connectivity. SWIFT’s first overture to corporates was a little halting and tentative with TR-CO and MA-CUGs. The second movement with the introduction of SCORE marked a crescendo but the pace of corporate take-up remained fairly andante. Sibos 2008 in Vienna was the start of the third movement. Looking ahead, I would expect to see a period of accelerating corporate take-up now that the business case has become more compelling than ever before.
Ensuring ‘Business as Usual’
I talked to Chris Furness, Managing Director – Transaction Banking at Standard Chartered who emphasises,
“During the current period of uncertainty, corporates need to have a disaster recovery plan in relation to their financial service providers. By using SWIFT, treasurers have a back-up solution in the event of business interruption of any sort. In the worst case, this could be the collapse of a financial partner; more likely, a service provider may not be in a position to process payments, in which case a company needs to be able to switch to another banking provider quickly to make payments to avoid damage to their own reputation." [[[PAGE]]]
It took a long time for many banks to accept corporates as part of the SWIFT community, fearful of the implications of corporates gaining technical independence from their banks. In theory, lack of dependence makes it easier for companies to change their banking partners but this view assumes that treasurers base their banking decisions on technology. Although connectivity is clearly a factor in working with a bank, it would seem to me that it is rarely the most important, compared with quality of products and services, financial strength and provision of credit.
SWIFT connectivity for corporates has matured such that it is now a valid option for most multinational corporates.
Today, most banks are far more supportive of SWIFT for corporates, and some are particularly active in promoting it. However, bank independence is becoming an increasingly important issue for corporates, for a variety of reasons. Corporates need to protect their own interests, one of which is to conduct ‘business as usual’ under whatever circumstances. Furthermore, in an increasingly competitive market, companies need to make it as easy as possible for their customers to deal with them. One of the outcomes of this is the need to access the right services in every region in which they do business, which enable them to manage their domestic needs as well as international objectives – payments, but probably more importantly collections. Few treasurers have managed to satisfy their domestic and international requirements globally by working with a single bank, and from the perspective of risk management and credit, it is desirable for even fewer.
Banks are increasingly realistic about their customers’ need to maintain banking flexibility, and only a handful of banks position themselves as global banks. Instead, there is increasing willingness to partner with other banks to leverage the skills of both. As Chris Furness of Standard Chartered Bank in Singapore continues,
“We work with OECD banks to support corporates’ global requirements. We recognise that treasurers want to concentrate their cash and automate the process according to treasury parameters, so we can provide our specialist skills in Asia and work with other banks to support their global needs. SWIFT is a strategic initiative for us at Standard Chartered and we work as part of the Corporate Access Group (CAG) to promote the interests of corporates working in Asia”
Defining moment
For me, Sibos this year brought the different instruments in the connectivity orchestra together – banks, corporates and service/technology providers. Due to the pivotal timing of the event, a number of bars have been skipped and the debate on corporate connectivity has moved on and accelerated. Using SWIFT as the channel for banking communications gives corporate treasurers the flexibility to work with their relationship banks (including multiple branches, which in itself often causes issues) to satisfy the needs of their business. Companies with many banking connections or even just a few need to position themselves to deal with any eventuality and make their payments, access information and conduct their financial affairs as usual. Connecting to banks through point-to-point connections makes it difficult to make, and act on decisions rapidly.
While the services available through SWIFT are still developing, SWIFT connectivity for corporates has matured such that it is now a valid option for most multinational corporates. Service bureaus and member concentrators, together with new ‘Lite’ options, available both through SWIFT and increasingly through the banks, reduce the effort required to connect. Technology vendors have proven middleware tools and payment solutions to provide automation, efficiency and control internally.
In the sections which follow, we provide précis of two of the key panel discussions which took place at Sibos. We are also pleased to present interviews with Elie Lasker of SWIFT about the new Alliance Lite offering, and Marilyn Spearing of Deutsche Bank on her thoughts on this year’s conference programme and managing cash in the new world.