Published: March 01, 2013
Participants at the Cash Management University organised by BNP Paribas completed a short survey in advance of the event, with a view to exploring changing trends and behaviours in cash and treasury management. All major industries were represented, with 37% in manufacturing, and 62% of respondents represented corporations with a turnover exceeding €1bn.
Centralisation was a major priority in 2012, and perhaps because of this, there would appear to be slightly less focus on this in 2013. Use of pooling and sweeping, in order to take control of cash globally, has been a focus for over half of Barometer participants, with payments also an important priority, in order to improve efficiency and control and reduce costs. We have also seen an increased use of notional pooling in countries where physical pooling is not permitted, and to optimise cash balances in decentralised organisations where local subsidiaries manage accounts locally. Collections are typically more difficult to centralise, not least due to greater commercial sensitivity, but increasingly there are opportunities to achieve this, particularly with the move to a harmonised payments and collections landscape through SEPA.
Twenty-five per cent of participants have already achieved the right balance of risk management and financial and operational efficiency in their banking relationships. Fourteen per cent have increased the number of bank relationships over the past year, primarily to diversify their risk and facilitate geographic expansion, but only 4% intend to do so in the coming year. We have also seen some companies decentralising limited portions of their cash and treasury management activities to take advantage of local borrowing and investment conditions, and provide on-the-ground management of local cash management issues, which typically involves working with local banks. However, the broader trend, illustrated by nearly half of respondents, is to rationalise banking relationships: ‘Relationship banking’ has been discussed at length in recent years, and it now appears that this is becoming a reality.
Corporate treasurers still have large cash balances that they need to manage, not least as a result of more extensive cash pooling noted previously. Companies are also building up cash to fund M&A and future investment opportunities, and to support possible future periods of income volatility. Twenty-seven per cent of companies reduced the number of banks with which they place deposits in 2012 as they seek higher-rated counterparties, while only 8% have sought to diversify their counterparty risk. There is moderate growth in corporates’ use of money market funds (MMFs) but other instruments such as commercial paper (CP) and repurchase agreements (repos) are also becoming more popular, and a few respondents noted that they are increasingly inclined to invest in corporate debt.[[[PAGE]]]
Of the new technology that is emerging in the market, eBAM (electronic bank account management) is the initiative attracting the most interest. The use of mobile devices, particularly tablets, is changing the treasury technology space dramatically as users increasingly demand the same ease of use and fingertip access to information that they are accustomed to when performing other activities on their mobile devices. Twenty-six per cent of companies noted the importance of new payment methods, such as mobile banking. Once the challenge of SEPA migration has been overcome, it is likely that the transformational potential of new payment technology will be more widely recognised and realised.
Despite market uncertainty and sluggish economic growth in many regions, it was reassuring that corporations across all sectors continue to be dynamic and confident in pursuing their growth plans. As figure 1 illustrates, it is interesting to note that companies are expanding into a wide variety of both established and emerging regions, and not only ‘headline’ countries such as China.
Over the course of 2013, cash and liquidity management will be a priority for more than half of respondents. SEPA migration is also an important challenge to overcome, with less than a year to go before the end date for domestic credit transfer and direct debit schemes: in reality, this should probably have been a higher priority for many companies, particularly bearing in mind the rapidly approaching deadline. Working capital optimisation is the third most significant priority, covering a wide range of issues including centralisation and optimisation of payment and collection processes and supply chain finance programmes.
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