Using the RFP Process to Enhance Your Banking Partnerships

 
by Sheetal Shah, Managing Partner, Africa Treasury Management Company

There are a few constants in the life of a corporate, one of them being the company’s bankers. A corporate’s banker is usually a corporate’s first business partner; the first lender and the keeper of their most trusted asset: their cash. Given the current challenges facing the banking industry globally, it is becoming more and more difficult for corporates to build long term relationships with its bankers. Meanwhile, banks are constantly upgrading their back end systems and processes with the latest in products and technology. What worked for a corporate a few years ago may not exist or may no longer be valid. An RFP (Request for Proposal) process allows corporates to review technology, products, services, efficiencies and savings periodically – plus, it keeps your bankers to their toes! 

 
Good treasury management practice uses RFPs as a way of giving your banking partners an opportunity to put in a proposal and price for a service or product in an ethical and professional manner. The RFP process is all about starting a formal dialogue with a pool of potential banking partners who you feel are best suited to respond to your needs. 

We find more and more corporates in Africa are choosing to work with a combination of both local and international banks for their treasury requirements to get the benefits of both. Africa is such a diverse region – be it regulatory, policies, exchange rates, people or culture, and corporates are increasingly expanding their businesses into more markets across the continent. This consolidation of banks has its benefits in this unique environment. Banks are interestingly getting more creative to provide regional solutions that are unique to the African business.

Why should treasurers issue an RFP? 

• To prepare the company for strategic long-term opportunities. RFPs will incorporate both current and future requirements of companies. Strategic planning will ensure the end solution is futuristic and incorporates all aspects of the business including technology, people, expansion plans, regulation and the role of the treasury itself.
• To achieve operational efficiencies and improve risk management
• To unlock inventory and receivables on the company balance sheet
• To be more competitive in the market
• Straight-through processing: treasurers prefer to have their transactions processed directly and quickly.
• Regulatory: government regulations across Africa are constantly changing and evolving. Keeping up with this is a challenge and you need a partner who is up to date with this. The impact of these regulations on the business is a key concern for treasurers.
• To understand new products and services in the industry which will benefit the company
• To improve liquidity management, have access to internal cash and get efficiencies in cash management.
• To reduce cost of banking services by leveraging the scale of the company
• Risk management strategies in order to select stable banks.

Increasingly, counterparty risk, compliance and corporate governance are critical to the success of an organisation. A methodical, transparent and structured RFP process will ensure the banking partner chosen will deliver the efficiencies and benefits you require. 

Step 1 – Prep

It is important to prepare the company before issuing an RFP. The RFP process is often overlooked and not given the importance it requires. This is possibly because it can be time- consuming and cumbersome given that the treasurer has many other responsibilities. It is therefore important to engage other stakeholders within the company to understand their needs and try to incorporate that into the RFP process. This way, you have internal buy-in. It is also important to keep in mind that you will need to incorporate both the current needs of the company and any future requirements. It is likely this you may not repeat this process for another three to four years after this. 

Most RFPs will require you to provide the banks with some basic information about your company, its size, corporate structure, number of markets it operates in, geographical footprint, and volumes of collections and payments.

During the preparation process, appoint a Project Lead or identify a senior Project Sponsor. This could be a member of your team internally, or an external consultant may be appointed who could run with this project for its duration. This allows for focus and frees up your staff to continue with their roles without eating into their time. The Project Lead will be responsible for identifying internal requirements, dealing with both internal and external stakeholders and issuing, awarding and implementing the RFP.

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Step 2 – Issue an RFI/ RFP

Consider issuing an RFI (Request for Information) before issuing an RFP. This will give corporates an opportunity to evaluate and shortlist the choices of banks and their capabilities before entering a formal RFP process. 

Banking is all about building relationships and this would be a good time to invite the banks for a discussion about their capabilities. Keep an open mind and be open to suggested new solutions and changes. The banks will help you refine your requirements in the RFP process. Also speak to your industry peers. What process and route did they follow? Learning from others means you will not make the same mistakes.

From here, you can select and invite a shortlist of service providers to the RFP process. 

The RFP document itself should not be too lengthy. It needs to be precise and ask for concise responses to that you can compare apples with apples. The output of this document should enable you to clearly deliver the end solution and choose the best service provider for your needs.

Step 3 – Shortlist the banks

Once you have reviewed the proposals and decided who meets the criteria you set, invite the shortlisted banks to a presentation process. This is an opportunity to clarify any additional questions. When looking for the right partner, look for: 

• Recommendations: Who is the team you will be working with? Have they done this for similar sized companies? What is the background of the people you will be dealing with? Speak to the references provided. This is a good way to reconfirm the banks capabilities
• Experience: Speak to the references about the implementation process. How did the bank arrange project timelines and updates? What were the challenges they faced?
• Relationships: What is the banks’ experience with regulators and the local market? Do they have their own network or do they tie up with a partner bank? 

 Don’t hesitate to ask for information and to clarify any additional questions. Mention any specific points about your company.

Step 4 – Award the project

Keep in mind that a successful partner bank is all about the people. A bank may have the right products, services and technology, but without the right people, getting a successful implementation right in the long term will be difficult. Meet the people you will be dealing with. Get comfortable. Focus on one or two banking partners and negotiate pricing with them. I recommend focusing pricing negotiations on items that may have a material impact on the business rather than pushing the bank on every line item. This way, they will be more inclined to accommodate you.

Step 5 – Implementation

During this stage the Project Lead will engage with the Bank Lead to enhance the Treasury Management System, the connectivity to the bank, any payment factories and cash management system for implementation. If required, additional bank accounts may also need to be opened. At this stage, it is imperative that the time frame and key deliverables for the project be agreed.  

Sheetal Shah Managing Partner, Africa Treasury Management Company Sheetal Shah is a Managing Partner at Africa Treasury Management Company specialising in treasury management in Africa. Please contact [email protected] for further information on how we can assist you in issuing and managing an RFP.