Building Foundations for the Next Generation of Treasury Management

Since the financial crisis, the global banking landscape looks like a very different place. The changes to banking and banks’ very structure require an evolution of everything: from strategy to long-term structural shifts, to a turn of focus from more traditional home markets to rapidly expanding emerging regions offering unparalleled opportunities and a new playing field for growth.

The threat to financial stability and the beleaguered position of the financial sector during the fallout from the crisis has bred deep caution among corporations. Global banks must reassess their positions, particularly now that the prevalence of a ‘one-stop shop’ style of global banking has receded. Regarded as another broken model of finance, which is unfeasible in today’s world, banks need to find alternative approaches to global corporates’ treasury needs.

This impetus is derived from the ongoing effects of the financial crisis, industry change and regulation which is playing its part in remoulding the payments landscape with the implementation of the single euro payments area (SEPA) and the Payment Services Directive (PSD), to name just two European initiatives. Moreover, it is creating a ‘new order’, reinforcing the need for corporate treasurers to seek stable, global relationships to help support their current and future financial objectives.

The Rise of Treasury and the Need for Change

The events of recent years have seen the treasurer taking increasing responsibility for their company’s financial needs, risk and cost structures. Increasingly, the boards of multinational corporate and financial institutions today demand greater cash management efficiencies, better access to cash and enhanced transparency around cash flows. We know that corporate treasurers have to accomplish more with less, and this – coupled with the increasing support required from the globalisation of businesses – is driving the changing needs of the global treasurer. Just like every other business in a downturn, treasurers have been impacted by restructuring and headcount reductions and yet their new role is demanding that they are strategists, risk managers and investment managers on top of their existing remit.

You don’t have to look back very far to recall a very different approach. Only two or three years ago, the use of one single bank by treasurers to drive operating efficiency was ubiquitous.

Fast forward those two years and a re-evaluation of strategy and service offering is taking place for treasury and payment services. Once again, treasurers are reverting to focusing on three areas: cash efficiency and the cost of banking; the buying power of a single bank relationship and the operational efficiency that facilitates; and the increased emphasis on risk management.

The Global Local Partnership

At last, the recognition of disparity between what was previously offered and what is required by treasurers today is the impetus behind the evolution of transaction banking and treasury services towards an integrated banking model. Previously disparate and siloed, treasurers today seek integrated worldwide solutions to their cash and liquidity management challenges, the centralising of cash flow and the rationalising of banking relationships. To achieve this, we have seen a shift from corporates using the facilities of one global bank, back to the use of a global provider who seeks local bank providers.

Where a territory does not offer the critical mass necessary to require the local representation of a global bank, utilising local banks can represent the most convenient way for businesses to establish operations and fund them around the world.

The Right Balance

From a bank’s point of view, success is built on being able to deliver a relevant product suite in numerous geographies to your client. The approach to achieving a global footprint is hugely varied with decisions centred around whether to accomplish this through a global banking provider’s own local branches or via local banks who may have a long track record in a local market and a deep understanding and knowledge of the nuances of that particular marketplace. The capability of local players, the infrequency or lack of volume of the transactions and the uniqueness of in-country payment mechanisms all impact how companies work together to create an integrated banking model. A global banking provider can have the ability to work with local banks and to give clients the flexibility and local services that will help enable that client’s needs to be met. Success ultimately lies in building a network where global banks work with local banks and can offer their clients global knowledge but local knowhow and a physical presence.

Irrespective of how a global footprint is reached, the nexus of local banks that provide the underlying payment capabilities should be virtually invisible to the client. An increasingly stretched treasury management function does not want disjointed reporting from around the world from systems that don’t talk to one another and cannot offer them a full and immediate picture of their current funding positions.

A Seamless Client Offering

So can a global network comprising local capabilities really come together seamlessly? The effectiveness of the infrastructure may come down to the level of integration between the global provider and its local banks and the flow of information throughout the global network. Client delivery is often dependent on one concentrated structure overlaid with capabilities that span the globe. At the end of the day, most banks can process payments, but integration and delivering information back to the centralised point are greater challenges. These days, innovations in technology are helping us to realise this integrated model, notably with the use of portals that provide a snapshot of a company’s financial health in real-time.

Portals allow a client one view into their overall banking relationship as the global provider can obtain feeds of transaction information and process it. This overlay structure, comprising the inner workings of the integrated system that pulls information together from all over the world, sits between the banks used around the world and the client, offering them the experience of doing business with one institution. This affords the ability to provide the client with the capability and combined geographic reach of a global banking network. This approach needs to be built on a model of information and integration. Arguably, payments are pretty vanilla, but it is the ability to integrate that transaction into the client’s work flow, then process and deliver the information back to the treasury that is vital.

Any potential issues mitigating the lag in information-gathering from around the world, coupled with the integration that drives straight-through processing (STP) levels may depend on the operational efficiency standards that banks are striving for from their centralised systems. These may be managed by relationships with the local banks and be addressed via interfaces. Collaboration with individual banks in specific locations to deliver the required global standards or the global provider can absorb some of the potential float if the cut-off time provided globally is more aggressive than that which a local bank might provide.

Delivery of Services

The new generation of treasury functionality that corporates demand today is built on an integrated solution across payments, collections and liquidity, with visibility, transparency and robust security features. Having one interface to access global treasury services, investment, loan products, trade and FX solutions provides new efficiencies to a bank’s client base. It brings greater visibility to a corporate’s liquidity management, allows companies to monitor their multibank treasury operations more closely and affords greater flexibility around analytics so treasurers can see all their positions in one ‘snap-shot’.

New payment hubs can help to support the consistent processing of all payments. This is in contrast to the traditional fragmented payments experience, where legacy systems used to make the monitoring of transactions in one place impossible. A hub approach collapses all these payments into one place, helping companies to manage their transactions in an e-payment environment in real-time.

Enhancing Liquidity Globally

The increased focus on risk management since the financial crisis has changed the dynamics between the large global and the smaller regional bank and has turned the spotlight firmly onto credit risk. This has had an impact on the treasurer’s decision as to whether to engage multiple banking providers, often deploying different banks on a regional basis. This integrated approach comprising global providers and local banks is viewed by the treasurer as spreading risk and mitigating counterparty risk – a key concern throughout the financial crisis due to the number of defaults. However, greater risk management controls operated centrally by the global provider can help in all aspects of treasury management, from tracing erroneous or lost payments, examining the payment flow required, to putting together a cash concentration solution, whether local, regional or global that meets a client’s own payment needs, as well as any specific country regulations.

Since the financial crisis, cash is king as businesses realise it is no longer ubiquitous. Greater visibility via the utilisation of online electronic banking platforms gives treasurers a snapshot of current liquidity positions around the world, vital in today’s world where credit is both expensive and constrained. Preservation of capital and its liquidity is driving businesses today, therefore making cash mobile by collecting it from around the world, whether physical or notional concentration, and providing centralised automation of this can assist the flow of internal cash and relieve stress from a credit stand point for clients.

The automation of all positions facilitates a global view of liquidity which can not only arm the treasurer with an all important snapshot, it also helps give the global provider the flexibility to work with each client on a case by case basis and provide bespoke solutions in any geography and currency. It is crucial that the processes in place allow treasurers to both centrally manage their risk and their currency exposures worldwide and help ensure they have a single snapshot of all their global balances from all their electronic banking platforms.

This takes the onus of activity away from the treasurer, through a passive solution that gives them what they need to help enable them to make more informed decisions using sophisticated information. Just as corporate treasurers have a decision to make about which global banking providers can take responsibility for the centralised management of liquidity derived from all corners of the world but help ensure its delivery to any given location required, so clients are looking to their global provider to help them to make trusted and informed decisions about their investment portfolio.


An integrated banking model creates the backbone against which banks can gain lasting and secure client relationships, providing their clients with one global bank that can manage those multiple relationships, while integrating a comprehensive suite of financial solutions across the world. A key to client delivery lies in a centralised structure with the capability and combined geographic reach to be replicated throughout the network.

The ‘new order’ is characterised by the global marketplace, where a global bank with proven expertise and a commitment to delivery beyond cash management can provide a banking suite globally from a single bank interface. Critical to success will be the ability to leverage the investment and transaction banking businesses of these banks effectively, on a global scale and across less traditional territories, seamlessly integrating local knowledge with global expertise.

Once the solid foundation for the next generation of treasury management has been built, enhancements to the ongoing development of a corporation’s financial health can be engineered to deliver new and enhanced global transaction banking and treasury management solutions, helping move money faster, more safely and more easily anywhere in the world.

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