In recent years, the financial landscape has shifted dramatically. One result has been that the depth and breadth of banking relationships has been thrown into much sharper focus. Another has been the emphasis on driving efficiencies within the business.
When the financial crisis hit in 2008, many treasurers found their common practice of keeping banks at arm’s length no longer worked given the changed market conditions. Treasurers needed insights into matters they had previously seen as less than imperative and banks realised that they had a duty to communicate more fully with their clients. Today, relationship banking is synonymous with the cost-efficiency drive, taking top place on the agenda of banks and treasurers alike.
More Efficient Relationships
From the treasurer’s perspective, what they’ve seen is that they are working harder at those relationships to make sure they have a couple of trusted banks at the end of the phone whose expertise they can readily access. There is a greater partnership approach, collaborating to collectively meet the evolving needs of the treasury function in the ‘new norm’ of economic order.
The pressure on treasurers to deliver efficiencies and to sell solutions to their key stakeholders, whether that is the board or finance committee, is huge. The most successful relationships are those where the bank’s relationship director and the treasurer present to the board together, pooling knowledge and expertise of the business environment, the sector in which they operate, the requirements of each individual business and the most appropriate financial solutions available. It simplifies the solution and it is efficient, optimising the impact it has on the business.
So how exactly can simplifying banking relationships go hand in hand with maintaining efficiency? The fundamental answer is by investing in an open, honest and candid relationship with transparency at its very foundation. There should be no surprises, because it’s those uncertainties that compromise efficiency and ultimately impact business performance.
Responding to Change
The world pre-2008 was a different place, where controlled information sharing, holding back and playing cards close to chests was often the perceived way of doing things. Now the world has shifted; it’s clear that the more open, transparent and complete the information flow, the better the quality of the relationship.
Two-way candour isn’t necessarily a phrase I would apply to a bank-customer relationship back then; but without candour it’s all one-way traffic. The ability of two people to be candid and to talk on equal terms creates the best and most productive relationships.
While gravitation back to the openness of traditional banking relationships and a drive for greater efficiency to support the bottom line have arguably been accelerated by the volatility of recent years I think, and hope, that this rediscovered partnership is here to stay.
Looking beyond the present uncertainty, the approach taken in a volatile environment should be exactly the same as that in a consistent, steady-as-you-go environment. If you foster relationships and focus on efficiency when things are going well, it absolutely stands you in good stead when they don’t. In tough times, the measure of the best relationships are where both parties are still there, fighting together and wanting to find successful solutions together.
Proactively Working Together
With cost saving and efficiency the bywords for success in business post-crisis, the days are gone when treasury functions were very much merger and acquisition (M&A) led. Now, the focus is on back office functions and wringing every element of cash out of the business. Having simple, transparent relationships between treasury and bank breeds a more proactive relationship, creating an awareness of the full range of solutions that can help the operational efficiency of a bigger corporate.
Technology is, of course, a massive driver of this efficiency, delivering greater visibility and control, as well as lowering costs. Speed and reliability of reporting, as well as transactional functionality, is now standard across borders, and available online at your fingertips.
But does this ability to access banking services more remotely and independently jeopardise the strength of the treasurer-bank relationship? Far from it. In essence, the efficiency it brings to the more basic functions removes any ambiguity from the relationship, allowing it to flourish. It should give the treasurer and the bank a more efficient use of time to discuss the broader picture.
In a sense technology can be the greatest threat to a relationship. Any bank will tell you that what harms a client relationship most is the simple things, such as when technology breaks down and functionality fails to deliver. Again, efficiency and creating that simple but strong relationship ensure that issues are communicated at an early enough stage to avoid damage.
Individuality in a Multi-bank Context
The perception that you can’t have simplicity of relationships within the multi-bank context in which many treasurers operate is a fallacy. Irrespective of whether it is a one-to-one bilateral or a multi-bank syndicate, you can’t escape the fact that individual treasurers with individual bankers still compromise the underlying relationships. Fundamentally, decisions come down to the individual level.
So what should treasurers look for in a relationship that offers them both simplicity and efficiency? Well, certainly the proactivity of contact between their team and the bank. Whether the bank takes ownership and resolves issues quickly. Most importantly, whether you feel that the bank knows your business: are the solutions they suggest and the conversations you have relevant?
I’d encapsulate the acid test by asking: “As a corporate treasurer, do you feel that you know your banker well enough to pick up the phone and ask them any question, however complex or basic?” It is that informality within what is essentially a formal relationship that actually gets the best out of it. It is about transparency, which goes hand in hand with simplicity. It is about honesty, trustworthiness and, at the very foundation, integrity.
Relationship and Efficiency: A Win-win
Where we see the biggest wins, in terms of efficiency for treasurers and mutually rewarding relationships, is when chief executive officers (CEOs) and chief financial officers (CFOs) tell us that their banking team is an extension of their own treasury team. Treasurers really shouldn’t accept anything less.
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