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F O C U S{ T H E M A G A Z I N E F O R E U R O P E A N T R E A S U R E R S }
EBICS GOES GLOBAL NEW REACH
FOR PROTOCOL
NEW LAWS, SAME GAMEINVESTMENT
POLICY REVIEW
THE ABC OF RFP A GUIDE FOR
SUCCESS
NOTIONAL POOLINGTHE VALUE
OF VIRTUAL
GO WITH THE FLOW WHERE’S YOUR
CASH AT?
ISSUE TWO
IS IT 2015 ALREADY?Why treasury needs to get on a different track
2 ISSUE TWO
FOCUS
This document is for information purpose only and is directed at professional clients. It is not intended as an offer for the purchase or sale of any financial instrument, investment product or service. This material is not intended to provide, and should not be relied on for, legal, tax, accounting, regulatory or financial advice.
Recipient should seek independent legal, financial and other professional advice before investing in any product, subscribing to any service or entering into any transaction described herein. Neither BNP Paribas SA nor any of its affiliates will be responsible for the consequences of the recipient relying upon any information contained herein or for any potential error or omission. This document may not be reproduced or disclosed (in whole or in part) to any other person nor be quoted or referred to in any document without the prior written permission of BNP Paribas SA.
BNP Paribas SA is authorised by the Autorité de Contrôle Prudentiel et de Résolution and regulated by the Autorité des Marchés Financiers in France. BNP Paribas SA is incorporated in France with Limited Liability with capital 2.490.325.618,00 EUR. Registered Office: 16 Boulevard des Italiens, 75009 Paris, France. RCS Paris 662 042 449.www.bnpparibas.com. ©BNP Paribas. All rights reserved.
Focus is produced for BNP Paribas by Cedar Communications Ltd, 85 Strand, London WC2R 0DW United Kingdom. T: +44 (0)20 7550 8000, F: +44 (0)20 7550 8250W: cedarcom.co.uk ©2014 Cedar Communications Ltd
For BNP Paribas
Editor in chief Magali MoninEditors Emeline Réchaussat, Cathy Vuong
For Cedar
Consultant editor Mark JonesCreative director Stuart PurcellAccount manager Alex PearceAccount director Hannah SaundersProduction controller Teri SavilleProduction director Vanessa SalterDigital director Robin BarnesCEO Clare Broadbent
C O N T E N T S
Cover
: Corb
is
F O C U S
04POOLING RESOURCES SHOULD TREASURERS
GO PHYSICAL?
06NEW RULES, SAME GAME WHY BANKS AND CLIENTS SEE LIQUIDITY DIFFERENTLY
08GOING WITH THE FLOW
WHY FORECASTS ARE STILL CRITICAL
12EBICS GOES GLOBAL
GERMANY’S PROTOCOL FINDS A BROADER REACH
14HIGH VISIBILITY
ADP SETS THE CASH CONTROL BENCHMARK
16 BEYOND BILATERAL
HOW FRONTING IS GAINING POPULARITY
18A TO Z OF THE RFP
A TIMELY GUIDE TO A TIME-CONSUMING PROCESS
WWW.BNPPARIBAS.COM 3
SPECIAL REPORT: 2015
W E L C O M EThe financial meltdown on both sides of the Atlantic in 2008 caused
a paradigm shift. A new conservatism towards liquidity, investments
and risk management took over the corporate treasurer’s mindset.
Almost seven years later, markets and economies are stabilising, or
in some cases growing. New regulations are inundating the markets; neither
banks nor businesses are immune. In this special issue, our experts ask whether
corporate treasury practices have emerged from crisis mode and if they are
adapted to today’s environment.
With European companies sitting on approximately EUR 1 trillion in
cash, it begs the question whether liquidity concerns are overstated.
Cash should be better segmented to identify excess funds. Improving cash
flow forecasting remains critical. Similarly, cash investment policies still
reflect the conservatism of 2008 and may not take into account new
regulations and the interest rate environment.
Basel III is increasing the capital requirements of banks, impacting
popular products such as notional pooling and letters of credits. These changes
warrant a review of liquidity structures and trade financing agreements.
Speaking of reviews, the RFP has become an increasingly important –
and time-consuming – part of the treasurer’s brief as organisations seek to
leverage new trends and technologies. We look at best practice.
A lot can happen in seven years. But to many, cash and investment policies
are frozen in time. This issue brings to light a need for reflection and action as
we approach the new year. Are we finally ready to leave 2008 behind us?
Magali Monin
Head of transaction banking, Europe
FOCUS
4 ISSUE TWO
FOCUS
FLUID DYNAMICSBasel III favours physical cash pools over the
notional kind. But is regulation limiting versatility? Maria Papadopoulos and Jan Rottiers report
WWW.BNPPARIBAS.COM 5
SPECIAL REPORT: 2015
I n the pre-credit crunch days, with
external finance easier to find, liquidity
was not the main concern of CFOs and
treasurers. But as the squeeze tightened,
treasurers shifted their focus internally, to
their own books. In organisations with cash
scattered across the globe, “central visibility”
became the new norm. But how could they
leverage both debit and credit positions across
multiple entities and currencies without
investing in a major project with software
and accounting overhaul at a time of
budgeting austerity?
The virtues of virtualThe answer is notional pooling. In, say, a
multicurrency scenario, a treasury department
may need to swap the funds from a currency
with a surplus balance into the deficit currency
to cover the position and reduce the overdraft
charges. This involves FX margin, increased
administrative burden and numerous
transactions, with their associated costs.
To make it more challenging, it is not possible
to achieve a complete offset where a company
operates in non-tradable currencies or where
there is no market for the relevant currency
pairs. Such a solution would also rely on
extremely accurate forecasting, which few
companies are in a position to achieve.
That’s the value of a multicurrency notional
pool – a virtual process where no physical
transactions take place. Funds are virtually
converted into the base currency in the
evening, at which point the notional pool
balance is calculated. They are returned to
the original currency for use the next day in
order to calculate the consolidated available
group balance across multiple currencies.
In a notional solution funds are not
commingled – ideal for a decentralised
treasury. Fewer intercompany loans mean
reduced administration and accounting costs.
As a result, notional pooling emerged as the
liquidity solution of choice during the crisis.
Standalone liquidity RFPs for multicurrency
notional pooling reached an all-time high.
As companies have been increasingly
centralising their operations with payment
factories and in-house bank structures,
notional pooling complemented these efforts.
Under the third instalment of the Basel
accords, however, banks are required to
further strengthen their capital requirements.
New ratios focusing on the liquidity position
�Maria Papadopoulos is director of sales at BNP Paribas, advising multinationals on their international cash management needs.
Jan Rottiers is head of global liquidity product management at BNP Paribas.
The aims of physical and notional pooling
are similar but they work in very
different ways
of the bank – such as Liquidity Coverage Ratio
(LCR) – have been introduced. Now, banks
face restrictions in the way they net the debit
and credit positions in a notional pool.
The result: banks could be required to
allocate more capital than before in order to
cover the debit positions of the notional pool.
Users of notional pooling may be faced
with higher fees as banks pass on the costs
of increased capital requirements. Moreover,
some changes in accounting standards may
lead banks and companies to review their
contractual documentation.
With the climate looking distinctly chilly,
will companies revert to physical pooling
structures? The aims of physical and notional
pooling are similar: to enable greater access
to funds, achieve visibility and control over
global cash and increase financial efficiency,
but in practice they work in very different
ways. If you are a corporate treasury
department, you can manually transfer
cash from group accounts into one header
account. Physical cash pooling could be
achieved. The administrative effort involved
in such “physical” pooling (not to say, control
implications and room for error), means that
the work is generally outsourced to a bank.
Notional pooling is far more difficult to
achieve without a bank partner, especially
when you are dealing in multiple currencies.
We should not consign a once-loved solution
to the back of the closet so quickly. Notional
pooling has never been and will never be a
one-size-fits-all solution.
For some companies, notional pooling is
one component of a more multifaceted Corb
is
approach. Despite the potential increased
costs and administrative requirements,
it will continue to be a compelling solution
for some companies.
For example, sophisticated, geographically
far-reaching companies with a mixture of
debit and credit balances which fluctuate on a
day-to-day basis may decide to benefit from a
combination of “passive” end-of-day solutions
(cash concentration/notional pooling), coupled
with proactive intraday strategies (swaps,
hedging programs, etc) as an insurance
policy to “mop-up” and maximise any
residual positions. The notional pool balance
is calculated automatically at a point in time,
irrespective of the company’s cash flow
requirements. If funds are not required the
following day, some treasurers prefer to swap
funds for a longer duration instead of having
the funds automatically pooled.
Leveraging an opportunityBasel III encourages organisations to evaluate
the benefits and costs of their chosen liquidity
structures – a very good thing too, some
might say. As banks adapt to Basel III, so
the implications become better understood.
Treasurers and their partner banks will
need to monitor their liquidity solutions very
closely and ensure that optimal structures
are in place.
With a detailed analysis of balances and
cash flows, working with your partner
banks to model the impact of the rival
solutions, choosing the right approach for
a harsher regulatory climate may just
become a little easier. O
FOCUS
6 ISSUE TWO
FOCUS
NEW RULES, SAME GAME
T he 2008 financial crisis was a catalyst
for change in finance organisations.
As liquidity dried up and interest rates
tumbled, treasurers had to take a hard look
at their investments. They began to recognise
that cash and cash-equivalent instruments
were not all risk-free. Counterparty risk
(real or perceived) soared and led many to
cut down their fleet of investment vehicles,
introduce more stringent risk requirements
and prioritise same-day liquidity.
Understandable then: but is this
approach still necessary? Much has
changed. Companies now have more cash
available for investment than ever, yet many
still apply the same post-crisis investment
policies. Cash is still king. Even before the
financial crisis, companies had compelling
reasons to build up the cash reserves: capital
financing; capital investment; mergers and
acquisitions; paying down debt; and paying
dividends to shareholders. When the crisis
hit, a new imperative eclipsed the rest: the
FOCUS
Banks and corporates both strive for liquidity in the changed financial landscape. But they have very
different policies for getting there, says Nick Haste
need to build up surplus cash levels to
protect against future revenue and liquidity
shocks. Those threats have subsided, but
post-crisis investment policies are still
obsessed with short-term flexibility.
Behavioural changeThe market now is different. Volatility has
reduced, the Eurozone is less vulnerable and,
while counterparty risk will always be a
vital consideration, you see fewer knee-jerk
reactions. Decisions can be taken in a more
orderly fashion.
The regulatory landscape is changing,
too. This summer, the US Securities and
Exchange Commission (SEC) adopted new
Money Market Fund (MMF) reform rules,
while an EC version will be reviewed in the
next parliamentary session. This proposes
that Constant Net Asset Value (CNAV) funds
carry a 3% capital buffer against potential
run-off and panic withdrawals. The proposal
also prevents MMFs from obtaining credit
ratings from independent agencies. The
European Association of Corporate Treasurers
argues that the proposal will make CNAV
products “unviable” and users will not have
the ability to leverage ratings to manage
risk. Therefore, “real economy users of
MMFs would need substantial time to
adjust their internal policies and practices.”
Basel III is also imposing new
requirements on liquidity coverage (see
page 5). Result: longer-term cash investment
is becoming more attractive to banks than
short-term cash. This is increasingly
reflected in more attractive yields and the
development of new instruments to drive
longer-term investments by customers.
“Behaviouralised” deposits – account-based
solutions that incentivise stable, long-term
funds – are becoming more common, as
are cash accounts that offer a basic yield
plus a further incentive for stable funds
(based on minimum monthly balance
criteria, average balance thresholds or
�Playbook plans: whereas banks like the strategic approach, corporates favour a more direct route
WWW.BNPPARIBAS.COM 7
SPECIAL REPORT: 2015
minimum month or quarter-end balances).
Notice deposits are fast emerging as an
alternative to simple-term deposits. These
“evergreen” deposits have no set maturity
date. Instead, cash can be accessed with a
notice period of 31 to 35 days.
It’s as if treasurers and banks are playing
the same game but to different rules. If it
were a football match, corporates are playing
the long ball towards a direct goal of liquidity,
security or yield. The banks are playing the
passing game, constantly moving the ball
around to adapt to new and changing
regulations. There is no right way: but
understanding the other team’s tactics
certainly helps. For a treasurer, a goal is a
goal; and that is to ensure the company has
sufficient liquidity and that funds are
invested prudently and appropriately.
How attractive is that cash?Industry best practice suggests treasurers
should review cash investment policy at
least every three years. Strategic, market
and regulatory changes such as Basel III
should also prompt a review. The landscape
changes but the destination is the same:
build a sufficiently robust and flexible policy
to enable you to meet your liquidity, security
and yield objectives. Companies are now
recognising that same-day or short-term
liquidity is not required for all their cash,
particularly when that cash is not as
The banks are playing the passing game, constantly moving the ball around to adapt to new and changing regulations
�Nick Haste is the European head of the corporate deposit line for the BNP Paribas Group and a former treasurer for BNP Paribas Fortis.A
lam
y, G
ett
y
Investment policies: a blueprint
The investment policy will include information on the type, frequency of management reports, key accounting and reporting dates to avoid maturities and the escalation process in case of policy breach or market triggers. There may also need to be conditions for the selection, appointment, monitoring and benchmarking of third-party investment managers, where applicable.
LIQUIDITY
«�Minimum liquidity required for immediate access«��Monitoring process for liquidity management needs
APPROVED INSTRUMENTS
AND MARKET RISK
«�Approved instruments for operating, core and strategic cash«�Risk/return characteristics of approved instruments which may differ by cash flow tranche (e.g. tenor, maximum holding size by transaction/instrument)«�Fixed/ floating ratio«�Approval process for investment in new instruments«�Approved investment currencies and hedging of potential currency risk«�Approved use of derivatives«�Benchmarking of investment performance
APPROVED COUNTERPARTIES
«�Approved counterparties«�Characteristics of existing and future approved counterparties (e.g. credit rating, etc.)«�Monitoring process«�Limits for maximum exposure to individual or types of counterparty
attractive for their banks. Holding large
amounts of cash in short-term instruments
also makes it harder to ring-fence funds
needed for a specific purpose, such as tax or
dividend payments. It’s all about healthy
cash flow and forecasting processes, the
better to identify which portion of cash is
needed to fund working capital requirements
and which can be invested over a longer
term, so opening up a wider range of
instruments and counterparties and
attracting a higher yield.
Treasurers might segment their cash thus:
Operating. Cash required for working
capital purposes. Security and liquidity
are the most important risk priorities.
Core. Cash required for specific short-to
medium-term purposes. For example, funds
are set aside for known payments such as
tax or dividend payments in the medium
term horizon. As investment maturities
can be scheduled to the date(s) on which
this cash is required, security and yield
are more significant than liquidity.
Strategic. Cash required neither for working
capital nor funding specific liabilities.
Security is still vital, but it may be possible
to seek a higher return on this cash.
A new era of diversityWith the cash pile segmented, treasurers
seek investment policies to suit each
tranche. Revising investment policies makes
huge demands on treasury systems, but
rewards are commensurately large: a new
policy that meets the company’s risk,
reward and liquidity objectives and better
benchmarking. Improved cash flow
forecasting should follow with greater
alignment across the business and the
improved use of technology, enabling
treasurers to take a more precise and
sophisticated approach to cash investment.
Six years on from the crisis, the game
has changed. Perhaps it’s time to
re-evaluate the playbook. O
i
GO WITH THE FLOW
Why promoting a cash culture should be at the top of every
company’s to-do list
FOCUS
8 ISSUE TWO
FOCUS
T he financial crisis in 2008 forced
treasurers in the US and Europe to take
a hard look at their liquidity positions. The
tepid recovery, particularly across Europe,
has done little to alleviate concerns about the
future. Treasurers have therefore remained
– rightly – conservative when it comes to their
liquidity. Attractive investment opportunities,
due to low yields and counterparty risk
concerns, have been lacking and the recent
cut in interest rates by the ECB will do nothing
to change that in the near term. These factors
have resulted in record levels of cash reserves
being held by companies. Towards the end of
2013, UK businesses alone were sitting on
almost GBP 500 billion of cash reserves.
In this cash-rich environment, liquidity
may not be an immediate concern and cash
flow forecasting might take a back seat to
other priorities. But having a good cash flow
forecast is just as critical as before. Beyond
identifying what cash is coming in and
going out, it can help identify where the
cash is and how that cash is used.
We asked Alvarez & Marsal’s Stefaan
Vansteenkiste to explain why cash flow
forecasting should still be on the top of a
treasurer’s to-do-list and the importance
of promoting a cash flow forecasting
culture. Vansteenkiste has managed and
advised many companies on their financial
structures and strategies, including Diam,
Vion and HSA.
Many companies in Europe are sitting on large cash balances. Why is cash flow forecasting important in this environment?Cash flow forecasting is about ensuring the
right level of liquidity for your business.
Not having enough can be disastrous but
excess cash, while comforting, comes at a
cost and often lost opportunities. Surplus cash
could be deployed more efficiently into
longer-term investment vehicles, capital
expenditure projects or paying down debt.
An accurate cash flow forecast can help a
treasurer segment cash to determine what’s
really needed for operations, as against
cash available for other uses.
A cash flow forecast is more than just
predicting cash coming in and going out.
The process can help you better identify
and manage your risk by understanding
where your cash is at (i.e. foreign exchange
exposure) and who is holding that cash (i.e.
bank counterparty risk). This information can
highlight areas of potential improvement
in your cash management structure.
Finally, when cash is not a concern, there
can sometimes be a lack of discipline around
the usage and management of that cash.
If you’re not worried about cash, it’s easier
to choose not to chase a customer as hard
for payment, for example. Having a cash
flow forecast for which people are held
accountable can help manage that.
Don’t most companies already have a cash flow forecast in place?Yes. Typically, a cash flow forecast is
generated during the annual budgeting
process. That process is normally a very
robust and comprehensive exercise. The
resultant cash flow forecast provides long-
term (one to three years on a monthly or
quarterly basis) guidance for financing and
investment decisions.
However, there are some issues in relying
on just this type of cash flow forecast. First,
the forecast is not as useful in the short term
because it can miss the peaks and valleys
that can occur during a month or other
period. Second, it can get outdated quickly.
The other problem is that it’s usually based
on high-level assumptions (e.g. total sales
for a month), which makes it difficult to
determine what might be causing variances
against actual results. As a result, many
treasurers and CFOs have started to dedicate
resources to preparing a shorter-term
quarterly or 13-week cash flow forecast.
What makes this quarterly cash flow forecast different?Cash is forecast on a weekly basis for 13
weeks. This allows it to capture any near-
term weekly fluctuations in cash. And, unlike
the longer-term forecast, the quarterly
forecast is built bottom-up using a direct
approach. While company sales forecasts
are normally already built bottom-up from
the business unit or divisional level, the
focus is on sales and maybe EBIT margins.
This process goes a step further, asking
Stefaan Vansteenkiste is a managing director and country head of Alvarez & Marsal’s Benelux Restructuring practice. He has been with Alvarez & Marsal for more than ten years and brings 23 years of experience as a general and financial manager, specialising in turning around companies either as an interim executive or turnaround adviser.
Privately-held since 1983, Alvarez & Marsal is a leading global professional services firm that provides business performance improvement, turnaround management and advisory services to organisations. Follow A&M on Facebook, LinkedIn and Twitter.
Gett
y
Many treasurers have started to dedicate resources to preparing a shorter-term cash flow forecast
Regular process: iteration is key
WWW.BNPPARIBAS.COM 9
SPECIAL REPORT: 2015
Start with senior management support.
Cash flow forecasting has to be seen
as a priority from the very top.
Take the time upfront to structure the
forecast properly. Establish what the
right level of detail is based on what’s
important to your business, your ability
to forecast and the ability to capture
the actual data. Define what entities
are included, what is cash, the sources
of liquidity and how you are going to
deal with issues such as intercompany
trading balances.
Define and establish a clear process.
Set the process upfront and stick to it
– make it part of the weekly routine
and instil that cash culture.
The variance analysis and discussions
are critical. The weekly variance
(forecast versus actual) analysis
discussions with the businesses are key
to holding them accountable and
anticipating potential issues. Do not be
afraid to challenge the businesses on
their underlying assumptions,
variances and forecasts.
Be conservative: it is always preferable
to have too much liquidity, despite the
cost, than too little. Don’t expect to get
it right from the very start – it will
improve with every iteration.
How to build a 13-week cash flow forecast
i
What do you mean by “cash culture”? At many companies, cash flow forecasting
is seen as a finance or treasury spreadsheet
exercise and the businesses or divisions
don’t pay much attention to managing or
monitoring cash. “Cash culture” means
getting the whole organisation to think
about managing the company’s cash.
That culture shift happens when
businesses in the cash flow forecasting
process get involved: not only providing
the forecast but being held accountable to
explain the variances between the forecast
and what actually happened. So if cash
collections were lower than expected last
week, it would have to be explained which
customer didn’t pay and for what reason.
Is it just a one-time delay? Was the
customer given different payment terms
than normal? Is there a risk that the funds
might not come in? It is the joint process of
forecasting, discussions on variances and
reforecasting that instils the cash culture.
This mentality is important no matter
what the current liquidity situation is.
Time and resources are the biggest hurdles. Companies have downsized and the same tasks have to be performed by fewer people
What are the results for clients that have implemented a cash culture?Better visibility of their cash flow and
liquidity and a better understanding of
their cash management structure; improved
working capital management; improved
ability to assess their counterparty risk
and facilitated improved communication
internally and with their banking partners.
It may take weeks, perhaps months, of
iteration to implement the cash flow forecast.
If liquidity is not an immediate concern, now
is a good time to start the process rather
than when you have liquidity pressures. O
Going with the flow: Forecasting is about ensuring the right level of liquidity
the business lines to forecast cash flow as
well. That might mean taking that sales
forecast for a top customer and using the
actual collection terms forecasting when
that cash is meant to come in. Cash going out
should be forecast based on the actual
payment terms for that expense or vendor,
– payroll every two weeks or monthly tax
payments. The other difference is that this is
part of a regular process. Each week the
forecast is compared against actual results,
discussed with the forecasters and updated.
This sense of accountability helps create a
“cash culture” in an organisation.
What are the challenges in putting together a short-term forecast?Time and resources are the biggest hurdles
for treasurers and CFOs. Companies have
all downsized and the same tasks have to
be performed by fewer people. Setting up
the cash flow forecast process requires
time and input from multiple departments
(businesses, finance, IT, tax etc.). It also
gets more complicated with separate
business lines, multiple countries, different
currencies and multiple financial reporting
systems. Collection of the weekly data
across the different businesses is also likely
to be inconsistent. There is always a
solution, but it comes down to prioritising
the time and resources available. Gett
y
FOCUS
10 ISSUE TWO
FOCUS
FOCUS
12 ISSUE TWO
FOCUS
For around 95% of German
corporations, secure communication
with banks in Germany is facilitated by
EBICS: the Electronic Banking Internet
Communication Standard.
EBICS provides corporations with a high
level of security, signature workflow and
the ability to communicate with multiple
banks using standard formats. For
transactions with financial institutions in
Germany, EBICS is just about ideal.
But in light of the ongoing centralisation
efforts by many multinational companies,
there is one drawback. EBICS is restricted
to payments and collections from domestic
accounts only. For a great trading and
exporting nation, that is a problem.
To manage their non-domestic bank
accounts, some German companies have
adopted SWIFT, the well-established
standard for global bank connectivity,
while the majority leverage their bank’s
proprietary communication channel.
In this centralised, rationalised and
streamlined world, however, no one
wants to flip between two, let alone three,
different systems, with all the managerial
and resourcing headaches that implies.
Reaching outEBICS has some
notable benefits
outside the
national market
GERMANY’S EBICS FINDS
GLOBAL REACHKarsten Becker on how some banks are extending the domestic platform
into the international market
WWW.BNPPARIBAS.COM 13
SPECIAL REPORT: 2015
For companies with a low volume of
transactions beyond Germany’s borders,
having to manage multiple channels
is simply not cost-efficient. Switching
entirely to SWIFT might not be a
financially attractive option: EBICS is
usually the more cost-effective solution
and integrates more easily with existing
treasury systems – ERP (Enterprise
Resource Planning) and TMS (Treasury
Management System).
Not surprisingly, many corporations
in Germany made their preference clear:
to leverage their existing infrastructures
built around EBICS beyond the domestic
market.
Raising the global standardIn response to those clients’ needs, some
banks have now developed and introduced
Global EBICS, enhancing the platform from
a domestic to an international one.
This enables companies in Germany to
leverage EBICS as a single, convenient and
familiar protocol for their global cash
management activities, such as making
payments and retrieving bank statements
from non-German accounts.
The list of managerial, operational and
technological implications is quite
formidable:
«� Facilitate regional or global treasury
and/or payments centralisation;
«� Standardise processes and controls;
«� Reduce the number of bank channels
that are used globally;
«� Achieve greater process automation
by better integrating non-domestic
accounts, thus increasing straight-
through processing (STP) rates;
«� Use a global treasury management
system connected to EBICS to
enable overseas subsidiaries to
access the solution.
There can be other bank-specific
benefits too, as a global communication
protocol opens up value-added services
that previously were of limited
availability. These can include enhanced
cross-currency payments, globally
traceable payment and collections, and
enhanced reporting services for easier
reconciliation and richer account
statements.
A loud corporate cheerThe ability to leverage EBICS for global
cash management rather than simply
domestic cash management has been
received enthusiastically by customers
across a wide range of industries,
particularly mid-market companies
(the so-called Mittelstand segment).
Companies currently using – and
(doubtless) being frustrated by – multiple
channels can now rationalise and replace
them with EBICS, thereby improving
controls and reducing costs.
No one wants to flip between two, let alone three, different systems with all the managerial headaches that implies
Karsten Becker
oversees cash management products and strategies for Germany at BNP Paribas. Prior to this, he held senior product management roles in the US for Deutsche Bank and Citibank.
Gett
y
Jörg Wiemer, CEO at Treasury
Intelligence Solutions GmbH is a fan:
“Global EBICS is a great offer for German
companies. It enables companies who
operate internationally to work efficiently
from all locations and dramatically
reduces implementation costs.”
Thomas Woelk, head of corporate
treasury at Wacker Neuson SE is equally
enthusiastic. “Wacker Neuson has a
particular interest in solutions that allow
us to leverage our e-Banking platform
globally using common standards,” he
says. “In particular, we recognise the
cost savings and strategic advantages
of centralising skills, rationalising our
technology infrastructure and achieving
higher levels of straight-through
processing for both incoming and
outgoing payments.”
EBICS is now able to expand the
market-leading communication standard
in Germany into a global channel.
With the SEPA migration behind us,
and an increasing number of corporates
now likely to migrate to payment
factories, Global EBICS will be an attractive
proposition. O
Painless protocol
Companies can use
EBICS to simplify
communications
FOCUS
14 ISSUE TWO
FOCUS
HIGH VISIBILITY OUTFIT
ADP has set the benchmark in cash control. European treasurer Roland Soulier discusses financial
efficiency and control in a decentralised organisation
J ust as clients rely on business
processing solution provider ADP to
support their local payment needs in every
country in which they operate, treasury is
structured as a service provider to the
business. ADP’s treasury organisation is
highly efficient, with a focus on automated
processing and distributed responsibilities.
Roland Soulier looks at the balance
between central and local responsibility
and how he maintains visibility and
control over cash, liquidity and risk at a
regional level even when execution is
handled in local subsidiaries, and the
changes he envisages that are to come.
How is your treasury in Europe organised? Our treasury operates as an in-house bank,
with highly centralised decision-making,
policy and process definition, and reports
to the group treasury function in New
Jersey. However, transaction execution is
decentralised and takes place in each
country, so we have a treasury representative
within each subsidiary, typically the CFO
or local controller, who ensures compliance
with treasury policy and procedures.
What are the most significant challenges in your treasury?We are fortunate as a business that we
have no debt apart from facilities to support
intraday liquidity. This is a considerable
benefit in many respects, but being a
cash-rich business brings some challenges
of its own, in particular short-term cash
investment. We have a highly conservative
policy, with cash invested in short-term
instruments of up to six months. We have
a performance benchmark based on EONIA
rates but, with near 0% interest rates, it is
a considerable challenge to generate a
return on cash while maintaining our
security and liquidity objectives.
How do you manage your bank relationships?We have a bank syndicate that provides a
credit facility to back up intraday liquidity.
We then select from this group of banks for
our transaction banking business,
such as cash management. This policy is
important for both ADP and our banks,
given that we pay relatively low funding
fees. We therefore have three criteria when
choosing our cash management banks. First
is the credit rating of the bank. Historically,
ADP maintains visibility despite serving more than 125 countries
WWW.BNPPARIBAS.COM 15
SPECIAL REPORT: 2015
our policy was that a bank must have a
AA credit rating, but this is becoming
increasingly difficult. Consequently, we
can work with A-rated banks. Secondly, as
mentioned above, the bank must be part
of our credit syndicate. Thirdly, it must be
a global bank with a presence across our
footprint and a cohesive approach to
solutions, technology and services across
the countries in which we operate.
Based on these criteria, there are only a
handful of banks in each region which are
eligible for our cash management business.
We have two levels of relationship coverage
in each case: one relationship manager
from the bank’s coverage team who
coordinates with group treasury in New
Jersey, and a local relationship manager
and cash management specialist who
supports the subsidiary on a local level.
How do you maintain visibility over cash flows and balances given ADP’s decentralised treasury organisation?Although bank accounts are managed
locally, we receive daily account statements
in treasury for all accounts. These are
obtained via MT940 (end-of-day account
statements) messages through our treasury
management system and presented each
day in a report tailor-made to our needs,
including balances, flows and even cash
flow alerts. All bank relationships are
managed at a regional level and new bank
account openings need treasury approval.
How do you make sure that subsidiaries comply with treasury policies on bank account management?We issue self-audit checklists to each
subsidiary on a regular basis to monitor
new accounts and ensure that these are in
line with group policy. Every year, about
two months before our year-end close in
June, we confirm signatories on each of
these accounts and also verify this list
with our banks. When we first started
this process we found a number of
discrepancies between our signatory list
and that of our banks, but they are now
far more closely aligned.
How do you manage group liquidity given that not every entity will have surplus balances all the time?We choose to operate a notional, rather than
physical, pooling structure so that cash
remains on subsidiaries’ accounts, more
appropriate to a decentralised organisation.
Where necessary, we fund short-term
liquidity needs or acquisitions within the
group using inter-company loans.
How important is cash flow forecasting to ADP?Cash flow forecasting is typically a major
challenge for corporate treasurers but the
degree of automation, control and visibility
over cash that we have achieved at ADP
means it is far less of a challenge for us than
other businesses. Around 80% of outgoing
cash flows take place during the last week
of each month, and we have a monthly
netting process to manage intercompany
settlements. Furthermore, the need for cash
flow forecasting information is less
compelling for us than other firms given
that we do not need to fund long-term debt.
Instead, our primary objective when
forecasting cash flow is for investment
purposes. Subsidiaries have different
processes for creating cash flow forecasts,
but each one sends intramonth forecasts for
ad hoc flows above an agreed threshold, e.g.
EUR 1 million. However, in reality, our
liquidity facilities cover our liquidity
requirements so forecasting is done
primarily for financial planning purposes.
How do you see your treasury requirements evolving in the future?Looking ahead, as the volume of business
we conduct outside the US continues to
increase, risk management, specifically FX
hedging, will become more important for
us. For example, we may support a client Gett
y
in 30 countries, but we price our contracts
in one currency, such as USD. Consequently,
in this situation we would be long in USD
but short in local currencies. As non-USD
currency business continues to represent
a larger part of our business, we will
need to design and implement a more
sophisticated hedging programme. O
We have a highly conservative policy with cash invested
in short-term instruments of up
to six months
Roland Soulier
is the ADP treasurer for Europe and has been instrumental in deploying ADP’s cash management systems in the region.
About ADPWith more than USD 10 billion in
revenues and more than 65 years of
experience, ADP (NASDAQ: ADP) serves
approximately 637,000 clients in more
than 125 countries. As one of the world’s
largest providers of business outsourcing
and human capital management solutions,
ADP offers a wide range of human
resource, payroll, talent management,
tax and benefits administration solutions
from a single source, and helps clients
comply with regulatory and legislative
changes, such as the Affordable Care
Act (ACA). ADP’s easy-to-use solutions
for employers provide superior value to
companies of all types and sizes. ADP
was also until 1 October a leading provider
of integrated computing solutions to auto,
truck, motorcycle, marine, recreational
vehicle, and heavy equipment dealers
throughout the world. Visit adp.com O
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16 ISSUE TWO
FOCUS
F or many European companies, a
bilateral credit facility is the preferred
choice and standard structure for borrowers.
In the post-crisis environment, this trend
is slowly changing, especially with unfunded
bank instruments such as letters of
guarantees (LGs) or letters of credit (LCs).
As companies expand internationally,
they are engaging in larger commercial
contracts and demand for guarantee facility
amounts has increased. Yet Basel III is
curbing credit appetite among most banks.
With new incentives to diversify further
and reduce concentration risk, banks are
limiting the size of bilateral guarantee
facilities. Counterparty risks are also
impacting the behaviour of suppliers and
buyers. Beneficiaries are requesting LGs
or LCs from well-established banks, with
credit ratings of A- or higher. But the pool
of top-rated banks is dwindling, especially
among global institutions. These factors
are pushing some borrowers and banks to
seek solutions such as syndicated facilities.
Is a syndicated LG or LC facility right for you? Syndicated LG/LC facilities, with or without
a financing leg such as a revolving credit
facility, can offer valuable advantages and
options. There are multiple structures
available, including fronting, ancillary or
joint signature mechanisms, and solutions
can also be combined. Different options are
adaptable to the needs of certain industries
such as construction, engineering, defence
and machinery, either for dedicated projects
or general corporate purposes. The chart,
far right, summarises the key differences
between bilateral and syndicated facilities.
Fronting or not fronting?Among the different syndicated structures,
fronting has gained popularity. Similar to a
bilateral facility, the borrower manages
a single agreement with one or a few banks.
Bank selection is often based on rating,
expertise and network, facilitating
intragroup synergies. The fronting bank
issues LGs or LCs on behalf of the syndicate
with the implicit “counter-guarantee” from
the pool of lenders. This allows companies to
capitalise on the competitive assets of the
fronting bank, diversify risk and potentially
allocate “side business” to other banks.
Although borrowers often see this as
attractive, some banks are reluctant to take
on the fronting role. Credit and risk appetite
of banks remain low while fronting fees
have not increased to reflect the current
risk environment. The role is also complex,
activity-intensive and requires navigating
through various obstacles (management
of legal documentation, issues arising from
or related to internal systems, process or
operating capacity, compliance, roll-in of
existing LGs or LCs at the time of facility
set up, etc).
BEYOND BILATERAL Arnaud de Saint Hippolyte weighs in on bilateral and syndicated trade facilities in the post-crisis environment
Virtuous circles Finding the right bank smooths the constraints for borrowers and beneficiaries alike.
Banks
Borrowers
Beneficiaries
CHARTING THE RELATIONSHIPS
WWW.BNPPARIBAS.COM 17
SPECIAL REPORT: 2015G
ett
y
Another alternative is syndicated facilities
with an ancillary mechanism. The agent
bank manages the facility, including
documentation of the framework agreement
and reporting. LGs and/or LCs, however, are
issued separately by lenders with the
obligation falling to each lender. There are no
fronting fees, but the ancillary mechanism
imposes more administrative burdens, with
potential issues. For example, borrowers may
need to determine how to select the issuing
banks, favour pro rata utilisation and manage
participants’ voting rights. Fronting and
ancillary mechanism may also be combined
to provide extra flexibility and mitigate some
of these drawbacks, though this developing
option can be more complex to manage.
What does the market say?A BNP Paribas study of 120 public
European corporate deals closed between
January 2011 and August 2014, which
include a trade-related LG or LC tranche
above USD 50 million, shows that:
«� 58% of deals are multipurpose, combining
both funded and unfunded tranches;
«� Average facility amount is large, around
USD 645 million, of which the average
LG/LC tranche is close to USD 350 million.
Based on these findings, syndicated LG/LC
facilities are more suitable for larger deals
where the costs and effort can be justified.
Documentation
Alignment of banks on main conditions (such as covenants, collaterals)
Pricing
Bank rating
Business allocation
Handling
Cost
Stability / diversification of supply
Quality of advice
Issuance of large guarantees
BILATERAL
Various
Not ensured
More flexible
Fluctuates
Flexible
Various processes from one bank to the other
Varies depending on the number of bilateral facilities to manage; typically the higher the number, the higher the handling costs
Not completely ensured (especially if uncommitted facility)
Depends on the expertise of the issuing bank
Limited by individual banks’ credit capacity
SYNDICATED
Unique
Can be ensured (although often more restrictive )
Aligned
Can be secured through fronting banks
Can be rationalised / facilitate non-key trade banks to be associated in the unfunded trade business
(risk sharing in fronting structures)
Homogenised
Fees specific to any syndicated / committed facility (i.e. agency, fronting arrangement, commitment, external legal fees) but often lower
internal administrative costs
Ensured (can be important for listed companies for their risk management policy communication)
Can be ensured (choice of issuing / fronting banks)
More readily accessible under a fronting structure
Ultimately, the right structure will depend
on a particular borrower’s needs and
business. Multiple factors need to be taken
into account, such as volume, credit rating
of both borrower and potential participating
banks, deal size, general corporate purpose
vs project specific and costs. As you evaluate
your LC/LG needs and risk management
policy, you should consider the following:
«� Size of deal and facility purpose. Are
you a frequent/large guarantee or LC
issuer (above EUR 100m in permanent
exposure)? Do you foresee large project
bond needs in the next 12-18 months
which would not be absorbed by your
current facilities?
«� Credit. Are you concerned that banks
are less willing to extend credit or to take
fronting risk? Do they expect collateral
or security when lending to you?
«� Risk management. How do you
evaluate the risk of disruption of your
guarantee facilities within the next
three years? Do you have a backup
solution in your risk management policy?
«� Costs. Do you want to secure your
cost in advance for commercial
contracts/ projects? How do you
assess the costs, including hidden
costs such as time spent on legal
documentation or negotiation, etc.
incurred by entertaining various
bilateral lines with your banks?
An experienced trade bank with an
extensive network and capacity in your
market will help you find the right
solution. The more input you provide to
your bank partners, the better they can
support and advise you. O
©
Company needsProximity to beneficiaries
Ease of introducing new banksTransparency to costs
Bank capabilitiesHigh standards
Strong syndication expertiseSector experience
Protective and simple documentationGlobal player
Finding the right banking partner for trade facilities
Arnaud de Saint Hippolyte is head of Global Trade Solutions Structuring & Portfolio Management for Europe at BNP Paribas.
©
BILATERAL vs SYNDICATED FACILITIES
FOCUSFOCUS
THE A TO Z OF THE RFPChoosing a cash management provider is an ever more
complex and time-consuming task. Hugh Davies, Associate Director of Zanders, has a guide for a successful outcome
WWW.BNPPARIBAS.COM 19
SPECIAL REPORT: 2015
Understanding the scope – what to include in the RFP and what to leave out – only comes with a clear vision
Gett
y
T he treasurer’s role today has
significantly expanded as a
partner or consultant to the business.
However, the priority in cash
management for the last two to three
years has been ensuring compliance
with regulatory impositions such as
Single Euro Payments Area (SEPA)
and European Market Infrastructure
Regulation (EMIR). Projects focused on
delivering efficiency, which enable the
treasurer to play the more strategic role,
have been on the back burner.
With those regulatory projects now
mostly behind them, treasury teams
can turn to the bigger picture: driving
simplification and rationalisation to
improve their organisation’s systems,
processes or banking relationships.
The banking crisis of 2008 brought
bank counterparty risk sharply into
focus. With the greater scrutiny over
bank relationships, there is a strong
desire for the banking “wallet” to be
well balanced and focused on core
relationships; and for revenues earned
by banking partners from additional
services, such as cash management,
to be commensurate with credit
commitment (see Figure 1).
Many companies across multiple market
and industry segments are going through
a bank rationalisation exercise to ensure
the correct selection of the optimum cash
management provider from their core
bank group, ideally for the next five to
seven years.
Zanders Treasury and Finance
Solutions is a specialist treasury
LOW CREDIT COMMITMENT HIGH
GR
OS
S W
ALL
ET
H
IGH
REDUCEBALANCED
PARTNERS
REVIEW INCREASE
FIGURE 1 WALLET DISTRIBUTION MATRIX
Sourc
e: Z
an
der
s
The Request for Proposal (RFP) has become the standard means of running a large outsourcing project in which suppliers compete for an existing or new contract. It is often preceded by a Request For Information (RFI), commonly used to qualify candidates.
Big pictureKeep the end
destination in view
management consultancy that has
helped global and multinational clients
to achieve this through a structured
and methodical process, eliminating
much of the pain often associated with
an RFP process.
In this article, we share some of our
key observations and recommendations.
It should be easy. You issue an RFP
and the cream will rise to the top: the
best and most qualified bank will emerge
as the favourite. I wish that were
true. Sadly, there have been too many
examples of companies finding
themselves in the awkward position
of having been over-sold a solution that
the bank then struggles to deliver.
So companies are turning to a more
systematic approach to RFPs where
thorough preparation, research and
planning will help to prevent or
minimise this risk. And let’s not
underplay the risk: a prolonged,
expensive, abortive or derailed
implementation, disenchanted
stakeholders, and strained banking
relationships.
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20 ISSUE TWO
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Issuing the RFP itself is only one step
in the process. There are several critical
phases to ensure a successful outcome.
1 Understand why are you issuing the RFP. There are many triggers. It could
be dissatisfaction with current
providers. More commonly, we
see RFPs issued as a result of a
strategic shift in treasury or some form
of restructuring. M&A is a big driver: an
acquisition, a spin-off, a new legal
structure – all can result in new
entrants to the bank group that are keen
to participate in the cash management
wallet.
A spate of acquisitions may
have made the task of managing
multiple bank relationships too
burdensome and inefficient. In those
circumstances, treasurers naturally
want to centralise more activities.
Whatever the reason, the goal of the
RFP is the same: you choose the best
While pricing is significant, it should not drive the decision. You are not negotiating a single transaction, but seeking a long-term partnership
EVALUATION & ANALYSIS
BANK MEETINGS
STEP 2 «
RFP FOLLOW-UP & SCORING MODEL
Set-up draft RFP
Discuss and validate RFP in workshop session(s)
Complete and issue RFP to long-listed banks with NDA
Elapsed time from bank response time
Follow-up Q&A document on queries & responses
Set-up scoring model for RFP responses
Reference questionaire templates (visits/calls)
Apply scoring model
Discuss RFP responses and scoring in RFP evaluation workshop
Approve shortlist and communicate next steps
Organise ‘Beauty Contest’ of shortlisted banks
Debriefing sessions and scoring adjustment
Decision on chosen bank(s)
Price and legal negotiations
Recommendation workshop(s)
Executive summary and high-level implementation plan
SELECTION & NEGOTIATION
FIGURE 2 BEST-IN-CLASS RFP PROCESS Source: Zanders
STEP 1 «
STEP 3 «
STEP 4 «
STEP 5 «
banking partner(s) for a long-term
relationship to deliver the most aligned,
practical and scalable solution.
2Identify what should be in the scope.This sounds obvious, but
understanding the scope –
what to include in the RFP and
what to leave out – only comes
with a clear vision and list of objectives.
If you are a company focused on
establishing a centralised payments factory,
for example, you may leave “out of scope”
countries or affiliates that are essentially
sales markets.
Alternatively, there may be sensitive
commercial reasons for leaving receivables,
or perhaps payroll, out of scope, or
tax-related consequences for certain
business units that need to be avoided.
Indeed, there may be some markets where
the regulatory environment adds too great
a level of complexity – which could very
well put a successful outcome in jeopardy.
3Who are the other stakeholders outside treasury?In a perfect world, the treasurer
and the team own the vision,
draw up the roadmap and execute
the plan from start to finish. The
reality is rather different. There are
bound to be multiple stakeholders whose
views and requirements need to be
considered. Compliance with internal
policies will be an issue. For example:
Technology and IT. The “future
state” cash management blueprint
needs to align with the company’s
technology strategy. The enhancements
and investments required will need to
be discussed and agreed.
Compliance, tax and legal. A transformational cash management
project requires a thorough understanding
of the regulatory environment in your
various markets. The trading models, the
in-house bank or the liquidity management
and payment structures envisaged
(especially when physical sweeping to a
treasury entity or Payment-on-Behalf-of
models are anticipated) need to be shared
and reviewed with the corporate tax and
legal departments.
Bank relationships. Reciprocity and
commercial implications associated with
rationalising cash management activity to
a handful of core banks need to be reviewed.
This will often influence the longlist of
banks invited to answer the RFP.
WWW.BNPPARIBAS.COM 21
SPECIAL REPORT: 2015
�Where are we going? Drawing up a roadmap for an RFP process will speed up the task in the long run
Once completed, the new solution design
is developed, driven by a series of
workshops including the critical
stakeholders. Ask an independent expert
to facilitate the workshops so that a
thorough examination of all the options
takes place and the results are properly
documented. Then you build the business
case and the roadmap.
The business case articulates the value
of the project, estimating quantitative/
qualitative benefits and project costs.
The roadmap sets out the timelines and
resources needed across what are likely
to be multiple sub-projects.
Figure 2 sets out the various steps to
be followed for the RFP itself. The RFP
response should begin with an Executive
Summary and end with a Solution
Summary. Always include a detailed
questionnaire. Don’t rely on a generic
cash management questionnaire: it is
critical that the document be customised
to your specific requirements. This
will enable you to score responses
objectively and highlight what
differentiates respondents.
Scoring models are a regular feature
of RFP. They provide an objective basis
on which to invited shortlisted banks
to the next round. This six-sigma
methodology is often used. All the
questions are listed, by section (for
example, Connectivity, Payment Factory,
Customer Service Model, etc) alongside “risk
factors” – how you rank the question in
order of importance. A risk weighting per
section can then be generated.
Any “knockout” questions – ones that
automatically exclude a respondent if their
reply isn’t satisfactory – should also be
identified.
4Decide how you are going to approach the project. One of the most important
steps is gathering data from
the business/affiliates.
Consider circulating a detailed
questionnaire requesting information
about the banks you use, instrument
types and volumes and current payment
processes and costs. Take care to construct
the questions in a way that eliminates
misinterpretation due to cultural or
language issues. The old software industry
adage “Garbage In=Garbage Out” (GIGO)
applies.
From the input of business and treasury,
the “current situation” can be documented.
Human resources. Centralisation and
efficiency initiatives such as shared
service centres have significant
implications on resources. It is critical
to define where these activities are
performed and where they are
migrating to.
The business/affiliates. Engage
stakeholders early in the process, too.
They will have a view on how any new
structure(s) will affect the supply chain
or customer relationships – and those
views need to be heard.
When critical players aren’t consulted or
included in the core team, or if they feel
somehow disenfranchised, the entire
project might grind to a halt.Gett
y
FOCUS
22 ISSUE TWO
FOCUS
implemented with minimal risk. The
scoring model is often revisited and the
weighted ranking of the respondents
changed following these meetings.
The final Selection and Negotiation phase
will analyse the pricing offered in detail.
While pricing is, of course, a significant
consideration, it should not drive the decision.
You are not negotiating a single transaction,
but seeking a long-term partnership with the
bank. A partnership is built on mutual trust
and respect, so while undertaking an
objective RFP process, historical relationships
often do play an important role in the final
selection. Only once a bank is confirmed as a
true contender, when meetings, site visits and
reference calls have all taken place, is detailed
scrutiny of pricing worthwhile. Normally, a
handful of individual price points have a
significant bearing on the overall costs. We
recommend focusing pricing negotiations on
these points rather than on getting the lowest
price for every last item.
Finally, the timeline associated with such
an RFP project should not be underestimated.
While it will be determined by the scope of
the project, Figure 3 shows some approximate
guidelines for the time required for each
step and the commitment expected from
the project team – which comes, of course,
on top of the day job.
Why it’s worth itThe objective of any RFP should be to
ensure the selection of the right banking
partner through a fair, objective but
robustly competitive process that stands up
to rigorous scrutiny. Regulation has made
the cash management services business
more complex.
At the same time, the competition is more
concentrated among a smaller number of
players. So differentiating factors, even
between a firm’s core credit providers, can
be harder to identify.
Corporate governance, counterparty
exposure and compliance are all under the
microscope, so a methodical, structured
and objective approach is vital. Only then
can you ensure the new partner delivers
the benefits you outline in the business
case faster, more efficiently and with
reduced risk.
The banks that are not chosen also
deserve proper feedback. Bear in mind
they may become an important partner in
the future. The detailed analysis resulting
from such a structured RFP process can also
support these sometimes difficult discussions.
All sides put enormous effort into RFPs.
If that process is fair, transparent, rigorous
and objective, all parties should see it as
worth the investment in time and
resources. O
Only once a bank is confirmed as a true contender is detailed scrutiny of pricing worthwhile
Questions are scored according to the
quality, accuracy and relevance of the
response:
O� ��Requirements partially met, with a
partial solution (1 point);
O� Requirements partially met, with
a viable workaround (3 points);
O� Requirements fully met (9 points).
The result is a weighted score per bank,
per section, and an overall weighted score
per bank to identify those that go through
to the next round from those to be eliminated
at this stage. Shortlisted banks are then
invited to present their solution and
capabilities. This is often the first opportunity
for the broader teams to meet face-to-face.
It’s an important step in establishing
empathy and, for the bank, demonstrating
a deep knowledge of your business and
showcasing their expertise. The main
purpose, however, is to ensure that the
required solution is fully understood by
the bank and can be delivered and
FIGURE 3 TYPICAL RFP PROCESS TIMELINES Source: Zanders
PRE-STEPREQUIREMENT
ANALYSIS
STEPS 1+2: RFP PROCESS
STEP 3: EVALUATE RFP
STEP 4: BANK MEETINGS
STEP 5: SELECTIONS &NEGOTIATIONS
ROLLOUT
10 WEEKS 14 WEEKS
3 WEEKS
2 WEEKS
4 WEEKS 52 WEEKS
�Hugh Davies is an Associate Director at Zanders Treasury and Finance Solutions and Co-head of Zanders, London office, where he supports mainly corporate clients in the fields of treasury strategy, organisation and transformation.
WWW.BNPPARIBAS.COM 23
SPECIAL REPORT: 2015
Y ou have just come through an arduous RFP. What practical
advice would you offer?Plan to allocate the appropriate time and
resources to the project. The RFP is an
extremely valuable and worthwhile
exercise, but it does require a significant
time commitment.
Be comprehensive and structured in
your approach and take the time to
formulate the questions in the RFP to
ensure they are clear.
Clear questions will result in stronger
bank responses and provide greater value
– otherwise you may end up with generic
responses and not enough real substance.
Don’t issue an RFP without a clear
strategy in place. More importantly, don’t
hold back sharing that strategy with the
banks. The more information you
provide, the more valuable the feedback
you will receive from the banks. It
transforms the RFP process from a Q&A
to a consultancy approach.
Do you recommend engaging in an RFI (Request for Information) stage before starting the RFP?If time permits, I would highly
recommend issuing a RFI. Though my
team and I are fairly knowledgable
about the latest trends, the RFI brought
to light more details of these trends and
approaches. Also, the information gathered
in this stage contributed to fine-tuning our
objectives and scope for the RFP.
What do you see as the role of external support, such as consultants?External support does help, but don’t
assume that they will replace the
Estée Lauder’s recent European RFP proved to be a seamless exercise
Bart Taeymans joined
Estée Lauder in
2007 and heads its
International Treasury
Centre in Belgium.
The centre is part of
the Global Treasury
department, which
runs non-US cash
management and
foreign exchange
exposures.
Design is goodA successful RFP needs
attention to detail
workload of your internal teams. While
consultants will provide support on the
methodology and approach, the contents
and details will need to come from
internal staff.
How long did your full RFI and RFP process take? What was the most time-consuming area?The entire process took two years. For us,
the RFI was close to one-and-a-half years
and the RFP was seven months. Much of
the effort and time were spent on
planning and preparation and less was
actually spent in the evaluation and
selection phase. Evaluation and selection
go very quickly if you have a structured
approach.
When down to the last two banks with similar scores, what is the final decision-making factor? For Estée Lauder, the key differentiator is
the relationship. That does not necessarily
mean with the bank, but the people
within it. It’s a partnership. We need to
feel confident that our contacts will be
the champions of our cause and make
things happen. O
Founded in 1946 in
NYC, The Estée
Lauder Companies
Inc. is one of the
world’s leading
manufacturer and
marketer of quality
skincare, make-up,
fragrance and hair
care products, with
approximately USD
10.2 billion in sales.
THE RIGHT FORMULA
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