{ the magazine for european treasurers }to funds, achieve visibility and control over global cash...

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

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4 ISSUE TWO

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FLUID DYNAMICSBasel III favours physical cash pools over the

notional kind. But is regulation limiting versatility? Maria Papadopoulos and Jan Rottiers report



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

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6 ISSUE TWO

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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



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

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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

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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

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Many treasurers have started to dedicate resources to preparing a shorter-term cash flow forecast

Regular process: iteration is key



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

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10 ISSUE TWO

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12 ISSUE TWO

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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



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

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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



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


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



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.

FOCUS

20 ISSUE TWO

FOCUS

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.



�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.



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

Gett

y

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