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“Furthermore, the in-house bank set-up lends itself very nicely to payments-on-behalf-of (POBO) and receivables-on-behalf-of
(ROBO) structures, which can help an organisation move to the next stage of operational efficiency and risk management control,”
adds Samuel-Ogbu.
The on-behalf-of (OBO) model offers numerous benefits. On the POBO side, the liabilities of each local business unit can be
discharged out of liquidity owned centrally at the IHB (even though they remain on the balance sheet of the business unit). As a
result, treasury can better design and deploy optimal liquidity structures. Meanwhile, the ROBO structure provides a significant
incentive to improve straight through reconciliation rates, minimise errors, and provide a full audit trail from the IHB back to
each subsidiary.
Leveraging the IHB set-up, it is also possible to simplify the management of foreign currency balances and transactions through the use
of a multi-currency account. And as Samuel-Ogbu observes, “using a streamlined or single account set-up to process multi-currency
payments – in up to 100 different currencies – can dramatically reduce FX administration and the associated costs.”
Increasing control, reducing risk
Operating a centralised treasury with a streamlined payments and receivables structure also aids 360 degree cash visibility. “Right now,
clients need real-time visibility over their flows from every perspective, including at a country level,” says Murray. “Take Russia and
Ukraine, for example. Treasurers with operations there need to know they have sufficient funding in those markets to pay their local
teams and meet local supplier payments. This is where having the single view over your balances, and working with the support of a
knowledgeable banking partner that you trust, can help you to honour your obligations to your employees, and to the company from a
working capital perspective,” he explains.
Embrace digitisation
“The right technology can further improve visibility on all fronts – whether you’re trying to get money in or out of a country, or simply
want real-time balance information,” says Gada. “In this respect, banks such as Citi are developing a range of new mobile and tablet
tools which give treasurers greater transparency on their account information, together with analytics on-the-go. The resulting
‘snapshot’ enables them to take quick decisions on where cash is most important – globally – at any given moment.”
The analytics that Citi currently offers include balance information across accounts at the bank – and third-party bank accounts. The data
can also be cut by currency and by country to monitor exposures in that way. And if a trapped liquidity concern does arise, then the client
can easily act upon that data, or get in touch with their liquidity provider for support. “The true value of analytics lies in enabling treasurers
to be better informed and to work smarter,” adds Gada.
“As an example of this ‘working smarter’ theme,” says Murray, “this kind of analytical data also assists greatly with benchmarking and
achieving best practice in liquidity management. It allows clients to examine whether they might be able to invest their money more
wisely; pay down debt; reduce risks; or see if there is any liquidity that they are not capturing, for instance. In short, it provides a
catalyst for clients to think differently.”
A collaborative future
Aside from analytics, the big transaction banks are also helping clients to embrace technologies which are perhaps less ‘exciting’ but
equally fundamental to overcoming the globalisation challenge. For example, by leveraging cloud innovation and format standards
such as XML, treasurers could not only reduce their IT costs but also implement a single core technology base that should improve
transaction and information flows to and from their banks.
These flows include transparency around pricing data. “And this is where the XML comes into its own as it allows the bank to gather
data from all of its global applications and present a coherent picture to the client that says precisely what we charge them for their
transactions and what we collect from their subsidiaries,” Gada observes.
The underlying message here is that clients’ ecosystems and banks’ ecosystems no longer need be distinct. “Today, a treasury can
leverage the bank’s ecosystem to help them get their job done – whether this be analysing bank fees, or even streamlining bank
account management (BAM), through eBAM. A co-operative model, potentially with the bank embedded in the client’s ERP, has to
be the way forward in terms of efficiency and productivity,” he adds.
This collaborative approach also rings true on the advisory side, with Murray keen to work alongside corporates to help them “explore
other ways to digitise payments to suppliers, through commercial and virtual card solutions, for instance.” These might not be the
traditional payment instruments treasurers are familiar with, he says, but corporates need to consider alternative methods in order to
achieve an optimal payments and receivables set-up.
Samuel-Ogbu agrees, saying that: “Whether it be virtual accounts, multi-currency accounts, or POBO and ROBO structures, it is the
responsibility of the treasurer – in conjunction with their banking partner(s) – to implement the best tools, processes and structures to
optimise global payments and receivables.” Furthermore, as globalisation continues, geopolitical and macroeconomic uncertainties remain,
and cost pressures increase, an intelligent approach to payments and receivables will no longer be ‘nice to have’, it will be essential.
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Adam Smith Awards © August 2015