Small businesses are often the target of financial services innovators with the understanding that SMEs often struggle to obtain the resources necessary to adequately manage their cash flow on their own. But in the wake of the 2008 global financial crisis, the corporate financial management climate has changed for businesses both large and small.
New research by BNP Paribas and the Boston Consulting Group explored the challenges faced by today’s corporate treasurers at large businesses, which are now voicing their demands to their banking partners. The report, entitled “As the Dust Settles…,” explores how corporate treasury officials’ roles have changed since the 2008 crisis, and what they want from their banks to address that modified role. It’s a complicated balancing act, researchers found, of wanting more robust cash management services to fit within a global market, as well as needing greater security and risk assessment tools. And so far, the banks have not stepped up to the plate.
BNP Paribas researchers surveyed 500 corporate treasurers at businesses with an annual revenue of more than $500 million and found strong patterns woven among respondents. Two key changes have emerged within the role of the corporate treasurer since 2008, the survey found: treasury managers are taking a more global view of their business and its finances, and they are more concerned than ever about mitigating risk and boosting predictability of their business’ money.
More than 80 percent of treasurers reported centralizing their decision making processes around global treasury policies on cash management, funding and more. This globalization, researchers concluded, means treasurers are “becoming the primary owners of the transaction banking relationship” — a shift that will force banks to respond accordingly.
Part of that response must be the offering of more robust security and risk mitigation services. Managing risks effectively was cited as the top concern among corporate treasurers, greater than improved treasury process efficiency as well as improved cash visibility.
The pressure placed on a corporate treasurer today – to place their businesses’ financial position in the context of an international market, while assuring those finances are secure – inevitably means that the services demanded by treasurers of their banks are similarly evolving.
BNP Paribas researchers found several ways banks should adhere to the new role of the treasurer. Working capital financing solutions (WCF) were found to be of great interest among today’s corporate treasurers, as one-quarter of those surveyed said they plan to increase their supplier financing programs in the near future. Researchers said this trend is due to a greater difficulty among corporations with obtaining financing due to stricter capital and liquidity regulations.
But while banks should take note of this demand, they should also note that 30 percent of treasurers cited cost concerns as their top barrier to adopting WCF tools, and that there is a perception that implementing such a program will require complex, taxing IT implementation.
To address these concerns, treasurers said they want banks to offer competitive pricing, greater connectivity across a supplier network, automation, consistency in user experience, and regulatory compliance within a working capital financial solution service – all solutions to address barriers of WCF solution adoption for a global, risk-conscious company.
Similarly, treasurers expressed significant interest in Big Data and how data analytics could improve their cash flow management issues. In a global climate, treasurers said they consider data analytics a potential solution to more easily and quickly reconciling payments. They also agreed that data can help mitigate risk by providing fraud predictability and prevention.
But just as data can strengthen security within the corporate treasury, it can threaten it, too. According to researchers, many treasurers argued that they do not want to implement data services because of a lack of high-quality data as well as a concern over information disclosure and privacy.
As companies demand more from their treasurers, treasurers demand more from their banks – and will turn to other solutions providers if the banks fail to meet that demand. BNP Paribas found that about 15 percent of those surveyed either already use or will soon use a nonbank digital provider of various cash flow management services. Overall, treasurers want a more streamlined, automated way to view corporate finances, and they want services from their bank – like straight-through and automated processing and support for treasury infrastructure – to facilitate cost-cutting efforts.
The findings from BNP Paribas’ survey unveiled a complex array of demands and concerns among corporate treasurers – fitting, considering the complex role of the position today. There appears to be a balancing act in place: Treasurers are now operating in a global economy, and therefore want sophisticated tools like Big Data to manage finances.
But in the wake of the 2008 financial crisis, researchers found, treasurers are more aware than ever before of the need for mitigating risk and assuring regulatory compliance with their finances. The concern means that while banks will need to meet the demand for streamlined cash management services, data analytics, and stronger financing programs, they will need to assure that these solutions are not only compliant with the varying regulations seen across jurisdictions, they will need to guarantee the security of corporate data and provide the most robust risk mitigation tools possible.
Unfortunately, researchers found that this balance has not been met. “One finding rang out especially clearly,” the study concluded. “Corporate treasurers are not satisfied with the service they are receiving. Since 2008, experts agree that treasurers have embraced their new, more demanding role. According to researchers, it is time for banks, then, to step up and meet the demands of a more global, risk-conscious market.
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