Author: Denise Bedell



Moderated by Denise Bedell


Liquidity and risk management, treasury efficiency, eBAM, SWIFT for corporates, and mobile treasury apps were center stage during Global Finance ’s TCM roundtable in New York in November.



From left to right: Dennis Sweeney, GE; Jeff Horowitz, BNY Mellon; Ken Deveaux, RBS

Denise Bedell, managing editor, Global Finance : To begin, let’s talk about managing liquidity. How are companies optimizing liquidity structures in the face of current market conditions?


Jeff Horowitz, head of sales & relationship management, North America, BNY Mellon Treasury Services: Companies attempting to optimize a global liquidity management structure need to look at three key elements: first, the legal framework; second, the tax structure; and third, currency and clearing systems. On the legal and tax side, the advocacy has always been to make sure there’s collaboration with partners, either internal or external. When it comes to currency and clearing, whether for a corporate or a financial institution, one should consider the liquidity investment and cash management tools available. The real focus is on transaction flows: what transaction types are being used, what the volumes are, what the information access points are and, ultimately, what you’re looking to accomplish. First and foremost, it is important to have efficient domestic structures. We recommend that you should first understand your low value payments, collections, disbursements and cash concentration/pooling, and then move to regional or multicurrency.


Dennis Sweeney, assistant treasurer, GE: Jeff hit on a number of themes that are important to us. First and foremost, you need visibility. You need to know where your cash is. You also must understand the legal and tax restrictions in the jurisdictions where you are looking to manage liquidity. Is a particular structure—such as pooling—available and what are its limitations? Then currency issues come in. Many countries restrict currency flows in and out or allow it for trade flows but not for capital flows. You have some countries that impose taxes on financial transactions or require a lending license if you want to lend to an affiliate. It gets very complicated very fast. And where it is generally most restricted is where the world is growing right now: the Asian markets and Latin America.


Ken Deveaux, head of product management Americas, RBS: There are a lot of restrictive jurisdictions where you can’t do anything about it, you just need to optimize around that particular currency in that particular country. That said, it is becoming easier in certain countries, and we can take advantage of those changes to better optimize structures. But we have to start with the assumption that there is no template. So for banks to be successful, we have to get better at understanding what the drivers are for each corporation and how we can bring the right combination of tools into play to build a company-specific solution.


DB: Are there any particular pain points that you would highlight?


JH: The primary concern today is around risk, in particular, counterparty risk. Events in Europe, for example, can be neither overlooked nor underlooked Clearly, there’s a debt crisis. There are also leadership changes. Understanding your counterparties and the sovereign risks associated with where you are doing business is crucial. And while these are macro issues, looking at what you’re doing in each country, industry and market in which you operate is going to become more and more important.


DS: There is no assumption that a bank is safe anymore. So the real challenge is, Where do you put the liquidity you have? We all have more cash on hand than we would in normal times because we’re concerned about economic conditions. Returns almost becomes a secondary consideration.


DB: How has counterparty risk analysis changed from a corporate perspective?


DS: We have a whole risk team now that is focused on counterparty risk, and they’re looking at not just CDS spreads as an indicator of performance, but they look at equity market performance, they look at negative news—a number of factors go into the equation. On a daily basis we are monitoring and setting positions not just for investments but derivatives exposure, FX exposure, cash on account and so on. So we certainly have stepped up the scrutiny of our counterparties, and we have tried as much as possible to diversify the types of investments we’re doing.


KD: This is something that all corporations are keenly focused on, so we’re trying to make sure that we provide that visibility not just on a snapshot basis but on a very flexible and recurring basis. I think that’s an area where the bar has been raised for banks to provide flexibility and visibility across the board. And it’s not just because clients are asking for it—there is certainly a strong regulatory drive as well.


Ultimately, it’s going to be a good thing for the industry, but there will be some lessons that we need to work through together.


DB: Efficiency and cost cutting are key goals for companies in current global conditions. How are companies optimizing treasury structures and moving into more shared-service environments?


JH: Shared-service centers and outsourcing have been around for a long time. We have seen peaks and valleys, and now we are moving toward a peak. We see interest in shared-service environments and outsourcing across all the areas we cover: corporations, asset managers, broker dealers, insurance companies and banks. The key issues remain the same: optimizing operating leverage, streamlining the process and focusing on core competencies. Companies must ask themselves what it is that they do best. Whether they’re an insurance company or a manufacturer or an asset manager, should they also be experts in global payments or processing low-value payments? A lot of companies and financial institutions are reviewing their core competencies to determine whether they should join up with a strategic partner to manage certain activities—and if so, who that partner should be.

"Organizations,whether they are financial institutions or corporate, should always rationalize accounts and account structures"

— Jeff Horowitz, BNY Mellon Treasury Services

DS: I think Jeff is right that we are heading towards a peak. There are also a lot more tools available with the Internet and the development of e-commerce sites where you can do electronic invoicing, manage purchase orders, payments, trade financing, and so on. All of this is coming together, and some of those sites are starting to gain scale.


DB: And interact with each other.


DS: Yes, and SWIFT for example, is supporting that interaction. They have their own trade utility, their own e-invoicing utility. So there are a lot more opportunities out there now as corporates seek to consolidate their business.


KD: Looking at the drivers that might encourage a move to shared services or outsourcing—including streamlining flows, increasing transparency, managing counterparty risk and managing FX risk—not only are all of these more important to do now, they are easier. There are standards in place for a lot of these processes. And as more standards become accepted, there’s greater convergence. There are fewer reasons for having individual specialties operating in different areas. As the whole value chain, or supply chain, becomes more integrated, that will create more opportunities for outsourcing. Things that were challenging in the past—like supplier onboarding—become more palatable, more feasible, when all these different pieces are available and integrated.


DB: Building on from that, how is the convergence of treasury and trade—and the entire supply chain—affecting the treasury function?


KD: As soon as we can accept the whole supply chain—the companies, the collection of partners that are providing goods and services, and so on—into the scope of working capital management and start considering all the flows that take place within that supply chain, then I believe that convergence has taken place.


Sometimes we get ourselves distracted and put it in technological terms—for example, querying when a cash application or system is convergent with a trade application or system. And that’s really not what it’s about from a usage perspective. When companies—hopefully with their banks as enablers—are able to look at the whole process and think about the flows of liquidity and risk management, that’s where we can get a lot of value from that whole proposition.


JH: Working capital—a term that’s been around for some time—is key here, when thinking of the convergence in treasury & trade as well as the supply chain. Working capital needs to be integrated end-to-end; it’s not about integrating a front-end application or solution. So whether it be cash management or payments, letters of credit, open account, even the supply chain itself—financing or processing—it really is an “end-to-end” process. We recently introduced what we’re calling the Working Capital Group. It isn’t a group that focuses singularly on trade or payables or receivables; we help clients, both corporate and financial institutions, focus on their entire working capital needs.


DS: This is an area where technology and tools are catching up and helping drive things forward. We are moving gradually out of paper. We’re doing more electronic payments. The movement, not only toward electronic payments but cross-border e-payments—the SEPA[single euro payments area] concept, with collections and payments handled electronically across borders—is going to make the whole playing field more efficient.


We are looking at multiple initiatives around this. We’re looking at how SEPA will allow us to reduce the number of bank accounts that we use. We’ve been in the vanguard of corporate access to SWIFT. And we are actively working with our business units to convert them from paper payments to electronic payments and collections: We’re trying to get them out of the lock-box and into ACH [automated clearing house].


DB: Are we seeing companies rationalizing their bank account structures and possibly their banking partners?


DS: There are two opposing forces, when it comes to rationalizing your bank accounts. One is the drive for efficiency, which is pushing you to rationalize through in-house banks and shared-service centers, and to use initiatives like SEPA to help reduce the number of banks and accounts you need. On the other hand, there are counterparty credit concerns that are driving you in the other direction. So what you may see is an effort by corporates to consolidate not entirely into one or two banks but into fewer, but larger, multinational banks.


JH: I believe organizations, whether they are financial institutions or corporate, should always rationalize accounts and account structures. You want to look at how you’re collecting and disbursing, concentrating and freeing up your liquidity. As you streamline these functions through technology, as Dennis has stated, and move from paper to electronic applications, you become more efficient and you can reduce the non-core bank relationships, as well as your accounts.


KD: Our customers are always looking for more efficient ways to understand what control mechanisms are in place on their accounts—for example, Who are the signatories? And in large companies with complex account structures operating in different parts of the world, that’s an ongoing process, and it may not be at the top of every company’s list, but it’s something that all companies need to spend a lot of time on. And given the regulatory environment, it’s even more critical that banks provide that clarity and visibility. Initiatives like eBAM [electronic bank account management] SWIFT’s participation, and CGI [common global implementation guides for ISO 20022 standards] are helping make that more achievable.

"We [banks] have to get better at understanding what the drivers are for each corporation and how we can bring the right combination of tools into play"

— Ken Deveaux, RBS

DB: Let’s talk about eBAM. Dennis, is this something you are evaluating?


DS: We’re looking at eBAM as the way we’re going to get productivity in three to five years. It is going to take some time to ramp up, but I think corporates are now getting on board, at least the large multinationals. And the perception is changing. When I first started talking about eBAM people said, ‘You’ll never get all the banks in the world to use eBAM, so why do it?’ Well the truth is, I don’t need all the banks to do it because I have a high concentration of accounts with my larger multinational banking partners. And if I can get them on board, a good percentage of the documentation that flows back and forth is going to be automated.


If I can do simple things like confirm that I closed a bank account or change a signer and get an acknowledgment back, ‘Yes that’s been changed,’ that’s important from a controllership perspective. So I see tremendous possibility here.


JH: I agree that it’s going to take a few years to see the ultimate benefits of eBAM. Having already completed successful eBAM pilots in collaboration with corporates, global FIs [financial institutions] and SWIFT, it’s clear to us the solution has important benefits for a wide variety of organizations. Whether you’re large or small, you want to phase out paper and automate. And that is another driver for eBAM. It takes true collaboration, not just between financial institutions but also between financial institutions and corporates and any third parties that might be involved. The eBAM initiative is in early stages, but I think the industry overall is very optimistic about where this can go.


DB: Is this something that corporates will have to drive with their banks?


JH: I think it’s both: Leading corporates such as GE will collaborate with their banking partners; and some banks will see the advantage themselves. There’s a lot of paper and opportunities for automation involved with opening and closing accounts, for example, on the bank side too.


KD: An additional aspect to this is that it is an important enabler of security. Banks have become better at walking away from strictly proprietary solutions for things like security, and the SWIFT 3SKey digital identity initiative—giving companies electronic credentials that are bank-agnostic—is important for the industry to create efficiency.


DS: The very fact that you can sign a document electronically—that someone knows what you’re authorized to do based on that digital signature—is really important for speeding up processes while ensuring there are adequate controls in place. I believe eBAM is just the first application that will use it.


DB: That leads in to the theme of bank-corporate connectivity and SWIFT initiatives. What do you see as the key initiatives that are changing the corporate treasury landscape?


KD: One of our leading priorities is to continue with the mainstreaming of corporate access to SWIFT—whether it’s through a service bureau model or SWIFT Lite. I think some of our clients initially were hesitant to mention to us that they were interested in connecting directly, that somehow they were offending us, but actually we embrace it, and we work closely to help our clients that are converting to that model. The other one to mention is the Trade Services Utility (TSU). As we look at the whole supply chain, there are many more efficiencies we can gain if more parties start using a common language, a common set of tools and a common flow. We support that as well.


DS: I think there’s still a lot of room to grow for corporates on SWIFT. SWIFT, to its credit, is doing a lot to facilitate corporate use of the network. You have things like the trade utility; you have 3SKey; you have the eBAM central utility, which I think is a great idea. A lot of the SWIFT initiatives are around making it easier for a participant to get up and running and productive quickly.


JH: We’ve already talked about eBAM and why we’re optimistic about its utility to corporates. Another initiative is the Exceptions and Investigations (E&I) solution that can help streamline the payment inquiry process. In fact, we’ve established a long-standing leadership position in the market, as we were among the first global banks to have E&I in place. E&I is one of many examples where we believe automation and innovative steps can provide a benefit in terms of straight-through processing that will be advantageous to everyone.


I also agree with Ken that SWIFT Alliance Lite is going to develop even further. There are more companies making use of Alliance Lite. All you need is a Web browser and a standard PC and you can be up and running. You can’t take advantage of all the various connectivity points and messaging types that you could if you had direct access, but it opens up SWIFT to more companies. And they’re not necessarily doing it to be bank-agnostic, they’re doing it because it’s more efficient.


DS: We’re also using FileAct for more things, not just the balance reporting that we started with or the bulk payment files, but we’re doing things like BSB [bank service billing] electronic invoices. We’re going to take e-statements via FileAct; so there is a lot more potential to take information back and forth using that particular utility.

"We’re looking at how SEPA will allow us to reduce the number of bank accounts that we use."

— Dennis Sweeney, GE

DB: Mobile treasury solutions have long been discussed but until recently had little impact. Are we getting to the point where mobile apps are of use to the treasury department?


JH: We did a thorough needs assessment prior to launching our iPhone and iPad apps for offerings such as our LiquidityDIRECT and TreasuryEDGE portals. Our research identified three areas where senior finance executives would benefit by having mobile access. One is business continuity—they can’t bring their desktop with them if they need to go into business continuity or a DR [disaster recovery] mode.


Second is transaction releasing. You typically can’t confirm a payment or a treasury transaction without having dual or triple release on that transaction. Since senior executives in particular are much more global and much more mobile than ever before, they benefit from having that release capability via mobile devices.


Third is enhanced decision-making. Being able to make decisions based on data that’s readily accessible via a real-time dashboard experience is clearly an advantage.


We’re in a fascinating time now, with a heightened sense of urgency. Keeping up with the speed of information as changes take place will be extremely important as we move forward, and mobile is really going to be a game changer.


KD: I think there’s always the risk that we try to solve for the machine rather than solving for the need. A lot of our clients have told us they need applications that are easy to use with increased visibility, increased control. So relating that to mobile apps—whether it’s an iPad or an iPhone—we are moving more of our capabilities onto those devices because we can increase visibility, we can make things easier to use.


There is an opportunity to potentially solve problems that we couldn’t before by using a tool like an iPad or iPhone. A simple example would be a card product that we rolled out recently called accessCONTROL. It’s a product that allows a small business to issue credit cards to its employees and be able to set and monitor key-card-like controls through a mobile app. Normally it wouldn’t be convenient for a small business owner to take a look at who’s paying for what all the time. But by throwing in the convenience of a mobile app, they can do it more deftly and more nimbly. So we believe that’s going to be useful for our clients.


DS: I’m a firm believer that the tablet is going to change the way we work—it’s going to be the PC of its generation. I believe the PC as we know it will disappear. You’ll just plug your tablet into a docking station and you’ll use it at your desk as well as use it in a car, train, whatever. The difference in the tablet is the battery life and the fact that you don’t have to lug around a big charger.


DB: Yet it still has a big enough screen to be useful.


DS: Right. And the amazing creativity of the apps that are coming out is going to drive its usage. For tablets and smart phones I expect to see a lot of app development where you’ll not only be authorizing a transaction via a mobile device, you’ll be checking market data, checking news, making investments, via apps. I don’t think you’ll be doing it from your desktop anymore. I don’t think you’ll have a desktop.





Head of sales & relationship management, North America, BNY Mellon Treasury Services


A 24-year veteran of global transaction services, Horowitz is responsible for sales & relationship management activities for clients in North America. Previously head of the sales and relationship management for North American financial institutions, Horowitz has served as a member of the BNY Mellon Treasury Services sales and client management leadership team for the past seven years.




Head of product management Americas, RBS


Ken Deveaux is the head of international solutions for Global Transaction Services (GTS) Americas. Based in Boston, Ken joined GTS Americas at its inception in early 2008 and oversaw product management and development for domestic treasury and cash management. He recently assumed the role of regional head of product management for the Americas. RBS is one of the world’s top five international payment businesses, with global capabilities spanning 38 countries.




Assistant treasurer, GE


Dennis Sweeney has been with GE since 1992. He and his team operate from their base in Stamford, Connecticut. Sweeney is a highly regarded innovator in the field of treasury services. He is a leading proponent of SWIFT utilities for corporates and a driving force behind the BSB standard for e-invoicing international bank service fees. Before joining GE, Sweeney spent 13 years at PepsiCo.





Managing editor, Global Finance