Photo of Han Hoestra, Prologis, Gaetan Okias, J.P. Morgan, Iain Currie, Prologis and Burcu Ondes, J.P. Morgan.

This One to Watch is recognised for the solution it was forced to implement when its encumbant banking provider decided to exit the transaction banking business. The company took the opportunity to rationalise its 1,700 bank accounts to two global banking partners without compromising its business as usual or KYC processes.

The challenge

Due to the complex nature of the company’s business model, treasury is responsible for 1,100 legal entities with as many as 1,700 bank accounts. Each business day, the cash management team is responsible for optimising cash balances for all bank accounts, taking into account tenant receipts, debt service, tax, utilities and vendor payments, in order to meet cash concentration objectives.

What’s more, each new property is set up as a separate company with its own bank account, which previously required frequent account opening, transactions, and closing activities.

All of Prologis’ accounts were held with a single banking provider – until the bank abruptly decided to exit transaction services as a result of regulatory and market pressures in Europe. This left treasury with a problem, needing to transition its many accounts to new banking providers as quickly and as seamlessly as possible whilst maintaining business-as-usual (BAU) processes for the organisation.

Whilst this unexpected change created significant challenges for treasury, it also presented a tremendous opportunity to re-examine the company’s banking relationships and the desired future arrangements. As Han Hoestra, Director, Cash Management, Treasury Europe & Capital Markets, Prologis recalls: “It afforded us the chance to select new banking providers who would be fully committed to the region, while also taking advantage of process improvements that would drive greater treasury efficiency.”

The solution

Following an extensive request for proposal (RFP) process, Prologis selected two banks to provide the company’s cash management services. Amongst the objectives of this search, Prologis required clear and efficient know your customer (KYC) and account opening procedures during the implementation phase and on an ongoing basis.

Most banks acknowledged, and were challenged by, the highly labour intensive processes ar;ound account opening, closing, continuous KYC functions, constant maintenance and service for the large number of accounts and entities required by the company. In the end, the two banks were selected because of their global footprint, commitment to doing business in Europe and their flexibility in meeting Prologis’ need to maintain long-established BAU processes.

The banks were also able to work with Prologis on fulfilling KYC compliance requirements, while still offering mass opening and closing of accounts in the extremely short time frame needed by the company.

Prologis was able to transition its entire account opening, maintenance and closing activities without interruption and within an extremely short timeline – which was critically important to maintain BAU processes. The provision of a single account application form to open a large number of accounts owned by multiple entities greatly simplifies the account opening process and reducing a previously cumbersome administrative task of one application per entity.

As Prologis began the process of rationalising its cash management business to new bank providers, treasury also took advantage of the opportunity to evaluate and improve its many processes to gain greater efficiencies. One such example was that due to system restrictions, treasury was sending multiple payment files each day, therefore incurring steep transmission fees. Treasury reduced the number of transmissions by streamlining the payment instruction flow to the bank, dramatically reducing costs through greatly improved process efficiency.

Best practice and innovation

Prologis used the RFP process to clearly outline its business needs and the requirements of a banking partner. Treasury worked closely with the banks to shorten the typical KYC process, reducing it from three weeks down to a single day, which was a critical requirement of the company. Given the large number of accounts opened by treasury, having an extremely timely KYC process was instrumental to smooth operations for the business.

What started out as a cautionary tale of a company that concentrated its transaction services with a single bank, resulting in a significant risk, has turned into a resounding success story.

“We utilised the RFP process to gain an in-depth understanding of our own treasury needs and limitations, allowing the organisation to rationalise our 1,700 bank accounts with two global banking providers,” concludes Hoestra.

Key benefits

• Provided the opportunity to review processes. For example, improvements to accounts payable systems streamlining the payment instruction flow to the banks, and thus reducing the number of payment files sent each day, dramatically reducing bank charges.
• Shortened KYC process from three weeks to one day.
• Documentation improved.
• Implemented in a short time frame with no negative impact on BAU.