The request for proposal (RFP) process is all about starting a formal dialogue with a pool of potential banking partners that you feel may be best placed to respond to your needs. It takes time and consumes resources, but it can provide far better results than an unstructured approach. If the need to at least review your banking partners has been established, the process that follows must lay bare the exact set of priorities that are driving change. From the outset it must be decided which priorities are fixed and which have a degree of flexibility. In short, you must know precisely why you are doing it.

Often an RFP results in a different banking structure, processes and technology. So it is also important to secure senior-level buy-in for the change, bringing on board the different functions and entities that will be affected up and downstream, explaining why it is necessary and what the expected outcome is.

The process of bank selection may be led in-house or, if there is insufficient experience of the selection process or the project is complex, an external consultant may be called in. If opting for an internal team, it is essential to afford them sufficient time to discharge their duties. It may be worth dedicating an individual to manage the process for the duration. Doing the day job at the same time may induce an element of nervous tension that may not yield the best results.

However, the existence of job titles such as treasury project or programme manager within large corporates indicates that this is a role dedicated to change and a bank RFP would slot perfectly into this portfolio. If such an individual is not available, the best compromise is to take blocks of time out of a more traditional role. This means, however, that there should not be any one individual on the team who cannot afford to be out of the office – cover may need to be arranged for critical roles (interim treasury management has gained in popularity in recent years).

In a multinational corporation (MNC) there are typically three sets of stakeholders with overlapping requirements to consider, which makes collaboration key:

1. Treasury has a set of needs focused around bank relationship management, liquidity and, to a degree, technology.
2. The business functions have requirements around getting the money in and paying out.
3. Shared services (if deployed), as an internal service provider, will straddle both.

The needs of the IT function, as the fourth estate, should also be considered as this may be seeking to overlay a structure on all other stakeholders.

In essence, the first phase should define exactly what the business is trying to achieve, what its range of options are and how the business decides between these options. A bank selection has potential to be complex but this stage should not drag on for months.

It may take time to collate all the required information, service definitions and data, but once gathered this discovery stage should be afforded a day or two of intense discussion, involving relevant representatives from all stake-holding functions to enable agreement upon the intended direction.

Co-ordination of the project tends to fall to treasury rather than procurement or any other function simply because treasury has the financial services background and the eventual task of managing bank relationships.

Starting the selection

Once a steering document has been published, only then should the business start thinking about which financial institutions might be able to help. The golden rule is that the bank or banks chosen have to be able to meet all genuine business requirements. This is why it is so important to have a requirements document with buy-in from all stakeholders and have all the relevant information to hand; no bank should be expected to figure it out itself.

Where a company operates a decentralised model, the selection team can struggle to get all business units engaged. But if business requirements suddenly appear when it’s too late to make changes to them, then the team will have a battle on its hands. To try to counter this, it is possible to explain the intention to all although it may not be possible to talk to each and every business unit. The project team can then ask for volunteers to be involved in the review – on the understanding that if an individual business is not represented, its place at the table will be taken by a representative from a similar business that has volunteered, and that its view will only be taken at the decision-making stage on the basis that it has shown commitment from the outset.

Straight to RFP?

Once the big picture has been established and the necessary detail has been added, a long list of institutions that are apparently capable of doing what is required can be generated. It may be desirable to go straight to RFP but often it is advisable to reduce that long list. The reduction process can be formalised using a request for information (RFI) in which the fundamentals are laid out and sent to banks, which then respond with high level information confirming or otherwise their suitability.

It is also possible to approach, in an informal manner, a set of institutions that have a fairly close match to your requirements. Here you may state that there is a need to go out to tender, that you have a number of potential banking suitors, and then, putting everything up front, ask directly whether each has the capacity to deliver on your high level requirements. It is preferable to have a bank self-disqualify than find out later that it cannot meet the criteria. Some may still be tempted to provide inaccurate answers but their stock will decline as a result when their inadequacies are revealed. It may even prove to be a major issue at a later stage of assessment if the offending bank has taken the place of a genuine contender and the selection has been reduced to a final short list.

If you are seeking new ideas, or if you feel there are services or products you might not be aware of, the early stages are where it must be done. You should not limit the banks’ ability to bring good ideas to the table but the RFP stage is where you will be looking for structured evidence of their capacity to deliver; the process should not be clouded by giving the banks carte blanche to throw everything at you, as it will make assessment very difficult.

The number of banks needed on the short list is open to debate. Obviously more candidates provide greater opportunity to find the most appropriate partner; but the bigger the list, the more difficult it is to make a comparison, which may detract from the attention required to make the best decision.

Drafting the document

In terms of ground rules for drafting an RFP, the simple advice is to be frank and open but omit irrelevant information. Fear of divulging sensitive information should not prevent the revelation of key points; a non-disclosure agreement (NDA) can be put in place if necessary. Explanations of company structure and other background detail should be included only if it helps the banks understand what is needed. The requirements definition itself must be expressed in a clear and concise manner, with a logical progression between points.

Whilst pre-formatted RFPs exist and provide excellent checklists for basic capabilities, every project is different and has its own objectives and nuances that cannot be conveyed in a standard form. But it is nonetheless essential to discover how each bank proposes to handle these, going beyond overly broad objective statements which will elicit from the banks either very little or something approaching a ‘kitchen-sink’ response.

Whilst there will be a number of yes/no responses designed to clarify basic points, the key elements of your own unique needs must be translated into a clear and open document. This must ask the right questions to be able to draw out critical detail from the banks’ responses. The RFP offers banks the opportunity to express the depth of their solutions and is a way of seeing if they can do what you want them to do. Their responses also demonstrate how well they understand your needs, how far they are prepared to go to meet those needs and how they propose to offer follow-up support on a day-to-day basis. It is also vital that they demonstrate their commitment to future deliveries of their products, services and technology because these will have to match your own plans to progress if an early re-selection process is to be avoided.

A typical banking RFP may extend anywhere between 15 to 40 pages. The responses will be at a minimum 40 pages and maybe as many as 200. Give the banks time to respond, as multiple specialists may need to consider their respective responses. A window of opportunity should be opened where dialogue can take place, but remain transparent about the process: whatever responses you give should be given to all participants, thus maintaining a level playing field. To this end, ensure the rules of engagement are set in advance so that the bank’s project co-ordinator (who will handle your RFP) knows who they can and can’t talk to within your company. It is advisable to log all communication.

Analysis of returns

When you do get the responses, read them all – another good reason not to send it to too many banks. When making a comparison you are basically assessing the adequacy of service provision offered by each bank for each key area. Because many corporates, especially the largest MNCs, spread out across the world to such an extent, even the top ten biggest banks could not hope to fully support that reach. Given that there may not be a 100% fit, usually there is a trade-off which may involve taking the best aspects from two banks. The decision regarding acceptable compromises is one for the stakeholders, but this can be aided by the use of weightings – giving each response a numerical value according to its relative importance to avoid the outcome being unnecessarily swayed by something that has low value.

At this stage most project teams will want to meet the banks’ teams. The human element should not be underestimated, especially as treasurers will often have to work closely with these people. This can be the point where you ask for evidence of their proposal claims (quantifying cost savings for example).

These meetings will typically be between two to three hours and there needs to be a team-discussion afterwards. Slotting one in the morning and one in the afternoon may not be a good idea if that discussion is to be of any value. If you take the time and trouble to call them in, give them the space to expand their response, and do them the courtesy of allowing a full discussion of what they have to say.

A last look before deciding

Having seen the responses and met the shortlisted banks you should now be in a position to create an order of preference. But there are other elements that also need to be tackled. As an extension of meeting the presentation teams, it is also worth meeting their customer services representatives. If there is new technology coming in that you are not familiar with, then you should arrange for a demo, structured around your needs. Contacting references is also advisable. The expectation that these will always be unreservedly positive is not too far from the truth; however, diligent questioning will often throw up some interesting points, some of which may be to your benefit. At the very least such a meeting can give some assurance that the bank is capable of doing good work.

The decision is now yours but if an RFP has been executed well it will be one made with an appropriate level of due diligence. RFP responses may even be retained as the basis upon which the implementation of the bank solution is measured and monitored. But beyond providing the right banking solution for today, a well-prepared RFP should also go a long way towards providing the right banking partner, which is hopefully one that can be retained for many years to come.

Checklist of RFP processes for bank selection

• Before starting on a major bank selection, appoint a strong project manager. Consider a third party for the role.
• If an internal appointment, ensure they can remain objective. Consider having them dedicate blocks of time to the role for the duration. Arrange for cover for them, if needed.
• Think carefully about which functions and individual within the company should be involved in the consultation process. Document any agreements with them in advance.
• Ensure you clearly understand and have documented what your main requirements are, why you are doing this and what you expect to achieve.
• Refer to this document often.
• Be flexible regarding your plans – it may be that more than one bank is required to cover all of your needs.
• Don’t change anything in the selection plan without managing and documenting it first.
• Always establish a requirements definition.
• Undertake preliminary research (using Treasury Today resources, conferences, bank websites, discussion with peer-group and an informal discussion with banks).
• Consider issuing an RFI.
• When building an RFP always ask if it conveys precisely and clearly what it is you require.
• Ensure questions are clear, understandable and have been tested and proven as such.
• Do not ask unnecessary or unreasonable questions.
• Some questions may be approached from different angles to test consistency of response.
• Beware of simply repeating questions (most likely if the RFP is the product of multiple departments). Proper co-ordination is required to maintain professionalism at all times.
• Ask open questions where detail is necessary and closed questions where a simple yes or no is sufficient. Remember that open questions are more difficult to compare.
• Lay out the RFP clearly, in logical order and with sufficient room for a full response.
• Complex requirements should be broken down into logical, manageable sections.
• It is in your interest to provide sufficient information to enable the bank to give the fullest answer possible.
• Do not over-burden the bank with unnecessary background information.
• Weight each question according to your own values.
• Agree upon weightings before sending the RFP to banks.
• Clear your mind of any bias for or against specific banks.
• Don’t send it to too many banks: it makes analysis difficult.
• Read all responses carefully.
• Look for added-value in bank responses eg raising new but useful points.
• Learn to distinguish between fact and sales talk.
• Resist the temptation to adjust weightings to get the answer you want.
• Meet the banks, meet their customer services teams and take up any references.

Part one of this article can be found at https://treasurytoday.com/2013/03/creating-and-issuing-an-rfp