BNP Paribas Treasury Insiders: Episode One

Treasury Insiders is a new series brought to you by Treasury Today Group and BNP Paribas. This article and its accompanying podcast investigate the impact of the pandemic on key themes such as liquidity, investment strategy and treasury structure.

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There is nothing like a crisis to focus the mind on the fundamentals. Coralie van Zyl, Head of Product Development Payments and Receivables, and Wim Grosemans, Global Head of Product Management, Payments & Receivables, Cash Management, BNP Paribas, spoke to Treasury Today amidst the backdrop of the global pandemic. With remote working testing corporate treasurers’ resolve across the world, the discussion homed in on the impact that the current environment is having on the visibility of funds, and the advantages of centralisation and virtual account management.

New normal

van Zyl is responsible for product development within cash management. She explained how, in a time of crisis, when enforced remote working is the norm, visibility of funds has rapidly risen up the agenda. “When it comes to forecasting cash flows, taking a decision on whether to execute a payment run or not, requires far greater visibility and control.”

Of course, managing within the pandemic is a challenge faced by most corporates. But van Zyl noted that BNP Paribas’ clients felt one of the biggest shocks came from simply being forced to work from home. “Everyone was dispersed, and so it’s a process of trying to ensure that everyone is equipped at home with the right tools to do their work,” she explained. “And having the family at home too involves having a really good balance, just so you can proceed with your work.”

This is where the product-set strength of a partner comes into play. Grosemans’ role is all about product evolution, ensuring solutions are aligned with industry developments. The task, he said, is focused on “trying to change clients’ lives, keeping them comfortable and making them the most effective in their roles”.

One of the vital developments BNP Paribas has been working on is its Virtual Account Management (VAM). VAM, said van Zyl, “has been one of the keys to helping clients towards centralisation and visibility”. Systems such as VAM form one of the three pillars of successful centralisation, she said, the others being ‘people’ and ‘knowledge’.

Knowledge demands investment in and development of different elements in order to be able to centralise. There is a pressing need, for example, to understand how payments in other countries work, she explained. “Centralisation is not ‘one size fits all’; you need to be able to understand the chain.”

Of equal weight is the ‘people’ pillar, with van Zyl noting that “specific profiles” of personnel are necessary to ensure operational effectiveness across the business. Achieving balance requires effort and she acknowledges that working on centralisation is indeed “a long journey, with steps that can help you to work towards your future solution”.

Taking control

As part of centralisation, the treasurer must typically aim to reduce the number of accounts held. This, said van Zyl, provides improved oversight of positions, assisting with cash visibility and control. But enhancing deeper elements of treasury through centralisation depends on what target the company has in mind.

It is, noted van Zyl, a matter of “how far the organisation wants to go with its centralisation journey”. Each company must assess this in light of its own needs. There is, she noted, a deep-thinking process around centralisation, and many elements to consider. As such, its execution requires extensive planning, and considerable time.

Although Grosemans said BNP Paribas truly believes in VAM and its power to further enhance the bank’s digitisation offer, like centralisation itself, it is not a ‘one size fits all’ product, needing to be placed “in the reality of where clients are”. Each constituent of the bank’s product suite is, he continued, “an add-on that will work symbiotically with the local realities that exist”. It is, he believes, a complement to the fact that clients operate in many different countries.

Evolving space

Despite the tumultuous experience for businesses across the world, Grosemans envisions continued digital evolution. “The crisis is forcing us to be able to function in different ways, and it’s working. Across the board, we’re seeing new extensions of the digital journeys that banks are providing their customers.”

van Zyl adds: “People will feel more confident as they accelerate towards digital and take that leap; we have all been forced to move forwards”. She sees more engagement with digital solutions, and reflection on structures and setups, as companies seek clarity on how they are organised.

However, Grosemans elaborated, the future isn’t one of dystopia, where client contact is usurped by full automation. “It’s important to keep in mind that digitalisation doesn’t mean that everything is becoming self-service and that banks are trying to move further away from clients: we want to increase proximity.”

Seeing cash

Of course, proximity includes bringing corporate cash closer. Mariya Tretyak, Head of Global Cash Pooling Products, BNP Paribas, explained how recent events have impacted corporate liquidity management.

Working on global liquidity management solutions, heading up the bank’s physical and notional cash pooling offerings, she outlined recent developments. Although centralisation, she said, can certainly help to optimise group liquidity, a full centralisation “remains not always possible from regulatory, legal, tax and accounting perspectives. Moreover, the recent crisis has reminded that companies benefitting from state aid might face some additional limitations for centralisation, such as, for example, restrictions in terms of cross-border transfers of subsidised liquidity.

With improvements in liquidity management dependent upon the level of centralisation, companies with a highly centralised treasury and a fully-integrated ERP can benefit from structures such as ‘collections on behalf of’ and ‘payments on behalf,” Tretyak explained. But, for many companies, a physical cash pooling structure remains by far the most effective way to get cash visibility across the accounts held around the world. It also provides direct access to liquidity which, she noted, is the ideal basis for a treasurer’s daily funding and investment decisions.

Multiple options

The pandemic has also impacted corporate investment decisions, Tretyak observed. With the right balance between yield and security becoming even more important at this time, increasing attention is being paid to the risk and duration of investment instruments. She is also seeing increasing adoption of automated parameter-based solutions assisting treasurers in their daily investment actions. “This is one of the co-creation initiatives that we are currently working on with our client group that we call the ‘Treasury Board’.”

For many, the past few months have seen a rise in the overall importance of effective liquidity management. “Centralisation has undeniable advantages in terms of liquidity management but it cannot always be reached,” said Tretyak. “Depending on the maturity of the organisational model and its level of centralisation, different combinations of liquidity products can be considered to optimise the visibility and the access to cash, also including notional pooling or domestic or cross-border interest optimisation solutions in more regulated countries,” she concluded.

Thanks to Coralie van Zyl, Wim Grosemans and Mariya Tretyak for their views on the challenges and opportunities that recent times are posing for corporates across the world.

Make sure you listen to the accompanying podcast to hear BNP Paribas’ deeper dive into its clients’ journey towards centralisation, better visibility and better reporting. And please stay tuned for the next instalment of our Treasury Insiders series.

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