A New Way to Evaluate Cash Management Banks

The challenge with Request for Proposal (RFP) 

A Request for Proposal (RFP) process helps corporate treasuries make cash management purchasing decisions but it also takes significant time and effort, delivering few real insights on which to base a business case for change. 

RFPs are often triggered as a result of changes in a business strategy or by overdue reviews of existing arrangements. The process is used to evaluate the relative merits of different banks before setting up a complex new cash management arrangement.  

Even experienced teams can invest significant amounts of time framing their company’s pain points, procedures and strategic objectives in order to eliminate any misunderstanding or confusion while investigating the benefits of each individual bank’s proposal. 

Language used to explain treasury concepts and solutions can also differ across banks, adding another layer of complexity. 

Using DBS’ fintech-like platform Treasury Prism, treasurers can simulate different accounts, liquidity structures and arrangements proposed by a number of different banks. By analysing each bank’s offering, they can make a quantified assessment of each proposal’s costs and benefits. Treasury Prism also includes an optimise feature, which can recommend alternatives that treasurers might also like to explore without having to call for RFPs. 

Using DBS’ simulation platform, treasurers can model various structures in a range of currencies, taking into account tax and regulatory implications in Asia, Europe and the US, as well as more than 30 liquidity and transactional flow management tools, bank solutions and corporate tools. Each individual simulation creates an algorithm-generated score incorporating interest yield, debt, tax bank fees and corporate costs. 

The platform gives CFOs and corporate treasurers access to information they need in real time, together with tax and regulation updates from more than 20 markets globally. Being able to use this digital platform to compare and contrast bank offerings online to make informed decisions, helps save time, effort and manpower required by traditional RFP processes. 

Finding practical and effective solutions 

DBS launched Treasury Prism in October 2017, and it is already helping to resolve complex cash management problems experienced by a number of treasurers. 

In one case, it helped an Asian parented logistics solutions company with an international network, to find a banking partner, to manage its domestic and cross-border banking needs in Singapore, Malaysia and China. 

The company’s treasurer used DBS Treasury Prism to explore liquidity management options in Malaysia, and to access information about local tax and FX regulations, as well as using the tool to quantify the benefits that revisions to its cash management structure could potentially deliver. In order to implement this new arrangement without using DBS’ Treasury Prism, the company’s treasurer would have had to create an RFP and interested banks would then pitch their solutions to the client. Instead of having to examine numerous bank proposals, the company’s treasurer was able to find a quantitative solution using the platform’s simulator and could move forward faster and also avoid the time and expense of an RFP. 

Similarly, a treasurer of a European-headquartered company used DBS Treasury Prism to reduce its large number of bank accounts and banking relationships in order to minimise costs and increase the efficiency of its cash management operations. 

Using the platform’s self-help tools, the treasurer was able to analyse and model the potential positive and negative impacts of setting up new cash management arrangements, allowing the treasury to identify ways to streamline the company’s consolidation process to just five banks. 

Meeting key challenges 

Mark Troutman, global head of sales at DBS’ global transaction services, said, “Asia’s rapidly shifting financial services landscape, especially in digitalisation, is driving demand for transparency and advice, in cross-border and domestic banking transactions.” 

“DBS Treasury Prism provides insights about regulations and local banking requirements and helps identify possible domestic or cross-border cash management structures so treasurers can meet their unique business objectives,” said Troutman. 

He added treasury functions are increasingly at the forefront of an organisation’s need to meet compliance and international regulatory obligations. 

One of treasury’s key challenges is that remits can vary broadly, making the adoption of the latest raft of financial regulations a minefield for many non-financial corporations. This impacts areas such as foreign exchange, interest rates, commodity hedging, liquidity management and funding activities. 

This growing complexity in terms of types of transaction instruments and settlement systems, often leaves the treasury function without the necessary information, systems, processes or resources to effectively comply with regulatory requirements. 

Changing the conversation 

Corporate clients who are using Treasury Prism have described this new digital tool as a game changer. 

This was highlighted recently when DBS sought to expand an existing lending relationship into an operating cash management relationship with its client, a leading international feeder services company. 

The company already had relationships with cash management banks at global, regional and local levels, and wasn’t looking to make any changes. 

However, DBS’ Treasury Prism sparked a new level of conversation between DBS and the company’s chief financial officer, resulting in DBS becoming one of their main cash management banks for a variety of cash management solutions in Singapore, including international funds transfers and ERP connectivity. 

“DBS Treasury Prism is changing the conversations we have with corporate treasurers, making the process of reviewing bank proposals simpler and more transparent, and it is also helping to elevate the expectations of cash management solutions across the industry,” said Troutman. 

Ultimately, DBS Treasury Prism keeps treasurers ahead of the curve, helping upgrade the timeliness and quality of their guidance in boardrooms and in corporate strategy. 

(This article was first published in The Corporate Treasurer in May 2018.) 

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