Liquidity and cash management are already a $280 billion banking revenue pool globally.  One in five corporations change banks due to poor cash management optimization.  88% of treasurers indicate cash management as a key area of importance.

In liquidity management, your clients need the best.

With the crisis, many corporations posting good revenues still faced a major cash liquidity problem. Post financial crisis treasurers continue to intensify their efforts to improve the flow of liquidity across their corporate structures – as much now to mitigate counterparty risk as to earn money from money. Liquidity management has become the backbone of corporate business world. Banks are taking their best efforts to cash in on this business opportunity. 

What corporations seek from banks is not just the traditional liquidity management solution but a solution which will manage mobility of cash and also work and grow the cash in hand.  Common challenges faced by corporations are:

• Inability to know cash in hand when they have globally dispersed account structures, often cross border and/or cross currency
• Inability to mobilize cash
• Inability to control cash and control subsidiaries (in some cases, even get information from them)
• Inability to make the money work and grow 24x7 through short term investments
• Inability to forecast cash flows to take corrective actions

Although many corporations will have relatively straightforward liquidity management such as cross border, cross entity and cross currency zero, target and range balancing (for sweeping) and interest or margin allocation (for notional pooling), ways to manage liquidity are getting more complex and so the banks that prosper as principal banks will be able to offer much more flexible rules.  Priority hunting for funds based on corporation-specific rules, basing movements on multiple account balances and separate rules and source/destination accounts for sweeping excess balances versus topping up a shortfall are examples.  Similarly, with notional pooling, a flexible variety of interest and margin allocation algorithms is needed to suit corporations’ diverse needs and also allow regulatory conformance in different geographies.

Territory-specific solutions are needed for a bank with multi-country aspirations, whether in Nordics or for example in China, where Entrust loans are common.  True Follow-the-sun operation is gaining popularity.  Cash flow forecasting has become a crucial element in managing companies’ day-to-day operations and  is one of the processes corporations ask most for improvement most on . Not only should the system provide extensive cash flow forecasting capability, it should also be possible to take corrective action manually or automatically based on rules.

Liquidity empowers banks to become the principal bank of the corporation by enabling the corporation better flexibility in liquidity management than its competitors.