The Importance of Bank Relationship Management
Since the Internet bubble burst and the world has become more aware of the abuses in corporate finances, there has been increased interest in accountability at the executive level for the financial operations of the company. Towards that goal, regulations (especially in the US and the EU) have been put in place to hold companies and their executives accountable for effectively and securely controlling their operations. Failure to do so not only puts the company’s finances and executives’ career at risk but can also now involve stiff penalties and jail time.
While an increasing emphasis has been placed on audits and compliance to look for abuses in financial processes and systems, the management of bank accounts has continued to lag others in tracking and maintenance. There are a multitude of reasons, including:
As a result, companies have little or no real-time visibility into a complete inventory of bank accounts or which personnel in the company have access to what functions at which accounts across which banks. Nor can they determine without a significant amount of work if the company is compliant with its own internal guidelines or if there is a breach, or attempted breach, in the operational reliability or security of their own accounts. Furthermore, because the company has little visibility over all its worldwide banking relationships across all the departments/divisions in the company, they miss an opportunity to leverage those relationships to benchmark and lower fees and streamline internal operations.
The payback for a company to take an active role in managing bank relationships can come early and often. Replacing the time consuming manual tasks around the bank relationship processes would be a great place to start. Reducing the amount of time and fees around organising your annual bank account audit from months down to hours can also be significant. Having a deeper understanding of your total relationship with each bank as a global diversified financial institution can pay handsome dividends when it is time to negotiate fees. After all, banks provide services, such as trade services, capital markets services, and insurance services, that go well beyond cash management account services, but often corporations negotiate each of these services in a vacuum.
Companies must manage and mitigate the inherent financial and operational risks associated with their banking activities. Yet most organisations don’t have good performance metrics to measure these risks; however, through the use of regular reviews it will aid the company in determining what services they are utilising with each banking partner along with the costs of those services and then enable a comparison across all banking partners to negotiate more favorable fees and rates. Typically companies rely on their banks to manage these relationships and provide the company with the needed information, but there is technology in the market that can assist with the overall management of your banking relationship.
There is an emergence of a new category of relationship management – bank relationship management (BRM) – that models the trends toward customer-managed relationships and puts control in the hands of the customer. It has three primary goals:
Bank relationship management provides processes and technology that help a company track and manage all their bank relationships by:
While there are a number of solutions that can track account transactions, BRM goes beyond that function to give a company control of those accounts and the ability to proactively manage the relationships with the banks across accounts. Bank relationship management provides a solution for the mitigation of fraud rather than just logging activities for auditing when a breach is finally discovered.
With the increased emphasis on meeting internal controls and compliance guidelines and putting in place cost-effective and manageable systems, BRM should be an integrated part of every company’s financial systems. The right system will not only help reduce risk and strengthen compliance, but will also save money by reducing audit costs and bank fees, lowering overall administration costs, and improving the speed of account creation and ongoing maintenance. In addition, companies now have one view of all banking related account relationships around the world, arming them with the information necessary to better negotiate fees and rates across bank relationships.
While traditional risk reduction, compliance related activities have traditionally increased cost and administration to meet the requirements of regulations; banks relationship management is one area where the right system can offer the company the ability to have their cake and eat it too.
BRM technology integrates the bank relationship information from across a company’s many bank accounts and provides a single view for provisioning, managing and executing bank mandates, metrics and reporting, and compliance/fraud tracking. This type of technology incorporates not only the standard bank account services but also the other financial relationships that a company might have with a bank, such as insurance and capital markets activities.
Companies that have implemented BRM solutions have benefited from: