Governance
eBAM – Bank Account Management becomes sexy |
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| Governance | |
| Written by Paul Higdon, Chief Technology Officer, IT2 Treasury Solutions Limited | |
| Monday, 26 July 2010 | |
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As we approach the second anniversary of the Lehman Brothers’ collapse, treasury continues to enjoy new levels of prominence. As we approach the second anniversary of the Lehman Brothers’ collapse, treasury continues to enjoy new levels of prominence in the attention of senior management, boards of directors, analysts and shareholders. Surveys and studies of international treasury management consistently show the visibility of cash as a very high priority requirement today, as organizations seek to minimize working capital requirements and external borrowings, and to protect or enhance their creditworthiness, through using more powerful and efficient techniques to identify and mobilise internal sources of cash. The introduction of eBAM – ‘electronic Bank Account Management’ – now adds the last piece of the puzzle in achieving the real time visibility of an organisation’s cash position. eBAM replaces a manually intensive, paper based environment, that had become unfit to service the functional and performance demands of organisations following the financial crisis. It is clear why the availability of bank account balances is critical to deriving the cash position; but why is the underlying administrative process a vital element? The answer emerges if we consider some of the key governance questions relating to the management of bank accounts: “How can we be confident that we understand our cash position if we are not sure how many bank accounts we have?” “Do we really understand our global exposure to our counterparties, with the inclusion of bank account balances?” “Are we sure that all of the signatories on our bank accounts are even still employees of the company?” Each of these critical questions is now answered through eBAM, when implemented as an integral component of organisation’s treasury management system (‘TMS’). The key development here has been the release of the SWIFT message set that supports eBAM. This means that the TMS can now create and interpret eBAM SWIFT messages, so that the bank account management workflows may be built into treasury’s STP operational framework. These workflows relate to the opening, amendment and closing of accounts, in a secure, controlled and transparent environment. The optimal solution will involve web-based inter-communications, to accommodate different requirements for centralisation of bank account administration that may be required in different companies’ finance policy. The primary cash management objective today is achieving central visibility of the balances of the organisation’s global network of multi-currency bank accounts. Having achieved this, finance management may therefore be confident that the cash position on which they are basing working capital management decisions is founded on complete, up-to-date information. Management – and auditors – may also enjoy a much higher level of confidence that the operational signatory file is current – and properly authorised, thereby improving control through reducing the possibility of error – and fraud.. eBAM also provides an added level of completeness and accuracy to counterparty exposure management. The fact that bank account balances are a key component for determining net exposure to a given bank adds another factor to the elevated importance of comprehensive, automated cash management. eBAM therefore provides many more benefits over and above the rather prosaic accuracy and efficiency gains of replacing manual processes with integrated STP workflows. Integrated eBAM frees the treasury team to focus on value-adding professional functions – and it helps the organisation achieve best practice through enjoying the many tangible and intangible benefits of the real time or on-demand visibility of bank accounts, cash and credit risk exposure. References: 2009 AFP Benchmarking Program (Association of Finance Professionals – USA); Deloitte’s 2009 Global Treasury Management Systems Survey – Deloitte LLP United Kingdom; PwC Global Treasury Survey 2010 (‘Treasury in the Crisis; Put to the test – can the crisis make treasury stronger?’ by Sebastian di PaoIa and Damien McMahon, PricewaterhouseCoopers LLP.
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