Lloyds TSB: Strike a Balance - Colin Hemsley
The abrupt downturn in the world’s financial markets has prompted many corporates to turn their attention to stability as much as opportunity. In tough times, finance directors are focusing on their core reponsibilities, explains Lloyds TSB’s Colin Hemsley.
The mood among corporate treasurers is changing as the global economy stutters and financial markets tighten. They are now just as focused on housekeeping as they are on sourcing funding. Risk management has rapidly climbed the agenda.
‘The treasurer’s to-do list has been turned upside down,’ says Colin Hemsley, head of major corporate and financial institutional sales, corporate banking transaction services for Lloyds TSB. ‘Removing or managing risk is as important for treasurers as finance or liquidity. That was not true a year ago.’
Hemsley gauged the finance directors’ sentiments at the recent EuroFinance conference in Barcelona, and saw at first hand how priorities are changing.
‘The overriding theme coming from their discussions is the need for continuity and stability. The events of the last year have reminded them of the responsibilities of their role rather than the opportunities. Security of cash and issues like counterparty risk are much more important now,’ he says.
The current environment is prompting more companies to take meaningful action in regard to cash management and financial supply chain optimisation.
‘Liquidity management is inevitably important, as it is driving efficiency in the financial supply chain. Companies are focused on governance, but they also recognise that squeezing extra days payable means reducing cash and working capital requirements at a time when those routes are more expensive,’ comments Hemsley.
One leg of Lloyds TSB’s approach to the financial supply chain is its supplier finance service, which accelerates cash through the supply chain.
‘Helping suppliers by giving buyers better credit is a good product at a time when there is uncertainty because of the credit crunch,’ adds Hemsley. ‘The gap between interest and action has closed in the last few months as it makes its way up the to-do list. We’ve had a lot of calls about accelerating receivables from corporations that in the past had little desire for such services.’
Banks must step up to the mark when it comes to payment services, partly because many large corporates are looking to work with fewer banking partners.
A strong, AAA-rated UK bank focused on mid-market and some large, multi-national clients, Lloyds TSB is a pioneer of relationship banking, and understands how corporates work with banking partners. This insight leads Hemsley to disagree with those who see the Single European Payments Area (SEPA)’s effect on cash management as the driver pushing corporates to streamline their banking relationships – at least for large corporates.
‘For them, SEPA Credit is generally a non-issue,’ he says. ‘They had in-country accounts in Europe and need to work with indigenous banks because they have operations in many countries. SEPA Direct Debit might provide more opportunities, but that is a year away at best.’
Instead, he feels corporates are simply going back to basics. They want visibility of cash, they want to move it quickly and they want a choice of cash management mechanisms to get value from that cash. Most importantly, they want safety and security.
‘When banks were queuing up to provide finance, companies often gave payments business to the cheapest provider. Now, they are less likely to give it to a niche provider, and instead are pushing ancillary business to core banking partners who already support them in other ways,’ Hemsley remarks.
‘We must provide cash management services. Along with financial supply chain services, that is a key area of investment for us – one we will expand. Lloyds TSB has been criticised in the past for being too conservative. Some of those organisations who did those more exotic things are no longer around,’ he adds.
As their priorities change, finance directors need banking partners that understand the changing balance of risk and opportunity, and Lloyds TSB has shown its ability to do that.