Deutsche Bank: The Flow of Liquidity – Shahrokh Moinian

During the financial crisis the role of cash management came sharply into focus. But, as recovery gathers pace, has the way in which finance departments approach the question of liquidity been fundamentally transformed? Deutsche Bank’s Shahrokh Moinian talks to FDE about the changes in corporate behaviour as a result of the downturn.

The credit crisis caused a radical shake-up in financial operations, during which time cash management became increasingly important. Shahrokh Moinian, head of cash management for corporates for the EMEA region at Deutsche Bank, has observed patterns in cash management throughout the crisis.

For corporates, liquidity has not always been the hot topic it is today. "Without wanting to generalise," Moinian says, "before the crisis some corporates opted for an 80:20 rule. If 80% of liquidity was in a cash pool that was fine; the 20% was marginal."

During the crisis, its status changed. Financial directors became adept at finding and extracting cash from every nook and cranny of their corporation.

The need for cash control and efficiency accelerated centralisation, automation and standardisation in corporate cash management. Companies also increased their use of centralised structures, such as payment factories, while in-house processes and workflows were made to self-regulate and formats such as XML and SWIFT became acknowledged industry standards.

"Deutsche Bank emerged from the credit crisis in relatively good health compared with many other international banks."

With the green shoots of a post-crisis economy gradually giving over to signs of a sustained recovery, liquidity solutions are now being chosen for their long-term prospects.

Corporate attention is turning to the untapped potential of the collections process and the refinancing of existing debt. Receivables will be put under the spotlight as treasurers uncover more cash traps in the financial supply chain.

"Prior to the crisis, collections were little more than a hobby," Moinian recalls. Now he sees a clear link between receivables and liquidity, and cites the renewed focus on collection speed and factories as evidence of this trend.

New payment methods promise to make cash even more accessible for multinational corporate treasuries. The introduction of SEPA’s direct debit scheme will drive the creation of collection factories, while the growth of online commerce will encourage companies to rely more heavily on card collection solutions.

Intelligent cash management and optimised financial supply chains are central tenets of any treasury and the search for financial efficiency is relentless. Corporates are looking for geographical diversity while developing centralised payment systems such as direct debits and credit cards. Liquidity is no less important than it was at the height of the crisis, but managing it requires new insights, technology and innovation. 

For this reason, Moinian believes the role of corporate treasurers is under scrutiny, particularly how they can broaden their scope to assist the financial supply chain through improving payment terms and the acceleration of receivables. "Five years ago," Moinian says, "the supply chain fell between the cracks. There was a dearth of targets for corporate treasurers to improve aspects such as days sales outstanding and payment times."

Embrace uncertainty

For many corporates, managing the financial supply chain is increasingly becoming a global game. Moinian feels that all eyes are on the developing markets. "Asia Pacific, particularly China and India, is at the forefront, but there is interest around the United Arab Emirates, which is becoming a regional hub for many corporates.

Meanwhile, Russia and Ukraine still offer many challenges and opportunities for corporate treasurers," he says. Looking at the global picture, Moinian stresses that "there is little clarity" and believes that treasurers will be more positive this year, although the economic data provide few pointers as to how the economy will fare over the next year or two. Although we are no longer in a crisis situation, it would seem uncertainty is "the new normal".

One trend emerging post crisis is that treasury departments are looking to diversify their banking relationships so that they have regional partners that can provide local knowledge and economies of scale. Before the crisis, the trend was to consolidate banking partners to drive maximum efficiencies, but now this is deemed too dangerous from a risk perspective.

Deutsche Bank emerged from the credit crisis in relatively good health compared with many other international banks. It is investing in technology and client services and expanding into new locations. Meanwhile, many banks are trying to develop their commercial transactions operations in reaction to increased demand. But as Moinian points out: "If you look at transaction banking, there are already many players with a global presence and capabilities. Joining this sector is not easy."

Shahrokh Moinian, head of cash management for corporates for the EMEA region at Deutsche Bank.