BRM is mostly used by treasurers and CFOs as they are both accountable for their company’s bank relationships. Implicitly, the finance community uses BRM regularly as every time discussions are about banks, it touches BRM. Mostly, treasurers will have the prime contact with financial institutions but also the CFO and the CEO are frequently involved. Auditors ask companies about bank relations (for example, if there is enough available credit for the next 12 months). Supervisory boards require regular updates on the banking landscape, especially, when new funding is required, and FP&A is asked to report on banking costs. Some examples in which BRM applies are, however, mostly in an implicit rather than in an explicit way.
Banks’ earnings are higher than the costs they charge you. These opportunity costs are mostly hidden and do not form part of your discussions. For example, margins on deposits and FX transactions are opportunity costs for your company. Therefore, it is necessary to understand the total earnings capacity of your banks instead of only those earnings that generate costs for your company.
Suppose you get 1% interest on your deposit and the bank uses your funds to fund other companies against 5% interest. Therefore, your decision to place your deposit with a certain bank influences the earnings capacity of that bank. However, in your P&L, you only see the 1% interest income. The same applies to FX transactions. The difference in this example between 1% and 5% cannot be fully allocated to your company as earnings capacity, but only up to the central bank’s market rate. Instead, the remaining margin is allocated to the company taking the loan. Xploritas computes all of this for you automatically.
Before going into a bank meeting, you need to know what any issues are, how much business you did with the bank in the last 12 months, if there are any (near) covenant breaches, how that bank compares to other banks, what your employees’ notes on that bank are, what the quality of their services is, and much more. Using Xploritas, you can quickly, easily, and accurately generate the banking report you need and place all this powerful information (and more) in your hands. Isn’t it time you were better informed than your bank is?
The quality of management information depends on the quality of the data used. That applies as well to Xploritas. The data you need to source for Xploritas can include your loan documentation, pricing agreements, regular balances of loans, deposits, the number and value of transactions, the number of FX transactions per currency pair, guarantees, etc. Xploritas is designed to make all this as easy as possible without any unpleasant surprises along the way. First, all inputting of data is done at the entity level, meaning you can distribute work and responsibilities. Second, building up information is modular, so, you do not need to spend a lot of time gathering all the data initially, the system will reveal a host of data as you move along with capturing more. And third, although most data is probably not organized to be ‘BRM ready’, it is not difficult to extract the data from your documentation, the information supplied by your banks or your treasury management system.
The Bank for International Settlement (BIS) is located in Basel, Switzerland. It is a club for the central bankers of OECD countries and they issue various directives on how much capital banks need to set aside depending on the type of product or collateral. Those directives have been translated into country-specific legislation. Xploritas uses the current Basel III directives to calculate the capital requirements for each product portfolio. This is the same approach for every bank, making each bank fully and easily comparable.
Bank Relationship Management requires having an overview of a vast amount of data metrics, KPIs, and the meshing of these elements by applying complex algorithms. Having an overview and insight across every bank and entity is a powerful approach when procuring banking products and services. Based on the complexity, BRM services are typically provided through consulting houses, the Big 4, and boutique providers.
Some consultancies provide spreadsheet-based calculation tools for their customers, others use make-shift software behind the scenes, but none empower their customers by providing them with a software-based solution that allows them to run their own BRM without the need for consulting. This is where Xploritas comes in, by providing users with empowering, enterprise-class software for finance and treasury that puts the power of bank relationship management back in the hands of those it most affects.
With Xploritas, no consultancy is needed. The application is both intuitive and self-explanatory. It’s true that a consultant could help at a later stage when defining new banking strategies or the implementation and discussion around new banking agreements. However, the choice is yours!
