COPENHAGEN, Denmark – One message was clear during a panel discussion on corporate-bank relationships at the Eurofinance International Cash and Treasury Management conference—transparency is paramount. As treasurers, you should know your bank inside and out, and you should provide them feedback on their performance; otherwise, they will never improve. Conversely, you need to be able to trust your bank to be honest with you about how you’re doing.

Evaluating you

David Nelson, vice president investor relations and treasurer for IT services provider Cognizant, said that when his treasury department was first establishing itself, it focused on having as few bank relationships as possible. “We selected one bank to provide our global cash management,” he said. “We had a different structure in every country, about a quarter of our cash was uninvested, because there was really no treasury function. We had a very limited team, and it was only after pleading and begging, I’ve able to hire about one person every year. So we put in place one platform, because we didn’t have the bandwidth to have multiple bank relationships.”

Since then, Cognizant’s bank relationships have grown. Last year, treasury took out its first debt facility—a syndicated bank facility. “We have about 25 banks that are in the facility, and they all want to be a relationship bank,” he said. “So we’ve really had to rethink what a relationship is. So we’ve gone through the process of taking a look at each one of those banks, where they are in the credit facility, and where they’re strong. We’ve had to modify and adjust, country by country.”

From that point, Cognizant’s treasury evaluates each of its relationship banks’ actual performance, starting with its top banks and then down to the smaller ones. But perhaps even more importantly, the treasury team asks for its banks to evaluate them. “It’s one of the things we’ve always insisted on from our banking partners,” Nelson said. Basically, we’ve said, ‘You know a lot more about cash management, investment management, etc. than we do. That’s your specialty. Tell us where we can improve.’”

Nelson noted that sometimes, banks are reluctant to give feedback because they don’t want to give their clients bad news. “But we keep pushing,” he said. “If they come back and say, ‘It’s perfect,’ we say, ‘You’re not telling me the truth.’ So we keep pushing and we get a lot of insight from the banks. And that’s what we’ve done since the beginning; we tell them that we expect our better banks to come back and tell us where we’re not performing well.”

The value of transparency

Henning Jakobsen, vice president and general manager for Colgate Palmolive’s Nordic hub, stressed the importance of having an open and honest relationship with your bank. “During the crisis and the credit crunch in 2008, we had very good communication,” he said. “Banks like to be informed of where you are. At the time, they were nervous. But the more we could tell them—the good news and the bad news—you build a trust. And although it doesn’t pay the bills, it definitely helps you get your mind around what the issues are and create a mutual relationship for when things really get bad.”

Working across the organization

Mayela Stuparitz, CTP, global treasury director, Wm. Wrigley Jr. Co., noted that her treasury department does an annual feedback survey of its business units, asking each one to provide feedback on their bank. “We have specific categories and specific areas where we grade them, and we use that information to provide feedback to our banks,” she said. “It is a way of connecting the business units that are using some of those services and having the dialogue as it takes place and not later on when you’re trying to solve an issue.”

Wrigley’s treasury department has had this evaluation process in place for many years, Stuparitz added. “Our banking partners expect that feedback—the good, bad and the ugly,” she said.