As HP’s Treasurer for Europe, the Middle East and Africa, a region with approximately $32 billion of revenues in FY04, Sarah Jones is a demanding customer for the commercial banks that the company uses to handle its transactions across the region, and at least as demanding when it comes to investing the approximately $13 billion representing HP’s offshore cash portfolio. The HP Treasury team based in the UK is one of HP’s three shared service centers that handle global Treasury operations, and is specifically responsible for the provision of Treasury consulting across EMEA and for the daily cash management activities of approximately 250 legal entities in EMEA, Latin America and Canada.

How many banks do you work with? Lots! On the vendor payables side we have pretty much consolidated our activity with two or three banks across the globe; however on the accounts receivable side we still work with at least one bank per country and HP is present in many countries. So, for a local sales subsidiary, we would typically use one local bank for our accounts receivable and payroll activities and then hold a vendor payables account with one of our global banking partners. The main driver for this is the need to make it easy for our customers to pay us. I have yet to find a truly ‘global’ bank that can provide the coverage in terms of branch network and paper-based payment mechanisms that we still need in some countries.

You don’t treat Europe as a single entity then?

No – we manage our cash at an individual legal entity level. We could put a central entity structure in place using some form of agency agreement but until we get a single European payment system in place there remain differences in domestic versus cross-border pricing, meaning that the central entity would most likely still need to hold accounts in-country. Central bank reporting and lifting fee issues are also a consideration. Given the way in which we pool our local cash balances at HP, I’m not convinced that we would benefit from such a structure.

What would you like to see from your banks?

More information for a start, but in a self-service model – that is, I would like to be able to track a payment that I have initiated right through to final beneficiary. Today, when we initiate a payment to one of our vendors it kind of goes off into the ether! If DHL can track a physical parcel around the world on a real-time basis why can’t the banking system do the same?

What about on the receivables side?

Once again, more information would be nice! Obviously the amount of information that we get on the receivables side is a function of the level of information that the customer sends with their payment in the first place; then it’s a function of the initiating bank, the clearing systems and finally the beneficiary bank. Information can get truncated or excluded at any stage. This is why we are interested in looking at standard messaging along the financial supply chain in order that corporate and bank data can be exchanged in such a way that it can be used to achieve much higher levels of straight-through processing within the corporate’s finance business process environment as well as achieving a much higher level of control and potentially aiding the cash forecasting process. The banks and clearing systems along the way need to be in a position to support this type of initiative.

Don’t you have standards now?

Well as a company, we are using EDI quite extensively and have been involved in the RosettaNet initiative. I think the issue is that both corporates and banks alike are to some extent sitting on the fence waiting to see what standard will emerge as the leader. I am involved with the Corporate Reference Council of TWIST and hope that this forum will start to drive some consensus from the corporates as to where they see their priorities in this space and hence drive the banks to start to act.

It sounds as if you want a lot more information.

Yes – in addition I am looking for more real-time information and later cut-off times. The latter I have found is sometimes a function of a bank’s lack of straight-through processing capabilities, i.e. to the extent that they have to manually re-key information, they require an earlier cut-off time.

Why don’t banks have STP by now?

From what I have seen, the banks suffer from a myriad of legacy systems that sometimes don’t seem to talk to each other. Clearly it’s a huge task to eliminate legacy systems and implement something new, but this is what the corporate world has been doing to some degree with ERP applications such as SAP, and what we in HP Treasury have done with Wall Street Systems. Where it becomes obvious for a corporate customer is when a bank that purports to be regional or global provides very different levels of service and system capability country by country. Another area where this becomes obvious is in bank fees – we would like to see less variation in charges country by country and more automated and standard information provided to the corporate world in order to aid control and reconciliation of bank fees across the globe.

Have you been caught?

Yes – we have sometimes started working with a particular bank in a country based on a very good experience in another country only to find that they are not able to offer the same level of reporting or processing functionality. When you are talking about cash management business, especially accounts receivable, it’s not that simple just to change banks when this type of situation occurs.

Do you see any solution?

Well, a portable bank account number that stays with the corporate would be very useful.

Are you doing anything innovative in other areas of your treasury operations?

On the investment side, given HP’s sizeable offshore cash portfolio, we deal with a number of investment counterparties. Hence we are talking to a number of money market fund providers with a view to the creation of a multi-bank portal, similar to FXAll in the FX world. The other area that I am looking at is bank documentation. The amount of paper that we exchange with our banking partners in order to open a bank account or maintain signatories on our existing accounts is very high. I can imagine that the banks must have armies of people re-keying this data into various systems and I also don’t believe that paper exchange is the most secure way to exchange data in today’s world. I would like to see the industry come up with some standards for certain types of documents in order to benefit both the corporates and the banks.

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