OUTCOMES

  • We worked directly with the banker at their main syndication bank (their top lender) and showed our findings.
  • The information showed the banker that there was a lot more liquidity to gain (new deposits for the bank) if they are capable of providing:
    • Consistent pricing taking into account the massive volumes
    • A beneficial credit interest arrangement that accounts for their working capital minimum balances- which are extremely valuable to the banker
  • We repeated the process with the second syndication bank.
  • Both bankers came through with much better pricing on both the fees and credit interest.

IN SHORT 

This mandate cost the client approximately $25,000 in time & material and netted approximately $2,000,000 per year in savings/credit earnings in total.

CHALLENGES

  • One of the largest insurance groups in Canada was dealing with the repercussions of its decentralized structure:
    • Cash was held between 2 banks, spread between approximately 20 business entities
    • The business entities were negotiating pricing (fees) and credit interest individually which led to inconsistent and disadvantageous deals, unbeknownst to any party (banker and client)
  • No one in the company within the treasury department had enough banking knowledge to recognize the inefficiency. 
  • Furthermore, any potential SME had very little time to dedicate to the investigation and calculation.

ACTIONS

  • Sierra Consulting began the investigation by working with finance leadership  in order to uncover the full banking footprint
  • Reviewed all compensation statements, along with corroborating bank statements to determine the amount of fees paid.
  • We recovered the price list for each business unit (BU) to uncover all discrepancies in pricing between.
  • We did the same for credit interest rates over all their accounts (approximately 300 accounts, held between the two banks).
  • We outlined their cash management habits– for incoming and outgoing cash, and what methods were used for each BU.
  • We also established their yearly cash trends to determine their ”peaks & valleys” in their cash levels and identify the overall working capital sum.
  • An analysis was performed by Sierra Consulting, using all of the information collected to estimate how much could be gained in opening a discussion with our banker.