Now that you have determined which stage in the relationship you are in with your bank, it is time to evaluate the strength of the relationship. Banking relationships are based on performance, risk, and profitability KPIs. These relationships come down to two main objectives: fairness and accountability. For something to be truly fair, there should be transparency on all sides. Transparency and accountability are the foundation of a long-standing relationship.
Benefits of RFPs
After evaluating your banking relationships, you might determine it is time to consider the RFP process. It is common to worry if the RFP will hinder the current relationship or wonder if RFPs are fair to banks. This is when it is key to keep in mind the upside to going through an RFP process. During this process banks in, and out of, your network have the opportunity to gain new business. Your current banks can list services you were not aware they had the capability to offer. Generally, an RFP can be the only true way to gauge a banks appetite for your business.
Are RFPs fair?
RFPs can be a lot of work for you and for the bank. We are often asked if there are other ways to benchmark a bank or negotiate without going the route of an RFP. This cannot be done by simply looking at your database alone. While statistics and data are a key part of evaluating the relationship, it is not a stand-alone metric and should be considered in conjunction with other factors. Benchmarking should be done in the context of each relationship. An alternative to RFPs is bilateral negotiations. These negotiations can only be effective if you have a balance of information going into the process.
What motivates Treasurers to complete an RFP?
RFPs do not always mean you are unhappy with your current provider, although it may be true. There are several other motivating reasons to complete an RFP including:
- Cost reduction
- Required by management
- Share of the wallet
- Operational efficiencies
- Outgrowing current provider
Tips for successful RFPs
We understand the relationships you have with your banks are unique. Other than working with an advisory firm, like Redbridge, some tips to help you smoothly navigate through auditing your current banking services, progress through the RFP process, and ensure final selected services/prices are implemented correctly are:
- Effectively measure services and pricing with objective grading
- Measure the qualitative bids by measuring the quality of service fairly
- Compare pricing bids by visualizing the percentage of each service related to service group and total
- Include ECR bids and negotiate earnings credit rate/hard interest
If the process seems too overwhelming or you do not know where to begin, contact us to start the discussion. With over 20 years, more than 300 engagements worldwide, and teams in North America and Europe, we have the expertise to help you evaluate your banking relationships. Since we are independent of banks, you can be assured our intentions will be aligned with yours.