Benchmarking Treasury Operations
- A 360 Degree Perspective
by John Henson and Robert Russell, Treasury Advisory Group, Liquidity Management Services, Treasury and Trade Solutions, Citi
Today’s corporate treasury is being challenged in unprecedented ways. Complex factors, such as global growth, changing regulations, and advancements in technology are impacting treasury management, putting increased pressure on organizations to ‘do more with less.’ At the same time, the role of the treasurer has expanded to meet the evolving responsibilities of funding and raising liquidity, understanding and managing risks, and supporting business units as successfully as possible. In order to effectively navigate this dynamic landscape, corporate treasurers must leverage meaningful intelligence to improve performance and enhance results.
Benchmarking has become an invaluable means for treasury to gain an objective perspective of the current state of operations relative to similar companies and in absolute terms of liquidity and risk. However, effective benchmarking isn't simply about comparing a handful of functions and companies - it should provide a 360 degree treasury perspective, offering a broad baseline and insights into best practices across all dimensions of treasury management. While benchmarking practices have continually evolved over the years, the ways in which it can create value for a firm have remained constant. Typically, organizations will leverage benchmarking for one or more of the following reasons:
(1) improving productivity;
(2) setting effective goals; and
(3) driving continual improvement.
Taking a broad benchmarking approach
Citi Treasury Diagnostics (CTD) is a proprietary, award-winning benchmarking tool that takes a broad benchmarking approach, designed to help companies assess treasury and working capital management practices, and identify opportunities for treasury departments to deliver more value to their firms. Through mid year 2014, CTD surveyed nearly 500 CFOs, treasurers, assistant and regional treasurers, and other corporate decision-makers from companies representing a diverse range of sizes, industries, and geographies across the globe. Benchmarking results from CTD provide a clear indication as to what is most important to treasury practitioners, as well as insights into both emerging and existing themes within the treasury management space.
Illustrative CTD findings
Increased importance of cash visibility and forecasting
CTD reveals that visibility to both cash and short-term investments remains a major priority for companies of all sizes. A lack of visibility can significantly impact how confidently corporate treasuries rely on current cash positions, forecast cash flows, and make investment and borrowing decisions.
Survey results indicate that corporate treasury continues to place an increasing emphasis on daily visibility of cash flows in all currencies and countries, as well as on daily visibility of short-term investments. Most CTD respondents reported daily visibility over 75% to both cash balances and short-term investments [Fig 1].
Frequency of cash forecast updates are increasing across companies of all sizes, with results indicating a significant shift towards daily updates of cash forecasts, particularly among larger companies, which increased 18% over the last four years and is likely due to the wider adoption of more sophisticated treasury technology in this group.