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Insights from CitiGroup's: Treasury Leadership Report 2023
Financial management for many importing and exporting organisations is complex. The roles of CFO, Financial Controller and the like are senior experienced people, having to straddle multiple specialties, from accounts and purchasing, to managing multiple business units and global operations. Add to this the complexities of pandemics, wars and cost of living crises and it’s not overstating it to say how important this role can be to many organisations.
Many organisations are dealing with huge values in foreign currency through their import and purchasing of raw materials, export of finished product, staff salaries and the like, with the role of treasury management a critical one to many.
We often hear from our clients that treasury is only a fraction of their day-to-day job, which often leads to processes being neglected or taking a back seat.
CitiGroup’s recent Treasury Leadership Report highlights that good treasury leadership has a significant impact on a company’s financial performance.
They found that companies with both treasury sophistication and automation show the highest earning-to-revenue ratio.
We’ve summarised the key points from the report below:
1. A link between treasury and profitability.
Companies with ‘top-tier’ treasury performance had higher overall company profitability. They showed significantly better earnings-to-revenue ratios and Return on Invested Capital (ROIC).
2. Good treasury practice.
Organisations that nurture their treasury teams to be leaders have the highest financial outcomes.
'Good’ treasury includes efficient and effective treasury policies, processes, and procedures.
However, the biggest impacts come with effective liquidity and working capital management, along with strategic use of technology.
While most companies have established formal treasury policies, there's still room for improvement, especially in risk management, foreign exchange hedging and having robust legal entity financing policies.
3. The critical role of technology.
“Adopting and integrating treasury technology drives the greatest improvement in overall treasury performance. By corollary, treasury underperformance in other areas can be linked to technology underinvestment.”
The report noted that the adoption rate varies significantly between larger and smaller companies.
The COVID-19 pandemic accelerated the adoption of digital practices in treasury operations. Companies have adapted to remote working by enhancing their focus on cashflow forecasting and automating routine tasks, leading to improved efficiency and resilience.
Embracing technology for transformative opportunities, especially in data analytics, supports organisations in informed decision-making and predictive financial management.
The biggest hurdles for technology adoption is the cost of systems, followed by integration with legacy systems.
While many of the participants in the report are huge global enterprises, the issues are still relevant to many mid- to large-sized organisations and there’s some useful learnings for those responsible for treasury management.
At CNS, our mission is to help organisations confidently identify, manage and report on their treasury risk in a cost-effective way.
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