Citi Report Flies the Flag for Corporate Treasuries

A new survey released by Citi seeks to highlight the importance of treasuries for corporations and recommends continued investments in treasury processes and resources.

The study – ‘Treasury Leadership: Does it Matter?’ – observes that treasurers face rising expectations from executive leadership as firms navigate geopolitical and macroeconomic challenges; adopt new digital business models; and deploy emerging new technologies.

The report adds, however, as treasurers deploy strategies to create value for their firms, they are challenged to justify their investments and queried how their treasury roadmaps benchmark with peers.

Citi says it set out to answer three questions:

• Does leadership in treasury matter for a firm?
• What are the attributes of a leading treasury?
• What are the key steps needed to get there?

Based on its Citi Treasury Diagnostics global benchmarking service, Citi completed a comprehensive study of almost 350 large corporate treasury practitioners from a diverse set of industries and regions across the globe. It says the results are clear; companies that nurture treasury teams to be leaders enjoy better financial performance.

Citi estimates that the top 40 performing treasuries measured in the study may have generated up to $44 billion of additional earnings over the last five years, something it attributes to their better treasury performance. Another indicator is the return on invested capital (ROIC) across study participants is 10% for those with a leading treasury versus 5.8% for companies that have a treasury classified as a laggard.

“High-performing treasuries ensure efficient funding of working capital, proactively identify and mitigate financial risks, and deploy liquidity to fund the company’s growth,” says Shahmir Khaliq, global head of services, Citi. “Companies can use the learnings to leapfrog what can be a lengthy process of becoming treasury leaders, and by doing so, accelerate their ability to increase company returns.”

Whilst effective cash and liquidity management is a core function for treasury, Citi says the report highlights that this area contains significant opportunities for improvement for companies in the aggregate. “The data shows many companies still struggling with the fundamentals – including complete cash visibility, robust cash forecasting, well-engineered liquidity structures to centralise cash, and high process automation,” it states. “Meanwhile, leading treasuries are leaping forward, leveraging digitalisation as a key enabler for core automation and to leverage data for insights towards more effective decision-making.”

Stephen Randall, global head of liquidity management services, Citi, adds, “These results show that companies need to accelerate investments in treasury transformation. The good news is that the latest generation of technology-based financial services equips treasurers to automate, manage risk, and use insights to support business growth and contribute to financial outperformance.”