A new study, titled 'Treasury Leadership: Does it Matter?' has just been launched by Citi GPS and Citi Services, underscoring the vital importance of treasury operations in businesses. The study, initially published in 2015, aims to aid companies in evaluating their treasury, working capital, and risk management practices. It provides these insights based on an all-inclusive survey of close to 350 large corporate treasury practitioners from a range of industries and regions worldwide.
From the survey, the major findings indicate that the top 40 performing treasuries have generated an additional $44bn of earnings over the duration of 5 years, attributing this increase to their exemplary performance. The study underscores the role that treasury management systems play in enhancing overall performance. However, the exploration and implementation of digital techniques by high performing treasuries is limited, with full-scale adoption of these digital processes still in progress.
The research highlights the mounting expectations on treasurers from executive leadership as the latter navigate challenges such as geopolitical turbulence, macroeconomic hitches, and the adoption of new digital business models. Moreover, treasurers are also facing the hurdle of justifying their business investments and aligning their treasury roadmaps with peers as they devise strategies to create value for their firms.
Citi’s study sought to answer three questions: Whether leadership in a treasury is consequential for a firm, the characteristics of a leading treasury, and the essential steps required getting there. The findings were unequivocal: Companies that prioritise the development of their treasury teams to take the lead enjoy improved financial performance. Citi's study estimates that the top performing treasuries could have accrued up to $44bn in extra earnings over the last five years, solely due to their superior treasury performance. Another telling metric is the Return on Invested Capital (ROIC), which was found to be 10% for companies with a leading treasury, compared to 5.8% for those classified as laggards.
"High-performing treasuries ensure efficient funding of working capital, proactively identify and mitigate financial risks, and deploy liquidity to fund the company's growth,” said Shahmir Khaliq, Global Head of Services, Citi. He went on to say that companies could learn from these findings to speed up what can otherwise be a lengthy and drawn-out process of becoming treasury leaders. Thus, they could enhance their ability to boost company returns.'
Cash and Liquidity Management is a key function of Treasury but today’s report points out that this area holds considerable potential for improvement across companies in general. The data shows many firms continue to struggle with the basics such as total cash visibility, robust cash forecasting, and high levels of process automation amongst others. However, leading treasuries are making strides ahead, adopting digitalisation as a key enabler for core automation and utilising data to make more effective decisions.
Stephen Randall, Global Head of Liquidity Management Services, Citi, underscored that "these results show that companies need to accelerate investments in treasury transformation. The latest generation of technology-based financial services equips treasurers to automate, manage risk, and use insights, thereby supporting business growth and contributing to financial outperformance."