Balancing Digital Aspirations While Addressing Risk Management Fundamentals: Observations From Citi Treasury Diagnostics

The advent of new digital technologies and the evolution of financial services has prompted corporate treasury to rethink the techniques deployed to manage risk and how, with treasury’s broad access to company data, it may best utilize emerging solutions to offer business insights. Effective treasury policies, delivered through processes and procedures, managed through key performance indicators is arguably the foundation for achieving financial risk management objectives and a best-in-class treasury function. While Treasury objectives remain constant and digital opportunities exist in how those objectives may be delivered, for most treasuries, fundamentals need to be addressed to lay the foundation (and data layer) for realization of future aspirations. Digitalization opportunities exist but for many companies, the prerequisite is to address legacy infrastructure challenges, disconnected processes and fractured data-sets. Policy/Process disconnects exist. For example, 84% of those surveyed have either a formal policy in place or require formal loan agreements executed by policy. However, only 52% always link the funding requests with the financial plan forecast. KEY FINDINGS AND INSIGHTS Chapter 1: Operational and Financial Risk Management Observations 6 Treasury Policies, delivered through the effective deployment of Treasury KPIs to measure and manage outcomes strongly correlates with high performing treasury teams. Companies with KPI’s in place and measuring/managing to those KPIs are displaying best-in-class practices and achieving best outcomes. Centralization of Cash and Risk remains the mantra with 63% of companies concentrating Cash at Global or Regional level with 80% of those companies concentrating on a daily basis. We also see that Company Size matters when setting up cash concentration structures and In-House Banks — As companies get bigger (revenue) they are more likely to have Global and Regional concentration structures in place.