Rethinking World Class Treasury

Transcription

1 Rethinking World Class Treasury Ron Chakravarti Global Solutions Head, Liquidity & Investments Global Transaction Services, Citi Joseph Neu Founder and President The NeuGroup

2 Defining World Class Citi Treasury Diagnostics Citi Treasury Diagnostics Principles of World Class Cash FX Performance vs. World Class Principles*? Global Cash & Banking Group FX Managers Peer Group Treasurers Group of Thirty Sponsored by Citi Sep 10, Mar 11 Sponsored by Citi Sep 10, Sep 11 Sponsored by Citi Nov 11 * In discussion

3 Principles of World Class Cash Citi, the NeuGroup Global Cash and Banking Group, and 26 member companies (led by a core team of 6) conducted a year-long program to define world class principles for treasury cash management activities and provide a set of benchmarks that companies can use to measure performance Citi/Neu Group GCBG Principles of World Class Cash Phase 1 Phase 2 Policy and Governance Treasury Policy Treasury Centers Procedures and Control Talent Organization Structure Bank Relationship Working Capital Shared Service Centers Process Visibility In-House Banking Cash Pooling Cash Flow Forecasting Bank Account Intercompany Transactions Cash Positioning Accounting Systems and Technology End State Tech Vision Degree of Automation by Process

4 Phase 1 Some Highlights Organization - Owning core functions, while maintaining significant influence over those that can impact financial results Centralization Striking the right balance between HQ centralization vs. regional and local coordination and execution Technology Continually driving to minimize the number of core platforms, supplemented by "best of breed" special-purpose applications where necessary Talent - Developing and utilizing tools and philosophies for effective recruiting, development and retention of star performers Bank Relationship - Standardizing internal management and control of bank accounts and signatories, and the use of scorecards for measuring the performance of global partner banks Policies and Procedures Covering critical functions, including performance metrics, segregation of duties and control processes, and thorough, tested business continuity plans

5 Phase 1 Findings Some Highlights Treasury centralization World Class treasuries strike a proper balance between 1) HQ centralization and 2) regional or local coordination and execution. Realistically, HQ cannot execute everything Centralization of Policy Execution of the Processes 120% 60% 100% 95% 50% 45% 50% 80% 40% 60% 30% 40% 20% 14% 20% 14% 5% 10% 0% Centralized Regionalized Policy De-centralized Policy 0% Centralized Regionalized Policy De-centralized Policy

6 Phase 1 Findings Some Highlights Ownership : WC treasuries own core functions, while maintaining significant influence over those that can impact financial results. Cash forecasting draws special attention: treasury should own process and procedures for collecting cash flow data, but not the data itself. Talent management: WC treasuries develop and utilize tools for effective recruiting, development and retention of star performers. At least on informal rotational program for high-potentials is considered best practice; as is creative use of non-monetary comp. Do You Have a Rotational Program for Your Employees? 60% 55% 50% 40% 41% 30% 20% 10% 0% No Program Yes, Informal Program Yes, Formal Program 5%

7 Phase 1 Findings Some Highlights Technology: WC treasuries continually drive to minimize number of core platforms supplemented by best-of-breed apps where necessary. A pre-requisite is executive leadership driving toward single-instance enterprise platform globally. 91% said single global instance a realistic end state for ERP vs. 85% for TMS STP should be at least 75% Describe Your REALISTIC End State Straight Through Processing (STP) 50% 40% 30% 20% 10% 24% 43% 33% 0% 50 74% STP 75 94$ STP % STP

8 Scale & Efficiency Phase 1 Org Takeaways Global companies need centers of excellence around the globe. More exposure to diverse markets and business challenges call for distributed (rather than centralized) knowledge and information flows. Flexibility and redundancies are appreciated more after a crisis. Centralization need not mean everyone is working from the same place. Centralized Decentralized Service & Responsiveness

9 Phase 2 Some Highlights Liquidity management - Maximize visibility over available liquidity using automated systems that are integrated with bank products and services deployed, starting with cash pooling and concentration solutions. Cash forecasting - Deploy the highest level of automation and best obtainable business intelligence applications in forecasting processes so that more time is spent analyzing optimal cash utilization than in determining cash availability. Cash positioning - Structure operating liquidity management solutions so that reliable intra-day cash positions for the majority of usable liquidity can be accessed with minimal manual intervention. Bank account management - Standardize and automate bank account management to the extent practical to aid cash forecasting, liquidity and positioning aims, while also limiting the time spent on and resources devoted to such non-value added administration. Intercompany transactions Deploy processes and system to manage at least 50% of intercompany transactions via an automated netting / settlement mechanism. The organizational complexity and geographic scope of a multinational s evolution will usually call at some point for the use of an in-house bank to best manage these processes Dashboards - Drive reporting into dashboard frameworks that display updated information in visually-efficient formats that can be accessed in varying levels of detail by all appropriate user roles.

10 Phase 2 Process Takeaways World Class treasuries are relentless in implementing new systems and process innovations to shift human capital resources from low value treasury operations and transaction support toward higher value added finance analysis, business growth support and risk management. To a certain extent, this process follows a developed market (DM) to emerging market (EM) path, i.e., DMs are automated to support more manually intensive efforts in EMs, but World Class treasuries are also quick to leverage opportunities where EMs leapfrog DMs by implementing new technologies and infrastructure where there are no legacy systems

11 What Next? Rethinking World Class Five key trends today, as treasurers re-think treasury for the future and, in the process, redefine what is World Class Smart Centralization Centers of Excellence (COEs) Functionally centralized, globally distributed organization Unify global policy, procedures, and decision-making/accountability, rather than centralize all activity into single location Develop critical mass(es) of expertise around the world Leverage resources and infrastructure to success-transfer / globalize excellence Value Added Treasury Create capacity to focus on the strategic, support the business Standardize and outsource (where feasible) operational activity to focus on analytical and strategic decision-support, risk management, and helping the business Bridgehead to Growth Markets Software as a Service (SaaS) Harness High-Potentials rotations to make treasury value viral - Embed treasury thinking in the business, cultivate future strategic treasury leaders, retain high-caliber treasury-trained professionals Embed local knowledge and expertise Deploy treasury resources in/near growth markets to support business strategically in fastchanging markets Accelerate global data visibility and access Use distributed processing and provider partnerships to accelerate gains vs. waiting for (eventual) worldwide deployment of central ERP/TMS

12 Breakout Groups: Developing a World Class Treasury Model 1. Performance What key initiatives do you have (or plan to have) to improve treasury performance, efficiency, and automation? How are you identifying where the opportunities lie e.g., are you doing any benchmarking against world-class standards of excellence? 2. Centralization What activities does your treasury execute globally from a single center today (e.g., all global cash management from a global treasury center)? How will this look 2-3 years from now (e.g., will you have centralized more activities into global treasury centers, or will activities be conducted at the region or sub-region level) and why? 3. Value Add What key initiatives do you have (or plan to have), where treasury is helping the commercial business create value? How are you balancing between staying close to the businesses, your principal financial partners, and between traditional treasury activities vs. value add initiatives 4. Talent What professional development programs do you have (or plan to have) for your treasury, including rotational programs? Apart from resource development and retention, are these creating any convergence between treasury and business objectives? 5. Budgets Making the change will cost resources and investment how are you getting the buy-in for this? Do you have the performance metrics in place to show the RoI of change?

13 About The NeuGroup The NeuGroup is an independent research and publishing company dedicated to the exchange of knowledge among treasury and finance professionals through two mediums. Newsletter. Launched in 1994, our flagship monthly newsletter and website with daily updates, International Treasurer ( makes us a trusted advocate for global finance practitioners. Peer Groups. The peer group model began in 2001 with the launch of Tech20, a group of treasurer s in the technology industry, which served as the start of a network of practitioner-driven member forums committed to sharing knowledge and experiences with their peers. Current peer groups 12 Current number of member companies Current number of members Contact: Joseph Neu, Founder & President, Telephone: , jneu@neugroup.com

14 NeuGroup Treasury and Finance Peer Groups The Treasurers' Group of Thirty 1 and 2* The Tech20 Treasurers' Peer Group 1 and 2* The Bank Treasurers' Peer Group The Engineering and Construction Treasurers' Peer Group The Internal Auditors' Peer Group The Corporate ERM Group The FX Managers' Peer Group 1 and 2 The Global Cash and Banking Group 1 and 2* The Treasury Investment Managers' Peer Group The European Treasurers' Peer Group The Latin American Treasury Managers' Peer Group The Asia-Pacific Treasury Managers' Peer Group* * Indicates groups in their pilot phase.

15 About Citi Treasury Diagnostics Citi Treasury Diagnostics, is a proprietary benchmarking program begun in It has attracted more than 250 major global firms, across all industries, providing objective benchmarking of their treasury operations in the form of a customized, individual report. Benchmark Six Pillars of Treasury Operations Liquidity Working Capital Risk Subsidiary Funding & Repatriation Policy & Governance Systems & Technology Identify where you stand relative to peers - Learn what counts as best in class Benchmarks Universe and peer group comparisons Relative performance detail

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