Measuring Corporate Treasury Performance

Commentary

“Our new CFO …. has asked me, ‘How do I know you guys are doing a good job?’…. For a CFO whose life is measured by KPIs (growth, profitability, etc.), not having a KPI for Treasury, I understand, is a bit of an issue.”

“Treasury is like blood in the system. Nobody cares about how the blood is flowing unless they are bleeding.”

These quotes from the call sum up the challenge all treasurers face. A lot of the value added can’t be measured by traditional KPIs, and the importance of Treasury is often not appreciated until something goes wrong.  

Treasurers measure many aspects of their activities, but these are often not easily understood by the business, and do not equate to a better or worse performance. Even something as simple as bank fees needs to be assessed in context: going with the cheapest bank may be a very bad idea. There are many difficult calls – but there is no way of knowing what would have happened if a different option had been taken. Risk management is key: but success here means nothing goes wrong. That rarely makes the headlines, or earns plaudits from management. 

Most treasurers agree it is the best job in finance. There is a key operational component, some serious technical issues to grapple with, and a need to exercise judgment in many areas where there is no clear right or wrong answer. But, according to the participants on this call, what matters most is managing the key relationships - with bankers, markets, and the internal silos.

So – how do treasurers manage? 

• Most use measurements as management tools, not to impress management or other functions. Cash cover for dividends, percentage of credit lines utilised, support from banks compared to wallet share – these are not absolute indicators of good or.....