UK: Is Treasury Adding Value As It Should?: Strategy And Benchmark Practices

Modern treasury strategy must demonstrably match the needs of the company and meet the expectations of a wide set of stakeholders, as well as fundamentally support the business.

Treasury functions also face the added pressure of demonstrating their efficiency and effectiveness in achieving results.

Achieving the right strategic approach requires achieving the right balance between competing requirements. For example the introduction of IFRS has resulted in financial reporting having a significant effect on treasury strategy in a number of companies.

Perhaps one of the most surprising aspects of treasury strategy adopted in companies is the absence of consistency in the approach and attitude to risk management within sectors. This is not to say either approach is wrong – the key is that the approach reflects the requirements and concerns of a number of different stakeholders, but chiefly the Board of Directors.

Whilst treasury strategy and policy need to support the requirements of the business, and incorporate a broad range of concerns, of critical importance is that the risk management approach should be defined by the Board’s appetite for risk.

We have helped a number of companies achieve this by translating the strategic options into financial implications. This includes both an illustration of ‘what will this would look like’ and a quantification of the risk-return equation connected to the risk management options.

Deloitte has significant experience working with leading companies in a wide range of sectors. Our approach is to work with clients to help them achieve the answer most appropriate for their needs.

Benchmarking to continuously improve Benchmarking treasury practices is a useful tool to both demonstrate the efficiency and effectiveness of a treasury operation, and to help drive the process of continuous improvement.

Used in isolation a particular benchmark measure can be misleading: no two companies have treasury operations with identical scope of responsibilities or approach to risk management. The use of benchmark measures must therefore be put in context with skill and care.

Tailor-made benchmarking

Our approach to benchmarking uses our in-house developed benchmarking toolkit as its core. Using data we have gathered from working with a wide range of companies, the toolkit assists us to draw comparisons in key areas. This comparison is then used to prepare an analysis which produces the benchmark output which positions each of the main treasury areas relative to other relevant peers.

Most importantly, the analysis is not a cold comparison using irrelevant cold statistics.

We use our understanding of how your treasury is structured taking on board the specifics of your business, to draw suitable, relevant comparisons.

A second dynamic in corporate treasury management is to focus resource in the most value-adding activities. You may be placed in the top quartile in a particular treasury management area, but if there is little value added from this activity resources may be better re-focused elsewhere. Our analysis includes an output designed to present a simple illustration of where effort could be re-focused.

To maximise the value from benchmarking your treasury operations, our output includes a prioritised list of development areas, including our suggestions of alternative approaches you could take.

Our experience

The Treasury and Capital Markets group at Deloitte combines the skills of a broad range of professionals in treasury, banking and financial instrument accounting & valuation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.