At a recent NeuGroup meeting, global cash managers further refine and define what it means to be World-Class.
The NeuGroup’s Global Cash and Banking Group (GCBG) met last week to continue its year-long project to identify world-class global cash management principles. As noted, the scope of the GCBG world-class cash management project also encompasses key functions and processes managed by corporate treasury organizations and emulates similar work done by The NeuGroup’s Foreign Exchange Peer Groups 1 and 2.
The NeuGroup has partnered with Citi for this project, which brings together Citi’s Treasury Diagnostics tools and resources with The NeuGroup’s member-driven, peer group model.
In the first phase, companies discussed world-class principles in areas, including:
Treasury Organization
- Owning and influencing. To make a proper comparison, it is necessary to identify each treasury’s core functions as well as what activities are “owned” vs. “influenced” by treasury. Much discussion was given to the task of cash flow forecasting as an example of where treasury should own the process and procedures for collecting cash flow data but not the data itself.
- Centralization: control versus execution. While ultimate coordination and control wants to be centralized, companies are open to finding the right mix between the traditional HQ centralized, regionalized and localized execution of treasury activities. As part of this, treasury can fit into a shared services infrastructure that looks to current and future cash generation of the company.
Policies and Procedures
- Update for vital activities. The members discussed the need to both maintain and periodically update corporate treasury policies for vital activities to ensure global business and/or market changes are properly reflected. There was also consensus around segregation of duties and process exception approvals. A world-class treasury organization should also have a robust business continuity plan: the ultimate policy for vital activity.
Technology
- Single instance helps. There was a lot of discussion around the concept of having one technology platform worldwide. Members agreed that the concept of global single-instance (starting with the ERP and then treasury management system) combined with “best of breed” special purpose applications where needed would be classified as world-class.
Talent management
- Best-in-class treasuries value talent. This is a very important area for most treasury organizations. The members discussed various methods for recruiting, developing and rewarding treasury personnel, but also the value of rotational programs.
Bank Relationship Management
- Account administration is central. Much of the discussion focused on global control of bank accounts and signatories, as well as the use of corporate-wide resolutions to delegate account management to the HQ level. Best practice clearly seeks to centralize control of accounts as much as possible.
- Account analysis foundation to share of wallet. Best-practice is for treasury to have a detailed accounting of its spend with each bank. This starts with account analysis. Use of many of the standard tools of bank account analysis and bank scorecards was discussed, but the absence of common standards for interfacing with banks globally stands in the way of end-state best practice.
Member organizations in the GCBG will use the principles fleshed out at their meeting to gauge the performance of their cash management relative to best practice and their peers. The principles from the first phase lay the foundation for the next phase that will drill into specific cash management processes.
A more detailed discussion of each principal will be provided to members of the Global Cash and Banking Group.