By Ursula Conterno
Selecting key performance indicators is critical for successful Latin American treasury operations.
Treasury organizations spend significant time and effort building, tracking and reviewing metrics that support decision making and that help gauge the efficiency of their processes. According to a recent survey, LATMPG members were not the exception. Most members tracked operations across many treasury activities, globally and regionally. Depending on the activity being monitored, reporting frequency varied from a daily to monthly, quarterly or even annual basis, but most operational measures were assessed quarterly. The main user of the information was usually treasury itself. However, some metrics were geared to keep the business units, CFO, and board apprised.
Reporting metrics is not the same as tracking key performance indicators (KPIs). A KPI is a relevant performance metric that is benchmarked against a specific target. Although many treasury organizations manage a number of metrics around their operational performance and compliance, not all of them actually benchmark those numbers against a target.
This may be the case because selecting the right KPI for a treasury organization is not an easy task. In general, a KPI is best when aligned with the goals of the organization, so it can help drive the operations toward achieving those goals. Also, even when KPIs are identified and tracked at a global level, the same KPIs may not be relevant when making decisions at a regional level. In this context, LATMPG members discussed what would be the key considerations when selecting the KPIs for the LatAm operations. These are some of the takeaways:
- No one-size-fits-all solution. At a regional level, KPIs are a function not only of the organizational goals but also of the operational structure. If operations at a regional treasury center are closely related to operations at a shared service center, then the relevant KPIs will be different versus if there was no relationship between them. In that specific case, it may make sense to include SSC’s leadership into treasury’s ops reviews.
- Sometimes less is more. Even if there is value in tracking several metrics for day-to-day decision making and compliance, not all metrics should be KPIs. At their best, KPIs will drive projects and process improvements toward achieving treasury’s goals. If there are many organizational goals, resources would be spread too thin to be able to make a significant impact.
- Make sure KPIs/metrics provide actionable info. The information you compile should allow users to make decisions. If it is easy to compile but not actionable, it is a waste of time. For example, do not only show total cash but show cash split in different buckets that allow understanding how easily it can be mobilized for corporate use. Is it totally trapped due to FX controls, available but at a high cost, or easily available at low cost?
- Leverage technology. In an environment in which treasury operations are moving away from non-value-added activities, it is important to leverage technology when it comes to generating and tracking KPIs. Streamlining processes and systems so reporting becomes available at the touch of a button should be the objective.