Defining your treasury road map through strategic benchmarking

Defining your treasury road map through strategic benchmarking

Many corporate treasurers are considering ways to optimize their treasury function to meet ever-changing internal and external requirements and respond to market developments. However, defining the next steps for your treasury’s strategic development might not be a straightforward task. Zanders’ strategic benchmarking services and its proprietary Treasury and Risk Maturity Model helps organizations to identify how to develop their treasury department into a more enhanced and value-creating treasury function.

The Zanders Treasury and Risk Maturity Model is both a classification model as well as a tool providing the foundation for its strategic benchmarking services performed for many corporations. The objective of strategic benchmarking is to establish the status quo of a corporate treasury function vis-à-vis peers and best market practices.

Maturity level of a treasury function based on five different stages

The model defines the maturity level of a treasury function based on five different stages: foundation, developing, established, enhanced and optimized. To determine the maturity level of a specific treasury function, we use three core treasury activities (treasury operations, risk management and corporate finance) and three core treasury enablers (strategy & organization, processes & systems, and governance & control). Each of these activities and enablers consist of more specific sub-topics to achieve an appropriate level of insight into the maturity level of the treasury function.

Treasury Maturity
Figure 1: The various levels of treasury maturity.

Ultimately this results in an overall treasury maturity, a typology to indicate the level of treasury impact on the overall organization, ranging from a ‘transactional treasury’ to ‘efficiency & cost focused treasury’, to a ‘value added & strategic treasury’. Zanders observes that the majority of multinational treasuries find themselves at the efficiency & costfocused treasury stage, while expressing the ambition to become a more strategic business partner focusing on value creation.

The outcomes of the strategic benchmark assessment enable the organization to determine which short- and long-term improvements are called for to enhance (the performance of) the treasury function to the target level.

An example

To illustrate the Treasury and Risk Maturity Model in more detail we will focus on one of the core treasury enablers used in the model: treasury strategy & organization. As part of this enabler, some of the factors that Zanders assesses are the treasury operating model, strategy and objectives, long-term road map, organizational structure, level of business integration and cross-functional interaction, level of centralization of treasury activities and staffing of the treasury function. Some example characteristics of the various levels of maturity are provided in the table below.

strategy & organization

Strategic benchmark assessment approach

A strategic benchmark typically takes place in three steps: identification, analysis, and road map. The identification process starts by performing an in-depth analysis of the current situation by reviewing relevant documents such as policies, standard operating procedures and treasury reports. This is combined with structured interviews in order to fully understand the processes. Furthermore, this step involves shadowing sessions and quantitative benchmarking.

In the analysis phase, the data and information obtained in the identification phase is analyzed resulting in a benchmark scoring for each of the three enablers and activities. The benchmark scoring will be compared to peer averages for peers with a comparable level of ‘treasury complexity’. Furthermore, the benchmark scoring will be compared to a target scoring that is set for the company in each area, which is based on what Zanders sees as best practices, the specific business context and the overall corporate and specific treasury objectives.

The last step is the definition of the road map. Based on a gap analysis, areas of improvement can be identified, which are then translated into concrete steps to enhance the treasury function as well as the treasury road map, which provides a logical sequencing and prioritization of all sub-projects.

treasury maturity,fig 3

For almost every organization

The Zanders Strategic Benchmark Assessment is focused on treasury organizations that are eager to enhance their treasury and desire to move towards best-in-class, regardless of size and the current status. Strategic benchmarking is interesting for almost every organization with treasury activities. Of course the assessment can be entirely tailored to the client’s specific wishes and focus areas. Afterwards you know exactly which steps have to be taken to enhance your treasury organization, exploit the potential, save costs, and carefully manage the risks.

Value of Strategic Benchmarking

  • Improve insight in how your treasury function scores compared to:
    • Peers with a comparable ‘treasury complexity’
    • Best practice
  • Gain detailed insight where improvements can be realized to enhance the treasury function
    • Taking into account the specific business context and corporate/treasury objectives.
  • Identify areas which carry immediate operational or financial risks
  • Know which steps to take to enhance the treasury function
  • Prioritize and organize your treasury road map