The results of Nordea’s Treasury KPIs Report 2019 show that Nordic corporate treasuries are increasingly using KPIs to monitor performance but with a focus on short term mission critical goals rather than longer term strategic objectives.
Nordea last reported on Treasury KPIs in 2016 when results showed that more than three-quarters of respondents had established Treasury KPIs, with the majority answering that KPIs had improved Treasury effectiveness.
Johan Trocmé, Head of Thematics at Nordea, says: “We did a survey based report back in 2016 called Treasury KPIs and now that 3 years has passed where a lot has happened around in the world, in the economy and when it comes to technological developments, we wanted to check back so we can see where we stand today compared with what the world was like back then. We were also inspired by another survey based study we did last year called the Future Treasury, which was very much about technology and digitalisation, where we wanted to weave that into asking more specifically about treasury governance and specific objectives.”
KPIs across the Nordics
For the 2019 KPI survey, 161 large corporates in different industries distributed throughout the Nordic countries participated. Over 60% of the large corporates surveyed had an annual turnover of more than EUR 1 billion and 9% of respondents had a turnover of less than EUR 250 million.
Nordea’s 2019 Treasury KPIs report reveals that Treasuries are embracing KPIs, and the business is paying attention to the outcomes. However, just as in 2016, Treasuries are not using KPIs to evaluate their own performance or for benchmarking towards peers despite the accelerating pace of digitalisation. Many Treasuries also have a short-term focus. Increasingly lean and streamlined, they are often focused on mission-critical priorities like liquidity and funding.
Other findings pointed to operational KPIs and Corporate Social Responsibility (CSR) falling down the agenda compared to 2016, with hardly any Treasuries having implemented KPIs related to their digitalisation goals.
Johan Trocmé continues: “The good news in the findings from this survey is that large corporate Treasuries are really embracing the use of KPIs, so the clear majority of them, almost 80%, have them. The question marks are related to what they actually do with them. They have them and they check on the ouptut of what the Treasury is actually delivering and how it is performing. They are not seeking feedback from the organisation within the company and asking how do you percieve the Treasury’s contribution. They have a pretty strong short-term bias in the KPIs they are working with, not so much a long term or strategic bias in what they are actually looking to measure. Also, when it comes to this area of digitalisation where perhaps the most is happening right now, we can see that its really early days with only 6% of these 161 corporates having KPIs for some form of digitalisation to be achieved by the Treasury.”
The good news in the findings from this survey is that large corporate treasuries are really embracing the use of KPIs, so the clear majority of them, almost 80%, have them. The question marks are related to what they actually do with them.
Johan Trocmé, Head of Thematics at Nordea
Treasuries are continuing to embrace KPIs
The Treasury KPIs Report 2019 showed that 77% of Treasuries have established KPIs. 46% of those use specific KPIs to track Treasury performance, up from 27% in 2016. 90% of Treasuries say their KPIs are at least partially linked to the company’s goals but only 15% say their KPIs are “directly derived” from the company’s strategic goals, a slight decrease from 2016. Given the Treasury’s ambition to become a more strategic player, this figure would be expected to rise rather than fall. The Treasury does have the attention of business leaders. The Board is the most likely to set the Treasury’s KPIs (32%), followed by the CFO (28%) and the Treasury itself (19%). The business recognises the importance of what the Treasury does — but that doesn’t mean it sees it as a strategic function; it understands the importance of risk management to the bottom line.
KPIs are not being used to gain feedback
Only 35% regularly measure stakeholder satisfaction with the Treasury — down from 40% in 2016. Of those that do, it’s primarily ad-hoc. This suggests that the Treasury is not proactively listening to or engaging with the wider business. Only 7% said that KPIs are used to benchmark the Treasury against its peers; even though benchmarking can provide valuable insights and help to drive strategy. The most common reported use of KPIs was to support risk management within the group (68%). This shows a shift in priorities — in 2016, risk management came second. Back then, the most common purpose of KPIs was ensuring alignment with the goals of the company.
KPIs are focused on the short term
Treasuries are focused on the same top three core objectives as they were in 2016 — liquidity (83%), FX risk management (76%) and funding (75%). And interest rate risk management is up to 69%, from 64% in 2016. That probably reflects the current economic climate. Treasuries are lean and efficient. They’re focused on mission-critical, immediate goals — ensuring that the business has healthy liquidity and access to funding. But there’s been a massive drop off in operational and CSR KPIs.
KPIs not used for monitoring digitalisation initiaitives
Despite the major impact that digitalisation will have on every business, 94% of Treasuries don’t have defined KPIs to measure success in this area. This suggests that even if Treasuries are starting to think about new technologies, they’re not taking measurable actions Areas identified by Treasuries as possible areas for digitalisation in the short-term were Treasury reporting (53%) and FX exposure (51%). In the long-term, Treasury reporting came out on top again, cited by just over a third (36%) of Treasuries. That’s likely because the automation of reporting could save significant hours and free up employees to focus on more strategic tasks.
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