Cash & Liquidity ManagementCash ManagementLiquidity management a priority for treasurers and CFOs: Research

Liquidity management a priority for treasurers and CFOs: Research

Companies are still lacking full fund visibility and true centralization. Chief Liquidity Officer could be an answer to steer cash management

According to Asset Benchmark Research’s (ABR) 2019 Treasury Review, locked cash and feeble re-usability of its own liquidity are the two major difficulties treasury professionals face today.

ABR 2019 Treasury Review, an annual treasury review now in its fifth year, found assurance towards availability to liquidity as the top treasury goal followed by improving cashflow forecasting and lowering cash flow variability via hedging market risks. Cashflow forecasting in particular has become more important in today’s economic climate considering geopolitical issues such as the trade war between China and the US. The research had close to 800 participants.

Classifying treasury centres

The results of the research predicts that more than 3/4th (77%) of respondents expressed hopes of being either a profit centre or an added value centre in the next three years. As of today, more than half (56%) of the respondents classify their treasury centre as cost centre, which would come down by half and stand at 24% in the next three years. Respondents classifying treasury centres as profit centres today are 27% and would be increasing to 34% in the next three years. The classification of added value centre that is strategic and advisory in nature today and in the next three years are 16% and 43% respectively.

This clearly highlights the confidence of the treasury community looking ahead in contributing towards the top line and bottom line of their organisations.

Other notable highlights from the research include:

  • 64% of respondents said that they had not changed their primary cash management bank over the past 12 months
  • 47% of respondents mentioned that they already had a domestic cash pool setup with another 8% planning to have one in the next six months
  • Close to 60% of respondents from the Taiwan mentioned that they had already aggregated their bank accounts in order to optimize interest paid and cash visibility
  • Just over half (52%) of large corporation respondents sharing that they already had or were planning to have a regional treasury centre in the next six months

Chief Liquidity Officer

The findings of the survey highlight how liquidity is rising up the agenda of treasury – prompting calls for chief liquidity officers.

The 2019 PwC Global Treasury Benchmarking Survey, highlights the growing burden on treasury department with 64% of respondents noted they have an increased focus on working capital management. Today’s treasurers increasingly are asked to do more than back office cash management. They are also charged with streamlining and managing financial risk management. In the same PwC survey, 73% of respondents said strategic thinking is a key attribute for treasurers.

Jean-Luc Robert, CEO, Kyriba introduces a dedicated designation for this new role – Chief Liquidity Officer: “To acknowledge the treasurer’s evolving role, organizations should explore designating a chief liquidity officer. This position can be a single, authoritative point of accountability that oversees the lifecycle of liquidity and reports to the CFO. The CLO can develop a holistic strategy and be empowered to execute based on the company’s enterprise objectives.

“Ideally, the CLO will have all the tools and resources necessary to steer cash management, including forecasting, payments, and working capital, and access to all of the levers that can affect it.”

However, According to another recent IDC survey, only 1% of treasurers believe their companies are currently well equipped to benefit from better process centralization and autonomy.

He adds: “One of the challenges most companies face is that separate functions within the enterprise own different fragments of liquidity: Treasury owns cash and investments, procurement owns suppliers and spend, operations owns inventory. Hence, managing liquidity performance from the top level is paramount in order to truly optimize enterprise liquidity.

“The good news is that improving liquidity performance is possible today. But it requires a shift in the way CFOs prioritize roles and functions in their organization.”

JP Morgan launched the JP Morgan Working Capital Index in June this year to enable companies to benchmark their working capital performance against industry peers.

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