Could KPIs help treasury to remain strategic?


Nordea last reported on treasury key performance indicators (KPIs) in 2016. Back then, more than three-quarters of respondents had established treasury KPIs and the majority said KPIs had improved treasury effectiveness.

Nordea's 2019 Treasury KPI report reveals that treasuries are embracing KPIs, and the business is paying attention to the outcomes. But just as in 2016, treasuries aren’t 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.

Operational KPIs and corporate social responsibility (CSR) are falling down the agenda and hardly any treasuries have implemented KPIs related to their digitalisation goals.

Treasuries are embracing KPIs…

• 77% of treasuries have established KPIs to measure treasury performance
• 90% have KPIs that are at least partially linked to the company's srategic goals

Just over three-quarters, 77%, of treasuries have established KPIs. And 46% of those use specific KPIs to track treasury performance, up from 27% in 2016. Significantly, 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 treasury's ambition to become a more strategic player, this figure was expected to rise rather than fall.

Treasury does have the attention of business leaders, however. The board is the most likely to set treasury's KPIs (32%), followed by the CFO (28%) and treasury itself (19%). The business recognises the importance of what 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.

…but they're not seeking feedback

• 35% regularly measure stakeholder satisfaction with the treasury
• 7% said that KPIs are used to benchmark the treasury against peers

Only 35% regularly measure stakeholder satisfaction with 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 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.

They're focused on the short term…

• 13% have KPIs for operational efficiency and control — down from 64% in 2016
• 30% have KPIs for working capital management — down from 52% in 2016

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.

…and not ready for digitalisation

• 6% have KPIs for the digitalisation of treasury functions
• 36% have identified treasury reporting as an area for digitalisation in the long term

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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