Operational Key Performance Indicators (KPIs) are essential for measuring and optimizing corporate efficiency, focusing on metrics like free cash flow, working capital, and liquidity management, all of which must align with company-wide risk management tolerances. These KPIs should also be benchmarked against industry standards to ensure competitive positioning and compliance with sector-specific norms. Supply chain financing, DSO (Days Sales Outstanding), DPO (Days Payable Outstanding), and addressing trapped cash through efficient global cash pooling are critical areas for operational excellence. AI plays a transformative role by enhancing transparency, identifying gaps, and reducing operational costs, including headcount inefficiencies and mismatches in DSO/DPO performance. For industries with intensive working capital needs, such as manufacturing and retail, AI can optimize inventory management, ensuring alignment with both financial and risk thresholds. This integration ensures that KPI frameworks not only drive operational improvements but also safeguard organizational resilience within industry-specific and global risk environments.
Forecast Error
Forecast errors in foreign exchange (FX) risk management and working capital are inevitable due to business uncertainties, market volatility, and reliance on historical data. Common causes in FX management include inaccurate forecasting of revenues and expenses, unexpected currency fluctuations, and delays in consolidating global data. Fragmented ERP systems exacerbate these issues by failing to provide real-time, accurate information to Treasury Management Systems (TMS), resulting in incomplete visibility and heightened risk exposure. Integrating ERP and TMS systems with AI-driven tools is essential to address these challenges, as AI provides real-time data, predictive analytics, and scenario modeling to significantly enhance forecasting accuracy and decision-making.
Through our extensive experience conducting CFO-led studies for leading global organizations, we have implemented solutions that refine risk management practices, reducing the inefficiencies caused by forecasting errors. intellimation.ai, our global AI partner, plays a critical role in this process by delivering advanced analytics to optimize cash flow forecasts and improve working capital management. These AI-driven solutions not only mitigate risks and enhance financial performance but also align operational processes with corporate objectives, ensuring long-term success.
Foreign Exchange Plan Rates
Foreign exchange (FX) plan rates are critical for budgeting and operational performance, typically set annually but sometimes adjusted semi-annually or in response to unexpected rate fluctuations. The three main methodologies for determining these rates are bank-forecasted rates, market-based rates, and company-specific rates, each offering distinct advantages and risks. Bank-forecasted rates, based on financial institutions’ projections, are speculative and may misalign with actual market trends, risking budgeting inaccuracies. Market-based rates, calculated using observable data like a one-year rolling average or shorter periods, provide transparency and practicality, reflecting real FX translation costs and associated risks. Company-specific rates, while customized to align with internal benchmarks, risk introducing bias, potentially leading to inefficiencies and misaligned financial planning.
Plan rates should be treated as internal benchmarks for operational planning and budgeting rather than tools for FX risk management. Effective risk management requires strategies aligned with the company’s risk tolerance and cost profile, focusing on hedging market volatility and ensuring cash flow visibility. Distinguishing these functions allows organizations to achieve accurate planning while implementing financial risk management practices that mitigate currency fluctuation risks.
DSO/DPO Management
Days Sales Outstanding (DSO) and Days Payable Outstanding (DPO) are critical metrics for assessing a firm’s working capital efficiency and liquidity management. These metrics vary significantly across industries due to differences in business models, customer payment terms, and supplier arrangements. For instance, retail typically has shorter DSOs, while manufacturing and construction experience longer cycles due to extended payment and collection terms. Understanding these variations is essential for benchmarking performance, identifying improvement opportunities, and ensuring effective liquidity management. Technology, particularly integrated ERP and TMS systems, provides real-time visibility into receivables and payables, enhancing cash flow predictability. Despite this, many organizations struggle with suboptimal outcomes due to inadequate technology or misaligned processes. Our extensive experience working with organizations at the board level has demonstrated the importance of DSO/DPO optimization as a key KPI for liquidity and efficiency improvement. intellimation.ai, our AI partner, leverages advanced tools to deliver predictive analytics and enhanced visibility, helping firms optimize payment terms, address cash flow gaps, and make data-driven decisions, thereby improving working capital efficiency and financial resilience.
I am pleased to recommend Erik. During our time working together, Erik expertly transitioned complex projects from planning to successful execution, showing a keen ability to manage both strategic initiatives and detailed financial analyses. His proactive approach in identifying potential risks and developing mitigation strategies greatly benefited our team and our clients.
Joakim Lidbark
Former Global Head of CitiFX Client Solutions
I had the pleasure of working with Erik on several high-level CFO and board projects, spanning capital risk, foreign exchange, global policy, and treasury transformation . His depth of knowledge and keen understanding of corporate priorities are unmatched. Erik’s forward-thinking approach to potential risks, coupled with his adaptability to industry and company-specific nuances, sets him apart. He is also an outstanding communicator, able to connect effectively at all levels of an organization.
Nick Pedersen,
Global Head of Digital – NatWest
I have known and collaborated with Erik Johnson for over 25 years, beginning with our roles as regional treasury heads at Siemens—Erik in Hong Kong and myself in New York. Together, we were responsible for designing, streamlining, and implementing customized processes and protocols aimed at clarifying and managing complex corporate risk profiles across various asset classes, including interest rates, foreign exchange, credit, and commodities. This work ensured alignment with company objectives and risk management practices. Over the years, we have frequently partnered on global hedging strategies for corporate clients. Erik has dedicated his career to advancing the field of treasury risk management, demonstrating an exceptional commitment to deep understanding, integrity, and high professional standards.
Mark Cipollina,
Former CFO Siemens Capital U.S.
I have collaborated with Erik on multiple global risk management C-suite initiatives over many years with several different corporates. His extensive experience as a corporate treasurer provided him with a deep understanding of our needs across various operational areas. Erik delivered a comprehensive policy and risk management framework that aligned with our objectives, while adhering to industry best-in-class practices. His proactive and strategic approach to identifying and addressing risks, combined with his forward-looking insight and ability to embed technology into both current and future needs, sets him apart. I highly recommend him.
Ciaran Fegan, CFA
Senior Director, FX Risk Management & Treasury Strategic Projects at Viatris
I have had the privilege of knowing Erik for nearly 30 years. During this time, and in my previous capacity as the head of foreign exchange trading at leading global financial institutions in the Asia-Pacific region, I have been consistently impressed by Erik’s extensive experience in global risk management and his deep understanding of financial markets across multiple asset classes. Erik displays a disciplined approach to risk management, spanning both emerging and developed markets, and stands out as an industry leader. His strong grasp of macroeconomic themes and expertise in financial risk modeling, allow him to translate complex data into practical, effective risk management solutions that consistently deliver value for his firm and their clients. I am confident in recommending Erik for roles requiring strong leadership, strategic vision, and deep expertise in financial markets and risk management.
Christopher de la Hoyde
Former Head of Foreign Exchange Asia Pacific at RBS
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