Citi Perspectives 2024 E-commerce Edition

1 https://www.citigroup.com/rcs/citigpa/storage/public/icpublic/Working%20Capital%20Efficiency%20Generates%20Significant%20Value.pdf Sonia Lall Business Development, Technology and Communications, Citi Treasury and Trade Solutions Carly Kutschle Business Development, Technology and Communications, Citi Treasury and Trade Solutions | 11 At the Center: Why treasury is critical before, during and after IPO market funds or time deposits, depending on their investment horizon and policies. As well as these immediate benefits, investors are increasingly aware of the relationship between effective working capital management and shareholder value. Research by Citi’s Financial Strategy Group on MSCI ACWI Index constituents shows that companies that consistently shortened their CCC more than sector medians deliver a higher total shareholder return (TSR) and return on invested capital, ultimately enhancing a company’s valuation. For instance, CCC “shorteners” achieved a TSR of 143% from 2010 to 2022, with a compound annual growth rate (CAGR) of 8%. In contrast, “lengtheners” only managed a TSR of 44%with a CAGR of 3% during the same period. 1 Enlisting bank support Many fast-growing companies, especially those in the technology sector, have historically had smaller treasury teams given their prioritization of resources in revenue-generating functions. Because of this, investment in technology to automate processes and increased reliance on banking partners to serve as an extension of an organization’s treasury team are increasingly important. While there is a plethora of bank and fintech solutions available, the company’s focus should be on deploying technology that is easy-to- use, frees up time for value- added activities, and delivers demonstrable benefit — both for treasury and the business. Identifying a banking partner that can provide advisory services and next generation tools and technologies is critical. At Citi, our award winning and recently reengineered online banking platform, CitiDirect®, provides visibility of all accounts, currencies and countries on a single screen, ensuring treasury can rapidly scrutinize its hedging strategy, working capital optimization, liquidity structures or cash exposure as required. In advance of an IPO or in the years afterwards, companies may decide to implement a new enterprise resource planning (ERP) or expand an existing ERP across additional functions. Citi has a longstanding commitment to integrating with a wide range of leading ERP solutions, accelerating implementation and reducing the burden on a company’s IT resources. The implementation of a new ERP can also be an opportune time to reassess banking partners and potentially rationalize relationships and account structures in order to reduce costs and improve visibility and control. As the IPOmarket comes back to life, we can expect treasury to be front-and-center as a key driver of preparation in advance of coming to market, an aggregator of critical data that delivers insights into the business once a company is listed, and a partner in bolstering the company’s long-term business case and providing the stability that underpins operational success. Although this is an awesome responsibility, treasury can draw on the support of valued partners including its banks to triumph in this journey. Listen to this article