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A Day in The Life of A Corporate Treasury Manager

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Tyler Sciortino

on 16 July 2015

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Transcript of A Day in The Life of A Corporate Treasury Manager

A Day in The Life of A Corporate Treasury Manager
A Day in The Life of A Corporate Treasury Manager
The Core Objectives of The Corporate Treasurer
Liquidity and Cash Management
Capital Market and Funding
Risk Management
Treasury Operations and Control
Liquidity and Cash Management
Financial liquidity is the ability of a company to cover the required payments in a timely manner.

The corporate treasurer must ensure the institution maintains sufficient cash and liquid assets.
The treasurer can access the company's liquidity by comparing liquid assets and short term liabilities through key performance indicators.
If the treasurer identifies an issue, measures may be taken to reduce the gap between their cash on hand and their debt obligations.
Liquidity and Cash Management Cont.
A company must be successful with its cash management if it expects to be successful in the management of its liquidity. The treasurer's objectives would include the following:
1. Establishing the appropriate cash balance

2. Utilizing any existing cash surplus

3. Managing cash collections and disbursements

Capital Market and Funding
This function of treasury management pertains to the analysis of available funding options, the sourcing of funds, and the allocation of funds. The treasurer's responsibilities would include:
Optimizing the capital structure
Managing short-term and long-term investment
Managing a portfolio of debt, derivatives, and investments
Make certain that contractual terms and covenants do not constrain the business
Risk Management Function
The treasurer must understand and have the ability to quantify the business and financial risks that the company takes.

This requires appropriate deployment of all risk management techniques.
These may include analyzing movements in interest rates and exchange rates.
If necessary hedging tools may be implemented.
Treasury Operations and Control Function
This function involves the successful management of a corporate treasury department and its additional functions within a fluctuating business environment.

Requires effective communication between all members of the treasury department
Confident managers who think strategically
Ensuring that the corporate treasury department is aligned with objectives set forth by the executive management team


Advances in Treasury Technology
There have been many advances made that improve the efficiency of cash management and allow the treasury manager to take on additional responsibility within the company.
These automated solutions are all centralized within a TMS, or treasury management system, that integrates the corporate treasury functions in one module for the whole company.
If the company cannot repay its creditors on time and fails to meet its obligations, it can damage the reputation of the company and possibly lead to bankruptcy.
The treasurer can manage and monitor liquidity by ensuring that the cash flow forecasts are reliable, observing key ratios, and by upholding bank relationship policy.
In order to properly manage liquidity, the treasurer must constantly be thinking about new strategic ways to optimize funds to achieve maximum efficiency.
Determine the current cash requirements and account for any costs associated with its management
Develop investment strategies that target short-term vehicles following careful analysis of any associated risks
Implement various mechanisms and strategies, which will be designed to speed up cash receipts and delay cash payments
If the capital market and funding function is properly managed it can lead to the following benefits:

Effective optimization of weighted average cost of capital (WACC)
Earning maximum yield on assets
Lowering interest expenses
A better credit rating
Ensuring hedging matches funding profile
Effective risk management can provide the company with several benefits.

A clear vision of the financial risks facing the company
Reducing the need of external hedging
Minimizing the external risk on the balance sheet
Promotes a risk conscious culture


Additional responsibilities within the treasury planning and operations function:

Tax planning
Pension planning
Assist the board of directors with strategic development
Manage and discuss the fees and margins of service providers
Make sure the quality standards of service providers is upheld
Web based applications have gained substantial traction in recent years. One such type of application service provider (ASP), the software as a service model (SAAS), has become extremely useful to companies. Listed below are some of the benefits associated:

Latest technology due to the fact that it is web-based providing access anytime anywhere
IT responsibility no longer falls on the user but instead on the application service provider
It is less expensive since there is no license fee, maintenance fees, or hardware costs
Automated Solutions serve to:

Simplify settlement process via the treasury workstation
Provide timely cash position and liquidity forecasts through interfaces in the treasury workstation or ERP systems
Allow cash investments and short term borrowing via internet portals
Aid in the process of preparing periodic and ad hoc reports regarding cash position and liquidity management in a unified format
Liquidity and Cash Management KPIs
Percentage of account balances reported daily: Provides visibility into cash reported daily as a percentage of the total estimated cash position
Percentage of cash transactions reconciled automatically: Verify that each cash transfer is accounted for while minimizing the required effort
Percentage of business units/regions that miss forecasting date: Make certain that operational forecast data is provided within the set deadline
Capital Market and Funding KPIs
Risk Management KPIs
Portfolio sensitivity as a percentage of market value:
This is done to make sure the total portfolio sensitivity as a percentage portfolio value does not exceed the limit set in the treasury policy
Weighted average CDS spread of credit line providers:
Maximum percentage of investment per provider:
Hedge Ratio:
Hedge gain/loss deferral ratio:
Oversee the total non-performance risk of funding sources
Make certain that the value of assets at risk with any single provider is not more than the entire investment portfolio
Ensure that FX and commodity exposure is sufficiently hedged
Defer effect on P&L from each hedge until the items being hedged impact the income statement
Percentage potential gain/loss due to interest rate or FX scenario:
Determine the reduction in value of the portfolio given the established interest rate or FX scenarios
Cash Flow Forecasting
Cash Flow Forecasting is an important duty of the treasury manager because of the following reasons:
Allows the treasurer to recognize any deficiency in cash balances ahead of time
Ensure that the company is able to make payments to suppliers and employees
Identify any problems with client payments
Determine whether or not the business is hitting the financial objectives set by management
Full transcript