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8 Roles of A Treasury Department



Roles of Treasury DepartmentThe treasury department occupies a central role in the finances of the modern corporation. It takes responsible for the company’s liquidity—ensures that a company has enough cash available at all times to meet the needs of its primary business operations. It sounds easy, right? In fact it is not.

To really meet the goal, a treasury department would need to perform the following roles over time:



Treasury Role-1. Cash Forecasting

This is the beginning of all other roles carried on the operation of a treasury department. Dislike the accounting staffs who handle the cash receipt and disbursement activities on daily basis, treasury staffs need to draw all those accounting staffs records (within the organization including its subsidiaries if any), and compile it to generate a cash forecast (short and long-range). The forecast and all its components are needed to:

  • determine if more cash is needed. If that is the case, then they can go on to plan for fund inquiry either through the use of debt or equity.
  • plan for investment purposes, if the forecast results in surplus and cash excess shows up.
  • plan its hedging operations by using the information at the individual currency level.


Treasury Role-2. Working Capital Management

Major usage of company’s cash is in the working capital area. Working capital is a key component of cash forecasting. It involves changes in the levels of current assets and current liabilities in response to a company’s general level of sales. The treasurer should be aware of working capital levels and trends, and advise management on the impact of proposed policy changes on working capital levels.


Treasury Role-3. Cash Management

Combining information in the cash forecast and working capital management activities, Treasury staff is able to ensure that sufficient cash is available for operational needs.


Treasury Role-4. Investment Management

When the forecast shows some excess funds at, the treasury staffs are responsible for the proper investment of it. Three primary goals of the role are: (a) maximum return on investment; (b) matching the maturity dates of investments with a company’s projected cash needs; and most importantly is (c) not putting funds at risk.


Treasury Role-5.Treasury Risk Management

The treasury staffs are also responsible to create risk management strategies and implement hedging tactics to mitigate the whole company’s risk—particularly in anticipating (a) market’s interest rates may rise and leave the company pays on its debt obligations; and (b) company’s foreign exchange positions that could also be at risk if exchange rates suddenly worsen.


Treasury Role-6. Credit Rating Agency Relations

A company may issue marketable debt. In this case a credit rating agency will review the company’s financial condition and assign a credit rating to the debt. The treasury staff would need to show quick responds to information requests from the credit agency’s review team.


Treasury Role-7. Bank Relation

A long-term relationship can lead to some degree of bank cooperation if a company is having financial difficulties, and may sometimes lead to modest reductions in bank fees. The treasurers should therefore, often meets with the representatives of any bank that the company uses to: discuss the company’s financial condition, the bank ’ s fee structure, any debt granted to the company by the bank, and foreign exchange transactions, hedges, wire transfers, cash pooling, and so on.


Treasury Role-8. Fund Raising

Maintaining an excellent relations with the investment community for fund raising purposes, is important—from the (a) brokers and investment bankers who sell the company’s debt and equity offerings; to the (b) the investors, pension funds, and other sources of cash, who buy the company’s debt and equity.

Other than those main roles, fundamentally the treasury staffs also monitor market conditions constantly, and therefore is an excellent resource for the management team should they want to know about interest rates that the company is likely to pay on new debt offerings, the availability of debt, and probable terms that equity investors will want in exchange for their investment in the company.

If a company engages in mergers and acquisitions on a regular basis, then the treasury staff should have expertise in integrating the treasury systems of acquirees into those of the company. Another activity is the maintenance of all types of insurance on behalf of the company.

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