In the second part of “Barden Uncovered: Treasury Careers” Aoibhín Byrne, Senior Associate at Barden and expert recruiter in Recently Qualified Tax, Audit, Advisory and Treasury Careers, takes a look at the role of treasury in finance.
At a “talking treasury” event previously hosted by ACCA and IACT, a useful term was used to describe the role of treasury in finance – “the morning treasurer and the afternoon treasurer”.
The morning treasurer is engaged with trading activities (what’s known as front office) such as interest and FX rates hedging – the transactional side of treasury. The treasurer must ensure the best deal is obtained for the company’s cash and borrowings.
Once the trades have been completed, there is time to think and the afternoon treasurer takes off – the strategic side of treasury.
3 Key Pillars
When looking at the role of treasury in finance there are 3 key pillars.
- Credit rating, investor & bank relations
- Funding & liquidity /cash management
- Risk management
Here we’ll take a closer look two of the three pillars. The third pillar will be covered in the third part of the “Barden Uncovered: Treasury Careers” series.
Credit rating, investor & bank relations
The following gives a flavour of role of the treasurer when it comes to credit rating, investor & bank relations:
- Dealing with credit rating agencies, investors and banks make up a huge component of the work of a treasurer.
- Maintaining strong credit ratings is a requirement to raise finance for the business.
- Some companies could have over 100 different investors all with different demands.
- Having a strategic partnership with a bank is key to ensure the best treasury and risk management tools are used.
- In the open market we have today, there can be multiple forms of banks which can offer treasury services – domestic banks, international banks and fintech companies.
- For many corporates, front office trading is outsourced to their banking teams so it’s even more important to have strong banking relations.
Funding & liquidity/cash management
“Never take your eyes off the cash flow because it’s the lifeblood of the business” Richard Branson
Whether it’s managing the company’s liquidity (i.e. cash management) or funding requirements, the treasury team has a key part to play in this. The questions below provide a good overview of the issues the team can be accountable for;
- Does that company have a funding strategy? What if interest rates go up, what will happen to the company’s debts and ability to borrow on the market?
- How much of the company’s debt is fixed to protect the company from rising interest rates?
- Has the company got access to diversified funding sources?
- How many days can the company run on low liquidity? Cash is still king!
- Is the company matching funding activities to investment activities?
- Does the treasury team understand the exposure the company has to inflation, currency changes etc.?
- What hedging tools, if any, are being used?
As you can see from the above, the role of the treasury is not just front office or accounting, but can cover a huge array of issues from within and outside the organisation.
In the third part of “Barden Uncovered: Treasury Careers” we will examine the 3rd pillar of treasury in finance, risk management, and the issues facing many businesses in a volatile global market economy.
The first part of “Barden Uncovered: Treasury Careers” focuses on “The Basics: The what, the how and the why? Click here to read it.
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