What a corporate treasurer does

A corporate treasurer manages a company’s cash, liquidity, funding and financial risks. The practical aim, as the Controllers Council describes it, is to have the right amount of cash available at the right time, place and currency.

The work connects operational and strategic decisions. Treasury monitors cash and forecasts needs, helps arrange funding or capital, considers permitted uses for surplus cash, and manages exposures to liquidity constraints, interest rates, currencies and counterparties. The role commonly works closely with the CFO and senior management.

The corporate treasury decision loop

Treasury starts with cash visibility: monitoring bank-account balances, cash flows and the expected timing of receipts and payments. The Controllers Council and Rho describe treasury work as dealing with existing and expected cash, while Rho also identifies cash pooling and cash forecasting as activities used to manage liquidity.

Those forecasts inform funding decisions. Goldman Sachs describes its own Corporate Treasury function as raising funding and capital, allocating financial resources and managing liquidity and asset-liability risk in line with firm strategy. The precise responsibilities vary by company, but funding planning and liquidity projections are established treasury activities.

If cash is expected to exceed operating needs, treasury may assess permitted investments or other uses under the company’s policies. The Controllers Council says treasurers may investigate and recommend creditworthy financial-security issuers when a business has excess cash. Liquidity needs and counterparty credit risk remain relevant to that decision.

Financial risks treasury manages

Corporate treasury commonly addresses several connected risks:

• Liquidity risk: the risk that the company does not have sufficient cash or access to funding for short-term obligations.
• Interest-rate risk: exposure to changes in interest rates, including rates on loans.
• Foreign-exchange risk: exposure to currency fluctuations where a company has activity or obligations in different currencies.
• Credit or counterparty risk: the risk associated with a counterparty, such as a bank, customer or supplier, failing to meet an obligation.

Investopedia identifies interest-rate volatility, liquidity constraints, credit exposure and currency fluctuations among the financial risks managed by treasurers. Moody’s likewise identifies liquidity, market and credit risk in the corporate-treasury context.

Risk management is governed by policy and delegated authority. Investopedia says a treasurer can formulate board-approved policies that set permitted risk-management methods and the authority of treasury personnel.

A simplified cash-management example

Consider a company with $12 million of cash at the start of a month, $8 million of expected customer receipts and $17 million of expected payroll, supplier and debt payments. Its projected month-end cash balance is $3 million.

If the company’s hypothetical internal policy requires $5 million to remain readily available, the forecast identifies a $2 million funding or cash-management need. Treasury would assess permitted options, such as available funding or a change in the timing of a planned cash use, subject to approvals and risk limits.

If the forecast instead showed cash above the policy buffer after expected payments, treasury would assess how much is surplus, for how long, and which approved use fits the company’s liquidity and credit-risk limits. This illustrates how daily cash information can feed funding, investment and risk decisions.

How the role varies by company

Larger organisations commonly have dedicated treasury teams or professionals that monitor and forecast cash flows and manage liquidity, according to Rho. Goldman Sachs, for example, lists specialist areas including resource allocation, funding planning, asset-liability management, liquidity projections and liquidity policies.

At smaller businesses, the treasury function may sit with a broader finance team, a controller or a CFO rather than a standalone department. The Controllers Council notes that treasury duties can be combined with other finance roles.

Frequently asked questions

What are the main financial risks a corporate treasury team manages?

The main categories identified in the supplied sources are liquidity risk, interest-rate risk, foreign-exchange risk and credit or counterparty risk. These concern cash availability, rate and currency movements, and the possibility that a counterparty does not meet an obligation.

When does a company have a dedicated treasury function?

The organisational structure varies. Rho says larger organisations commonly have dedicated treasury staff or teams, while the Controllers Council says smaller businesses may assign treasury work to a broader finance team, controller or CFO.

Sources

• Corporate Treasurer: Mastering Financial Risk Management — www.investopedia.com
• Understanding the Role of a Corporate Treasurer — controllerscouncil.org
• Careers in Corporate Treasury — www.goldmansachs.com
• Corporate treasury: What is it, and why do companies need ... — www.rho.co
• Corporate Treasurers — www.moodys.com