Treasurers serve as financial risk managers who seek to protect a comp🌳any's value from the financial risks it faces from its business activities. Because these risks can arise from many sources, the role requires an understan🉐ding of many areas of business and the ability to communicate with a variety of financial professionals. Once an offshoot of the accounting department, corporate treasury management has evolved into a separate company department and professional body. Keep reading to find out more about the role of corporate treasurers.

Managing Risk

Treasurers manage several key 澳洲幸运5开奖号码历史查询:financial risks related to changes in 澳洲幸运5开奖号码历史查询:interest rates, credit, currency, commodities, and operations. Companies face some or all of these risks to varying degrees. The most common include liquidity, currency, interest rate, and occupational risk.

Liquidity Risk

Perhaps the most important risk a treasurer must manage is 澳洲幸运5开奖号码历史查询:liquidity risk. A company that experiences liquidity risk is running out of cash either fro🐟m insufficient revenue, excessive ex♛penditure, or the inability to access funds from banks and other external sources.

The inability to meet payment obligations as they are due can mark the end of a company if its 澳洲幸运5开奖号码历史查询:creditors sell off its assets to pay corporate debts.

Credit Risk

Surplus cash can be invested to earn interest, and the treasurer must be sure that those issuing or insuring securities are financially sound and 澳洲幸运5开奖号码历史查询:creditworthy.

One way to do this is by checking an issuer's 澳洲幸运5开奖号码历史查询:credit rating, which provides an independent assessment of the likelihood that a third party will pay on time and iཧn full as expected🧔.

The treasurer must also be confident that 澳洲幸运5开奖号码历史查询:counterparties to financial instruments used to manage risks, such as 澳洲幸运5开奖号码历史查询:interest rate swaps, will perform as expected.

Currency Risks

Exporting companies face the following 澳洲幸运5开奖号码历史查询:currency risks:

• 澳洲幸运5开奖号码历史查询:Transaction risk when they translate proceeds from foreign sales into their home currencies.
• 澳洲幸运5开奖号码历史查询:Translation risk in financial reporting when the value of the foreign subsidiaries' assets and liabilities fluctuates upon conversion to a single home currency.

Investors and analysts may view currency moves t🐷hat cause a drop in the value of consolidated foreജign assets and in profits as a problem, potentially causing the share price to fall.

Treasurers may find it more difficult to manage the risk that occurs when a competing company from another country experiences a more favorable 澳洲幸运5开奖号码历史查询:currency translation. For example, two exporters from different countries both selling goods to a Japanese importer depend on how their currencies move against the 澳洲幸运5开奖号码历史查询:Japanese yen. Competitive moves, such as relocating manufacturing plants to match the competitor's currency cost base, ♏can have major ramifications. The treasurer can suggest that senior management only implement such a move after extensive discussion.

Interest Rate Risk

Most companies need to borrow to finance operations, such as buying raw materials, machinery or premises. Borrowing at 澳洲幸运5开奖号码历史查询:variable interest rates allows🥃 companies to pay less if market interest rates fall, but raises their costs if rates go up.

If a company does not pay interest because of insufficient cash, it may run into a 澳洲幸运5开奖号码历史查询:liquidity crisis that could undermine its ability to borrow in the future or to raise it only at higher interest rates that reflect its heightened 澳洲幸运5开奖号码历史查询:credit risk to lenders.

Operational Risk

The financial risks discussed above are external. 澳洲幸运5开奖号码历史查询:Operational risk is an internal treasur🔯y risk that reflects inadequate operational controls that coul♊d lead to a loss of company value.

An example of inadequate controls might be if a treasury dealer borrows money under a company loan agreement, apparently for a business purpose, but transfers the proceeds to their bank account because the treasurer can undertake both dealing and funds transfer activities.

In a well-controlled treasury, such 💮functions would be segregated and attempted to undertake both by the same individual would be immediately detected.

Risk Policies

A treasurer will formulate a set of board-approved policies that define the methods allowed to manage the above risks and the discretionary powers of the treasurer and other authorized personnel.

These policies vary by company. But, not every business allows treasurers to use derivatives or to leave risks unprot🌺ected, or they may only allow such practices within defined limits and terms.

The treasury department's actions and 澳洲幸运5开奖号码历史查询:compliance with treasury policies must be consistently assessed independently by the internal audit department and by a treasury committe💝e comprised of senior management, including the treasurer.

This committee, or an 澳洲幸运5开奖号码历史查询:assetꩲ and liability committee (ALCO), will also regularly review and discuss financial risks across the company's assets and liabilities, and agree on appropriate actions to manage or transfer them. ALCOs will usually delegate the task of executing agreed-upon actions to the treasurer and their team.

When there is no single obvious solution to managing financial risks, a treasurer must weigh the pros and cons of a course of action. Decisions may involve consulting relevant internal and external specialists and undertaking data analysis and possibly 澳洲幸运5开奖号码历史查询:scenario analysis to recommend a course of action.

Professional Development

Many treasurers were trained as 澳洲幸运5开奖号码历史查询:accountants and undertook treasury activities as an offshoot for their accounting roles. However, with the development and proliferation of financial instruments and the globalization of 澳洲幸运5开奖号码历史查询:financial markets and companies, treaꦉsury management has become more specialized, complex, and time-consuming.

Large and multinational companies establish treasury departments as autonomous 澳洲幸运5开奖号码历史查询:risk management units. Corporate treasury managemen𝔉t is now recognized as a distinct profession from accountancy. Many countries have specialized professional bodies, such as the Association of Corporate Treasurers in the U.K. and specialized education programs.

Specialist and Generalist

Although a treasurer is essentially a risk management specialist, performance is enhanced by having a pract🍸ical k🐷nowledge of various associated corporate support functions such as law, tax, insurance, accounting, economics, and banking. The corporate treasurer is also a generalist in these areas.

Because financial risks come from various sources within a company, such as 澳洲幸运5开奖号码历史查询:interest rate risk in loans, credit risk in investments, or currency risk in de🌞btor invoices, a treasurer must understand the nature and financial dynamics of each of a company's assets and liabilities across many different departments, underscoring the benefit of a broad financial education.

Interpersonal Skills

In addition to consulting relevant internal colleagues, a treasurer often execut🅠es actions to manage financial risks only after also consulting with external specialists such as bankers, lawyers, credit rating agencies, tax and accounting consultants, and auditors.

A glance at any 澳洲幸运5开奖号码历史查询:tombstone will confirm the wide range of specialists involved in raising debt or equity, for example. Strong interpersonal and communication skills are therefore an important personal attribute for a tr𝓀easurer.

Senior Manager

The impact o🎀f financial risks on company value and survival can be catastrophic and sudden. The treasurer, along with perhaps a small team consisting of a treasury accountant, cash manager, treasury analyst, and dealer, is entrusted with a great deal of responsibility.

As such, a treasurer is often a member of a company's senior management team, usually reporting directly to the 澳洲幸运5开奖号码历史查询:chief financial officer (CFO) or even commanding a seat on the 澳洲幸运5开奖号码历史查询:board of directors.

The Bottom Line

Treasurers are increasingly assuming more strategic roles in companies. They have moved beyond managing working capital to becoming increasingly involved with working with a company's senior management to manage risk and boost the 澳洲幸运5开奖号码历史查询:bottom line.