Strategic Treasury

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The Functions of a Corporate Treasury At the end of 2008, Verband Deutscher Treasurer e.V. commissioned a survey to examine the functions of a corporate treasury. In addition, 142 corporate treasury job advertisements were examined and evaluated and compared to a similar evaluation performed in 2002.

The Functions of a Corporate Treasury

At the end of 2008, Verband Deutscher Treasurer e.V. commissioned a survey to examine the functions of a corporate treasury. In addition, 142 corporate treasury job advertisements were examined and evaluated and compared to a similar evaluation performed in 2002.

The treasurer’s functions can in principle be classified as follows:

  • Core functions (functions which can be found in every company)
  • Marginal functions (activities which are extremely company-specific and/or only form part of the treasury in selected cases), as well as
  • Functions, marginal sectors and interfaces to other organisational units or tasks which, whilst being important to the treasury, do not normally form part of the treasurer’s role.

As far as its definition is concerned, the treasurer’s professional profile is of Anglo-Saxon origin. An evaluation of the survey indicates, among the core functions, a wide overlap with the Anglo-Saxon treasury model, although, some clear divergences were also found within the marginal and other functions.

The result of the survey discloses 6 core functions of the treasury of general significance:

  • Cash management
  • Liquidity planning and control
  • Management of interest, currency and commodity risks
  • Procurement of finance and financial investments
  • Contacts with banks and rating agencies
  • Corporate finance

Cash management clearly forms part of the treasury’s core functions. In addition to dealing with payment transactions; cash management also includes planning, account organisation, cash flow monitoring, managing bank accounts, electronic banking, pooling and netting as well as the function of in-house bank. The figure below shows the cash management structures within companies.

Risk management and group finance have gained considerable significance.

Liquidity planning and control are closely linked to cash management. A central topic here also covers interest and currency risks, as well as increasingly also, commodity risks. This involves control of these risks, as well as the documentation of hedging transactions.

The core duties of the treasury also comprise the procurement of finance and financial investments, and therefore topics such as money dealing, working capital finance, but also factoring. An analysis of the job vacancy advertisements shows that the function of the procurement of finance is mentioned much more frequently than that of financial investments, the inclusion of systematic financial investments, in the sense of active asset management, were found to be the exception.

The corporate finance functions of treasury comprise medium and long term financing, particularly capital market instruments, ABS, group financing, credit, leasing, promotion instruments, shareholders’ loans and, in this instance, the handling, monitoring, terms, conditions, hedging, periods and contractual dates. It is interesting to note that this sector assumes less significance among the other core functions and is merely mentioned as a marginal function by about 15% of the replies. 

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