Taking the Treasury Initiative
Published: October 08, 2026
The difference between proactive and reactive treasury management models are scrutinised by Oleh Kurinnyi, a global treasury and operations specialist.
Everyone has their own path to success, but it is rarely an easy one. As the ancient sages said, per aspera ad astra – through hardships to the stars. In treasury management, as the centre for co-ordinating cash flows and managing liquidity risk, there are two main strategies of endeavour: reactive and proactive.
The reactive strategy is based on the treasury’s actions in response to external influences arising from the current conditions within the company and the business community. The proactive strategy involves the active participation of the treasury, and the treasurer, in shaping the company’s business processes and taking pre-emptive action.
In the early stages of a company’s operations, cash management is often a minor part of the finance function. It is typically carried out by one or two multi-tasking accounts payable specialists who are often involved in other projects or working part-time.
Functionally, their responsibilities include managing a single current account, in a single currency, at a single-service bank. They reconcile bank balances with the internal accounting system. They will also make payments as and when invoices are received from suppliers, or instructions are issued by the company’s accounts department regarding the accrual of taxes, wages, utility, and rent payments.
In this management model, treasury operations are recorded in simple spreadsheets, with minimal data analysis. The preparation of weekly or monthly cash reports is executed on a post-facto basis. Payments are often made manually, directly via the service bank’s online system, without automation or the use of specialised visualisation systems.
This reactive approach quickly becomes inadequate as the company’s business grows, its international network of branches expands, and it begins dealing with overseas suppliers and customers.
The issue of financial transformation becomes particularly acute in the event of intensive business expansion. This can happen through the acquisition or takeover of other companies in the sector in which the parent company operates. I analysed this challenge, and ways of resolving it, in a previous TMI article on financial transformation projects.
In such cases, not only do cash flows increase in terms of the volume and number of outgoing and incoming payments, but they also demand the systematic maintenance of accounts. These may be across several service banks in different countries, with the execution of payments in various currencies, and feature trade finance products as hedges against liquidity, currency, credit, and operational risks.
Steps to success
To address these issues, a shift to a proactive treasury model is required. First and foremost, a rolling cash flow forecasting system must be introduced. To achieve this, it is not sufficient to simply compile a one-off static table of all possible cash inflows and outflows, by counterparties, volumes, currencies, and contractual terms. A comprehensive forecast must be constantly updated to take account of the latest data on new transactions, or changes to the terms of previously concluded transactions.
Furthermore, any forecast must take into account the probability that each transaction will be settled by the agreed deadline, and in the full amount due. In the event of adverse changes in the financial position of a counterparty – within the industry or at national or global level – this probability decreases. This in turn may lead to an imbalance between incoming and outgoing cash flows.
To effectively forecast cash flows, the treasury must actively communicate with the company’s internal departments and external participants in business processes. My TMI article on the art of teamwork discusses how this may be best achieved.
The second key task of a proactive treasury is to build and maintain a reserve of high-quality liquid assets (HQLAs). These create a liquidity buffer capable of hedging liquidity risk in the face of financial market volatility and cash flow instability. My thoughts on this topic are further developed in this TMI article on how treasury balances risk with return.
The third key area of the treasury’s activities brings together all of the above, accelerating business operations through the medium of the TMS. These platforms are specifically designed to automate cash management, including cash flow forecasting. They connect with service banks, providing data analysis and visualisation via dashboards that, in many cases, now provide real-time visibility of cash positions, and data trends.
A TMS can enable the treasurer to centralise the cash management of a multinational company, integrate it with an ERP system, and incorporate it into the company’s unified financial reporting system. Many of the company’s business processes can be synchronised with treasury processes, ultimately enhancing the company’s overall efficiency.
When a TMS is AI-enabled, as most are these days, it can free up treasury time for value-adding tasks. However, as a valuable proactive management skill, it remains important for the treasurer to be able to formulate a task, then analyse, evaluate, and present the results.
This matters because a proactive treasury manager is thus provided with the means to become an active member of the company’s management team, playing a part in making key decisions regarding business development and core business processes.
Another key area of consideration for the proactive treasurer is managing treasury as a profit centre. This transforms the perception of treasury as a service department into one that is value-generating. In this approach, treasury proactively generates revenue through the effective allocation of liquidity, the optimisation of borrowing costs, and the arbitrage of interest rates and exchange rates, as I explain in my TMI article on transfer pricing methods.
The bottom line is that when a treasury department effectively addresses its key objectives – automating routine tasks, forecasting the future, and managing risks before they materialise – it is transformed from a reactive payment processor into a proactive strategic partner to the company’s senior management.