Introduction to Treasury

Treasury in a company is key in determining the firm’s financial strategy and financial policy – advising on what businesses to invest in, organising the appropriate funding for this, and controlling the risk in the organisation.

Dependent on the risk environment, treasury will create an appropriate capital structure of debt and equity in order to fund the business, getting the optimum balance between cost and risk. This translates into the need to ensure that at all times the company has the liquidity and cash to meet its obligations as they fall due, taking in funding from equity or debt capital markets activities, bank borrowings, through to day-to-day cash management and investment.

Treasury is responsible for the identification of risks associated with this activity and for controlling risks that could erode financial strength, using mitigation and hedging techniques and encouraging a culture of sound financial practice.

In essence treasury management is all about handling the banking requirements, the funding for the business and managing financial risk. It therefore incorporates raising and managing money, currency, commodity and interest rate risk management and dealing, and, in some organisations, the related areas of insurance, pensions, property and taxation.

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