Bankers, Get Your Basics Right !

Treasury (/?tr??(?)ri/) and Treasurer (/?tr??(?)r?/) definitions are generally misconstrued by several bankers I have come across. The definition implies, the term treasury to its roots to store money or valuables. In today’s world, where financial assets are typically deposited with a financial institution(s), rather than storing in a safe room. Treasury management function has evolved immensely with times. Far from being predominantly a cash controller, today’s treasurer is often seen as an integral part of the organization, communicating with internal stakeholders, as well as overseeing and advising on financial decisions.

The key objectives of a Treasurer include:

• Liquidity Management
• Optimize Cash Resources
• Short term, medium to long term funding
• Short term, medium to long term Investments
• Risk Management
• Repository of financial information
• Manage external vendors (not limited to banks)

To keep it simple, treasurer in any organization perform daily activities involving liquidity management to ensure availability of cash resources and necessary information available for senior management to help them in their overall financial objectives.

The first four key objectives (excluding the medium to long term funding) are often referred to as working capital management, as they focus on cash conversion. While the other objectives are equally key for any treasurer to perform. However, by setting up the organization’s working capital management right means laying the strong foundation for effective treasury management.

With the technology advancement and competitive global landscape, which has forced the organizations to centralize or in some industries decentralize their operations, treasurers have been seen playing a major role in creating value for the shareholders.

Treasurer or CFO, how we may know them in the middle east, are not just there to discuss financing requirements with the bankers, but do have a much greater role (as mentioned above) in managing overall corporate treasury function, than perceived by many of the bankers today. It is absolutely essential for any banker to understand this basic fact right before exposing him/herself into a relationship with a Treasurer.