Group treasury function

Group treasury function – the goal of most treasury functions is to optimize the organization’s liquidity, make sound financial investments, mitigate financial risks, and provide useful cash/interest/investment reporting.

A treasury function is (depending on the size of a group) a centralised support and service function that acts as the custodian of a group’s cash and balance sheet and its key financial risks. It performs its activities in a strong control environment, within board approved limits. It is normally not a profit center.

It is responsible for managing liquidity through funding and investments as well as financial risks such as foreign exchange, interest, financial counterparty credit, commodity, insurance and pension risk. It is also responsible for managing banking relationships across a group. Group treasury function

Treasury roles in a company

1. Cash Forecasting/Liquidity planningGroup treasury function

This is the beginning of all other roles carried on the operation of a treasury department. Dislike the accounting staffs who handle the cash receipt and disbursement activities on daily basis, treasury staffs need to draw all those accounting staffs records (within the organization including its subsidiaries if any), and compile it to generate a cash forecast (short and long-range). The forecast and all its components are needed to:

  • determine if more cash is needed. If that is the case, then they can go on to plan for fund inquiry either through the use of debt or equity.
  • plan for investment purposes, if the forecast results in surplus and cash excess shows up. Group treasury function

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.

2. Working Capital Management

Major usage of company’s cash is in the working capital area. Working capital is a key component of cash forecasting. It involves changes in the levels of current assets and current liabilities in response to a company’s general level of sales. The treasurer should be aware of working capital levels and trends, and advise management on the impact of proposed policy changes on working capital levels. Group treasury function

3. Cash Management

Combining information in the cash forecast and working capital management activities, Treasury staff is able to ensure that sufficient cash is available for operational needs. 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. Group treasury function

4. Investment Management

When the forecast shows some excess funds at, the treasury staffs are responsible for the proper investment of it. Three primary goals of the role are: (a) maximum return on investment; (b) matching the maturity dates of investments with a company’s projected cash needs; and most importantly is (c) not putting funds at risk. Group treasury function

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. Group treasury function

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. Group treasury function

General model of measurement of insurance contracts

Group treasury function

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