When we think about Treasurer , what comes to our mind ? Is treasury profession is an extension of accounting profession or treasury professionals are just liquidity manager and cash flow planners ? Well, the answer is Yes and No both. Treasury management is different for different organisation. It is largely a fall out of main business activities of the organisation and also depends upon philosophy and thinking of the Board of Directors. Since treasury management involves handling organisations cash kitty , the Board is expected to be naturally conservative and risk averse. So every Treasurer has to respect this connotation and act accordingly in fiduciary capacity as a custodian of shareholders fund.

So how does a treasurer add value to the business ? In different type of businesses , a treasurer can add value differently. In case of a Corporate conglomerate with significant debt, a treasurers significant KRA is minimizing the after tax cost of debt and if there is a cash surplus at all, improve the float efficiency through most suitable deployment.

In contrast,take a case of an FMCG company where cash realization on sale of product is instantaneous and no significant capital expenditure is required in foreseeable future, so here the stockholders equity minus fixed assets of the firm and current liabilities is almost equal to cash surplus of the Company , in such cases , treasury professionals have to assume the role of investment professionals or like fund managers managing the private corpus of a single organisation instead of many investors money. Here, investment management is a subset of treasury management.

Investment management is very niche activity ,whereas treasury management is more broader function , since along with investment management , treasury managers are expected to have appreciation towards various financial and non financial risks such as liquidity risk, interest rate risk, credit risk, price risk for equity, commodity and currency and operational, systemic, legal/regulatory and accounting risk associated with their activities.It is very imperative to mention that risk management and associated risk mitigation and hedging strategies are integral to treasury function. Also, for effective discharge of their duties and responsibilities, treasures are expected to maintain cordial relationship with various internal and external stake-holders such as Board, Credit rating agencies, bankers for credit lines and various other market intermediaries.

Now see treasury management in a banks. Banks which are heavily regulated entities are in a business of taking deposits and advancing loans. Negative or positive difference between deposits and loans is a part of treasury activities . Regulations require that certain percentage of every rupee mobilized as deposit should be invested in highly liquid notified Government securities, Cash or Gold. Asset – Liability Management(ALM) which is a backbone of not only treasury function but also entire bank as well is very much regulated.Regulator has specified the broader norms for treasury investment Hence, it is safe to say, here a regulator actually determines how a bank treasury should run. Also, earning maximum treasury return adds to banks financial health and creates wealth for its shareholders. Unlike Corporate, treasury management is not byproduct of main business activity , but is a main business segment itself.

To sum up, it can be concluded that since each organisation and its business is different and unique it calls for different type of treasury management and in all cases the ultimate goal is to contribute in ROE. Nevertheless, in today’s complex business environment , role of treasurer is becoming increasingly important and becoming more strategic.Today’s treasurers are tomorrows business leaders.

-Jayna Gandhi, CFA