Treasury Organization
Although there is no straight forward answer to the question, how to best organize a treasury function, this article provides an generic view of the way large MNCs creates departments or sub-functions within the treasury function.
Centralization of treasury continues to be a clear trend and most organizations prefer a centralized treasury function.
Treasury is mainly organized as a cost or service center an acts as an center of excellence in corporate finance.
Some common sub-functions are-
Business Treasury
which often acts as a face to the different businesses/P&Ls within the enterprise.
- Main responsibilities include Deal structuring & integration, Hedging & match funding and Cash consulting.
- Sometimes responsible for Bank account management, disbursement facilitation, & cash management.
- Helps in temporary investment of the company's excess cash.
Funding & Exposure Management
which acts as the face to the market.
- Main responsibilities include raising debt – both short term as well as long term and Banking & securitization.
- Manages external funding and debt and also helps manage internal funding requirements by various business units through intercompany loans and transfers.
Risk Management
- Centralization is ongoing of especially risk and cash management with broadening of responsibilities – examples include group payments and collections, insurance and group credit risks
- Main responsibilities of this department include risk management, asset/Liability management, Interest Rate and currency hedging
- Asset Liability management by controlling interest rate and foreign exchange risks due to mismatches between assets and liabilities.
Capital & liquidity
- Main responsibilities include management of rating agency & regulatory relationships
- Along with Liquidity & capital management
- Capital Management to ensure various legal entities can cover unexpected losses
- Liquidity Management by monitoring and managing the liquidity profile of the enterprise
Investor & bank relations
Bank relationship strategies have become more sophisticated and a specialized department is generally responsible for managing enterprise communications.
- Main responsibilities include Relation management, Credit allocation, exposure & procurement management
- Most organizations also have an enabling arm that is responsible for day to day operations, information technology, quality, trade management etc.
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