A complete guide to operating a corporate treasury from a global perspective For CFOs and treasurers looking to re-align their treasuries with the growth of the global firm, bankers who seek to maximize the value they create for clients, treasury and finance firm employees, and even finance students, this book provides an easy-to-read approach to this exciting and increasingly complex world. It includes a toolkit that gives practitioners a reference point that they can adapt immediately for use in their firms, providing a low-cost, high-efficiency advisory solution they previously lacked. * Offers a uniquely global perspective unlike most books on the subject, which tend to focus on the US market * Incorporates a bottom-up, segmented approach that uses fundamental building blocks to form a comprehensive overview of corporate treasury * Includes a toolkit that provides a ready foundation for learning based on checklists, templates, and scorecards that can be adapted and customized to the needs of an individual firm * Written by an author with more than 13 years working in different aspects of corporate and institutional banking, from capital markets to transaction services * Written by an author who has spent many years working The Handbook of Global Corporate Treasury serves as a ready reference for anyone interested in the nuances and practicalities of the complex world of corporate treasury.
Foreword xiii Preface xv Acknowledgments xix PART ONE: THE WORLD OF CORPORATE TREASURY 1 Chapter 1: Role of Treasury in a Global Corporation 3 Introducing Treasury Leadership 4 Organisation Structure and Responsibilities 6 Treasury Functions and Responsibilities 10 KPIs and Deliverables 15 A Day at the Offi ce What Does the Treasurer Do? 17 Summary 19 Chapter 2: Treasury Design 21 Key Elements of Treasury Design 22 Introducing Centralisation 24 Evolution of Treasury Models 25 Summary 36 Chapter 3: Treasury Culture 37 Qualities 38 General Skills 40 Technical and Work-Related Skills 41 The Many Hats of the Treasurer 43 Summary 44 Chapter 4: Importance of Operations and Control Efficiency 45 Tools 45 Different Offi ces: Front, Middle, and Back 48 Summary 54 PART TWO: TRANSACTIONS AND CASH MANAGEMENT 55 Chapter 5: Account Management and Structure 57 Putting an Account Structure in Place 58 Account Operation and Approaches 62 Rationalising Account Structures 65 Examples of Account Structures Across Sectors 68 Summary 69 Chapter 6: The Movement of Money 71 Money Transfer Mechanisms 71 Domestic Clearing and Settlement Systems 75 Cross-Border Payments and Collections 83 Summary 94 Chapter 7: Netting 95 Introduction and Concepts 95 Netting Implementation 101 Benefi ts and Caveats of a Good Netting Solution 106 Summary 107 Chapter 8: Liquidity Management Introduction and Float 109 Introducing Liquidity Management 109 Pooling as a Concept 111 Float and Its Causes 111 Summary 121 Chapter 9: Cash Pooling and Efficiency 123 Cash Concentration Structures 123 Pooling Structures 127 Implementation Aspects of Concentration Structures 130 Summary 134 Chapter 10: Cash Flow Forecasting 135 Forecasting in the Context of Liquidity Management 135 Forecasting Methods 139 Summary 143 PART THREE: BALANCE SHEET AND LIQUIDITY MANAGEMENT 145 Chapter 11: Liquidity and Working Capital 147 Working Capital in the Operating Cycle 148 Cash Conversion Cycle 149 Financial Supply Chain and Its Potential Pain Points 158 Summary 168 Chapter 12: Financial Strength and Linkages with Liquidity 169 Importance of Company Financials 169 Key Financial Ratios 171 Summary 194 Chapter 13: Sources of Capital 195 Capital Markets 195 Capital Structure 197 Factors in the Capital Decision 199 Debt Capital Markets 203 Equity Capital Markets 205 Summary 211 Chapter 14: Financing the Supply Chain 213 Physical and Financial Supply Chains 213 Different Financing Solutions 215 Summary 225 Chapter 15: Managing Operating Cash and Investments 227 Different Elements of Cash 227 Managing Operating Cash 228 Surplus Cash and Investments 230 Considerations and Aspects of Investment Decisions 230 Investment Process 237 Summary 237 Chapter 16: Credit Ratings and Bank Credit Assessment 239 Credit Ratings 239 Credit Rating Methodology 243 Bank Credit Assessment Process 247 Important Focus Areas and Discussion Points with Banks During Credit Reviews 252 Summary 253 PART FOUR: MARKETS AND RISK MANAGEMENT 255 Chapter 17: Art and Science of Risk Management 257 Kinds of Risk 257 Classical Definitions 258 Why Manage Financial Risk? 266 Styles of Risk Management 269 Factors Impacting Risk 270 What Does Risk Management Do? 273 Objective of Risk Management 276 Summary 278 Chapter 18: Markets and Risk Aspects of Each Market 279 World of Markets 279 Movement of Markets 287 Summary 289 Chapter 19: Risk Management in Practice: Ensuring the Right IMAGE(c) 291 IMAGE(c) Methodology 291 Risk Identifi cation 292 Risk Measurement 293 Risk Accounting and Reporting 314 Risk Governance 315 Risk Management Evaluation 320 Summary 321 Chapter 20: Products for Managing Risk 323 Forwards Family 324 Options Family 333 Swaps Family 346 Credit Family 351 Summary 353 Chapter 21: Combining the Products to Manage Risk: Risk Governance 355 Devising Risk Strategy Using Products 356 Using Products to Manage Risk 358 Credit Risk 362 Liquidity Risk: Balance Sheet and Asset-Liability Management 363 Use of Analysis 364 Operations and Technology Risk 367 Legal and Compliance Risk 367 Summary 374 Chapter 22: Risk Management Governance Strategies 375 Key Elements of the Governance Strategy 375 Sample Strategy A 377 Sample Strategy B 378 Sample Strategy C 381 Summary 386 Chapter 23: Operational Aspects: Documentation and Execution 387 Documentation 387 ISDA Framework of Documents 388 Execution 392 Summary 394 PART FIVE: THE TOOLKIT 395 Chapter 24: Treasury Policy 397 Framework 397 Aspects of Policy Implementation That Need Closer Scrutiny 398 Review 399 Implementational Aspects 400 Summary 401 Chapter 25: Treasury Systems 403 Treasury Management System Background 403 Some System-Related Questions 410 TMS Establishment Process 411 Developments and Standards 417 Summary 423 Chapter 26: Centralisation 425 Rationale for Centralisation 425 Basic Model Design 427 Post-Model Design Stage 429 Barriers to Centralisation 429 Summary 430 Chapter 27: Key Performance Metrics for a Treasury 431 Introducing Performance Metrics 431 Some Criteria for Deciding Performance Metrics 432 Performance Metrics 434 Some Caveats on Metrics and Evaluation 437 Sample Treasury Performance Metrics 438 Treasury Fitness 441 Summary 441 Chapter 28: Banks and Service Relationships 443 Sample Bank Organisation Structure 443 Banking Services and Products for a Corporate Treasury 446 Bank Selection and RFP Process 449 Review Process 449 Service and Relationship Management 454 Summary 456 Chapter 29: Operations and Control Checklist 457 List of Processes 457 Right Control at Treasury 458 Control Checks and Reviews 459 Some Common Causes for Error and Control Lapses 461 Summary 468 Chapter 30: Outsourcing 469 Selection Stage 469 Pre-Implementation 471 Implementation 471 Post-Implementation 473 Summary 478 Chapter 31: Building and Sustaining a Treasury Culture 479 Evaluation 484 Summary 485 Chapter 32: Managing Treasury in Uncertain Times 487 Uncertainty and Its Impact on Treasury Management 487 Triggers and Events 490 Simple Method to Manage Treasury During Times of Uncertainty 491 Summary 493 Glossary 495 Further Reading 505 About the Author 507 About the Website 509 Index 511