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Corporate Treasury Management

Duration: 3 days
  • The Role of the Corporate Treasury Function
  • Funding and Liquidity Management
  • Foreign Exchange Management
  • Interest Rate Management
  • Value-at-Risk and Cash-Flow-at-Risk
  • Risk Measurement with CorporateMetrics™
  • Organization, Procedures and Controls
  • The Impact of IAS39/FASB133
The objective of this seminar is to give the delegates a comprehensive understanding of the objectives, tools and techniques of modern corporate treasury management. We will start with a general discussion of the role of the Treasury Function in an internationally active corporation. The importance of funding choices and sound risk management will be explained, and we will define the scope, level and content of the tasks of a “typical” treasury function. We will then look in more detail into the techniques and tools available to the Treasurer. We will explain how funding issues are resolved and how liquidity and liquidity risk is managed using money and capital market instruments. Next, we will explain how foreign exchange exposure is measured and managed. We will discuss the differences between economic and accounting exposure, and we demonstrate the various techniques for quantifying and mitigating these types of exposure. We will then discuss how interest rate risk manifests itself in a non-financial corporation, and we will explain how this risk can be effectively measured and managed. After that, we will explain how "Value-at-Risk" and "Cash-Flow-at-Risk" are measured and used in a corporate framework. We shall establish a "Risk Exposure Platform" to analyze the economic and financial effects of changes in commodity prices, exchange rates and interest rates on the company's cash flows. We will use "CorporateMetrics™" as a practical example of this type of methodology. Finally, we will discuss how Corporate Treasury Management can be organized, suggesting appropriate risk management policies and procedures for top management reporting. At this point, we will include a review of the possible impacts of new accounting rules such as IAS39/FASB133.

Day One

09.00 - 09.15  Welcome and Introduction

09.15 - 12.00  The Corporate Treasury Function

  • Treasury Objectives and Responsibilities
  • An ALM Framework for Financial Risk Management
    • Difference between Banks and Corporations
    • Looking for Financial Risks on the Balance Sheet
  • How Risk management Can Create Shareholder value
  • Overview of Financial Management Techniques

Funding and Liquidity Management

  • Funding sources in financial markets
    • Bank and capital market funding
    • Repos and “sell-and-buy-backs”
    • Asset securitisation
  • Managing Liquidity Risk

12.00 - 13.00  Lunch

13.00 - 16.30  Foreign Exchange Management

  • FX Exposure and FX Volatility
  • Types of FX Exposure
    • Economic exposure
    • Translation exposure
    • Transaction exposure
    • Exposure on budgeted transactions
  • Internal FX Management Techniques
    • Limits
    • Netting
  • Managing FX Risk with Derivatives
    • Hedging with FX forwards and swaps
    • Hedging with vanilla and exotic options
    • Hedging contingent exposures
  • Cases and exercises

Day Two

09.00 - 09.15  Recap

09.15 - 12.00  Interest Rate Management

  • Ways of Looking at Interest Rate Risk
    • Re-pricing risk
    • PV risk
  • Measuring Interest Rate Risk
    • GAP analysis
    • Simulation approaches
    • Duration analysis
    • Yield curve analysis
  • Managing Interest Rate Risk with Derivatives
    • Hedging re-pricing risk with FRAs and interest rate futures
    • Hedging loans with interest rate swaps
    • Hedging floating rate notes with caps, floors and collars
    • Hedging PV risk with futures and options
  • Exercises

12.00 - 13.00  Lunch

13.00 - 16.30  Value-at-Risk in Corporate Treasury

  • VaR and its Role in Risk Management
  • The Relevance of Using VaR in Corporations
  • Calculating VaR
    • Mapping financial transaction
    • Mapping commercial transactions
    • Calculating undiversified VaR
    • Correlations and diversified VaR
  • Calculating “Cash-Flow-at-Risk”
    • Establishing and exposure platform
    • Estimating cash flows and cash flow volatility
    • Calculating “Earnings-at-Risk”
  • Stress Testing
  • Exercises

Day Three

09.00 - 09.15  Recap

09.15 - 12.00  Corporate Risk Management with CorporateMetrics™

  • What is CorporateMetrics?
    • The general framework
    • Types of risk covered
    • CorporateMetrics vs. other risk management systems
  • How Does CorporateMetrics Work?
    • Metric specification
    • Exposure mapping
    • Scenario generation
    • Valuation
    • Risk computation
  • Implementing CorporateMetrics
    • An example
  • Managerial applications
    • Which hedging strategy to use
    • Market risk limits
    • Regulatory reporting

12.00 - 13.00  Lunch

13.00 - 16.30  Organisation, Procedures and Controls

  • Establishing the Framework for Treasury Management
    • Defining risk attitude and risk tolerance
    • Formulating a treasury policy
    • Organisation, responsibilities
    • Reporting
  • Accounting issues related to use of financial instruments
    • FAS133 and IAS139
  • Information systems
  • Benchmarking and performance measurement

Evaluation and Termination of the Seminar