Making investment decisions: treasury and stakeholder relationships

3 Sep 20

Treasury management is as much about managing relationships as it is cash and risk. Together credibility, trust and understanding create the foundation upon which effective treasury management can be built. This foundation combined with a comprehensive understanding of your organisation’s operations is fundamental to success.

Key takeaways

  • Appreciate the importance of maintaining good relationships with stakeholders
  • Know who your key relationships and contacts are
  • Build visibility of the treasury function through communication
  • Remember the significance of transparency and governance
  • Always act objectively and ethically


Who are your key contacts and stakeholders?

Treasury is a specialist discipline. However, the interactions of those charged with managing treasury are wide ranging and at all levels. Typically, within treasury your external relationships will be with banks, lenders, brokers or investment managers; but extend naturally to other parties such as credit ratings agencies, market information providers and treasury advisors.

The key stakeholders are not only those external to the organisation; strong and transparent internal relationships with those charged with scrutiny and decision making, such as the chief financial officer, committees and board members, must also be established to operate effectively. Regular and clear communication links that openly detail activities undertaken in line with your strategy and policies are essential to this.


Why are solid, long-lasting relationships with stakeholders valuable?

Returning to the fundamentals, treasury focuses on the security of capital, the organisation’s liquidity and yield from investments. Because of the nature and importance of the role, trust is fundamental to success.

With internal stakeholders, treasury management can be a distant concept – but understanding the role and its implications will have a positive impact on the day-to-day operations of your organisation. Articulating the implications to internal stakeholders is important for the treasury manager's credibility, as this will help to build the operational alignment and internal support network necessary for routine operations, such as cashflow forecasting and achieving strategic direction.

Externally, the various relationships with investing and cash management need to be built and maintained. Building trust and credibility with these parties will help you to meet your needs in managing treasury activities and is an integral part of developing a robust infrastructure within the function.


How will relationships impact treasury operations?

Poor internal relationships and communication can be damaging to the flow of data required to manage operations on a daily basis. Making regular contact with the main organisation operations is crucial to avoid unexpected events that could affect your cash position. Visibility of the function and communication of important deadlines, for example knowledge of the need to make emergency payments, are vital in order to avoid having to unexpectedly redeem investments early if you have an insufficient cash balance.

Forming effective relationships with a number of external stakeholders has a number of benefits. For example, it offers a variety of options, usually in a timelier manner, for investing and other opportunities, and allows for the marketing of information that may be useful for decision making.


Why do you need consider ethics when managing relationships?

You must not only be transparent with your relationships by disclosing your dealings with various third parties to decision makers and scrutiny bodies; you must also act ethically.

Objectivity is key when dealing with a wide range of stakeholders. In building strong relationships, you create the potential for familiarity risk with a stakeholder, for example by only using one broker due to you knowing them better. This needs to be objectively assessed in order to ensure that you do not risk treasury performance. Your organisation should have a robust policy for situations where a stakeholder will try to influence you with hospitality or gifts, and as a treasury manager you need to consider whether this will damage your ability to act objectively and take action to prevent this risk from becoming realised.


How do you behave when managing relationships?

When managing relationships you must demonstrate professional behavior. Acting with integrity is important in recognising the risks of familiarity with your stakeholders. As a treasury manager, you must acknowledge that the stewardship of public money must come first when making decisions.

Self-reflection is critical – use your dealings with stakeholders to assess your behavior and reflect on whether you are comfortable that you acted ethically, transparently and with integrity.


Questions for you

  • Do you understand who your key stakeholders are?
  • Do your decision makers know who these stakeholders are?
  • Do you feel that you manage relationships with stakeholders successfully?
  • Are you comfortable with your dealings and behavior?


Sources of further information

CIPFA Treasury Management Network – join for the latest advice, guidance and updates on treasury management.

TISonline Treasury Management Stream – an in-depth guide to the investment of local authority funds, debt management and treasury management practices.

CIPFA Qualifications in International Public Sector Accounting Standards – courses to provide trainees with a comprehensive knowledge of the published standards and guidance.

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