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Treasury for NEDs

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Published: 18th December 2012 by William Webster

The following explains five board presentations that are available from Barbican Consulting. Use them for guidance. They are about Treasury, Markets and Governance and are for NEDs. Presentations can be tailored to fit your business and the risks you manage. References are available. More detail is below.

The financial crisis has resulted in ongoing regulatory pressure to reduce the amount of risk firms are exposed to. As a consequence markets have disappeared, regulation has become onerous and emphasis is placed on risk management. In response the operations undertaken by treasuries have significantly altered. For NEDs this is a challenge.

The products and risks are complex and change continues. Nevertheless the regulatory regime now firmly places responsibility with Boards. With this in mind there are five two hour sessions (presentation and discussion), they are:

  1. The Role of Treasury
  2. Liquidity & Credit Risk
  3. Market Risk
  4. Management Information
  5. Governance & Treasury

The sessions are to facilitate improved understanding of treasury and the important issues that affect strategic decision making.

They are "high level" and cover the issues NEDs need to know about in order to have a meaningful discussion about treasury and risk. Where it is considered appropriate reference will be made to the management information that is available.

There will be a formal agenda supported by the necessary presentation, time will be allotted for discussion. The details follow.

Presentation One

The Role of Treasury

  • What a treasury does
  • The regulatory environment
  • Liquidity management
  • Wholesale funding
  • Products available
  • How these products are used
  • Gilts, repo, buffer assets, securitisation, covered bonds, swaps
  • The Bank of England funding facilities
  • The funds transfer pricing process

Presentation Two

Liquidity & Credit Risk

  • The liquidity regime and its objectives
  • Risk drivers, stress testing & buffers
  • Turnover, repo and contingency planning
  • Credit exposures in treasury
  • Credit spreads, recovery rates and the probability of loss
  • Collateral, mark-to-market and liquidity
  • Rating agencies

Presentation Three

Market Risk

  • What it is
  • Risk measures and their strengths and weaknesses
  • Gap reports
  • Basis point value
  • Value at risk
  • Stress testing
  • Basis risk
  • Limits & limit structures

Presentation Four

Management Information

  • Reports selected from the Board and Risk Committee
  • What they tell us about:
  • Liquidity risk
  • Interest rate risk
  • Basis risk
  • Credit exposures
  • Forward looking, red amber green, trends

Presentation Five

Governance & Treasury

  • What the regulator expects from NEDs
  • How much detail do you need to know?
  • Risk appetite, qualitative and quantitative measures
  • Instructing treasury
  • The role of Risk Committee & ALCO - what can you delegate?
  • What can we learn from the mistakes of others?
  • Selected case study on dealing losses

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