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  • Writer's pictureWilliam Webster

Treasury course

If you have been working in or around treasury for the last two or three decades you will have seen some remarkable changes. One that is striking is how and where you come across complexity. At first complexity arose with products. It's why derivatives became controversial. Making things opaque helped disguise how much was made out of customers. With a spreadsheet an understanding of interest rates, cash flows and volatility you had a licence to print money. Enticing punters into the "too good to be true" was the name of the game and it's still popular. Caveat Emptor. Next risk management became complex. VaR appeared. It looked simple but underneath, the algorithms and assumptions went unchallenged. Some "knuckle dragging" traders thought it was nonsense. But it fooled many. We know what happened. Leverage worked - but not quite in the way we anticipated. Now regulation is complex. The objective is laudable and as a tax payer I can't disagree. But to have the benefits of a free market and at the same time control behaviour is wishful thinking. Unless you split up banks and make them smaller (which by my estimation won't happen) the problem continues. The politics dictate that the outcome will be partial and messy. What can we learn from this? Complexity promises to solve problems but history tells us that it ends up increasing risk. This is because it's easy to get suckered into something you don’t understand because you can't or won’t ask the right questions. Treasury is risky. If you feel a little uncomfortable and need to know more about it this course just may help you.

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