Treasury’s Role in ESG and Sustainable Finance

In many companies, cash is scattered. Different entities, different countries, different banks. Some parts of the business are sitting on excess cash, while others are borrowing externally and paying interest.

From a treasury perspective, that’s inefficient. From a CFO perspective, slightly painful once you see the numbers.

Cash pooling and centralisation are about fixing that.

What Cash Pooling Actually Is

Cash pooling is a structure that allows companies to combine balances from multiple accounts, entities, or countries to manage liquidity more efficiently.

Instead of each entity operating in isolation, cash is viewed and managed at a group level.

There are two main types:

• Physical cash pooling (zero balancing)
  Cash is physically transferred between accounts, typically to a central header account 
• Notional cash pooling
  Balances remain in individual accounts, but are offset notionally for interest calculation purposes 

Both aim to reduce external borrowing and optimise the use of internal liquidity.

Why Companies Implement Cash Pooling

The benefits are straightforward:

• Reduced interest costs
  Surplus cash offsets deficits, reducing the need for external funding 
• Improved visibility
  Centralised view of cash across entities 
• Better control
  Treasury gains oversight and can manage liquidity actively 
• Operational efficiency
  Fewer manual transfers, more automated structures 

In short, you stop treating each entity as a separate island.

Centralisation Beyond Pooling

Cash pooling is often part of a broader centralisation strategy.

This can include:

• Centralised payment factories 
• In-house banking structures 
• Standardised bank account management 
• Centralised investment and funding decisions 

The goal is to move from fragmented local management to coordinated group-level control.

Legal and Tax Considerations

Here’s where the simple idea becomes more complex.

Cash pooling involves:

• Intercompany lending 
• Cross-border cash movements 
• Interest allocation between entities 

This creates legal and tax implications:

• Transfer pricing requirements 
• Withholding taxes 
• Regulatory restrictions 
• Local banking rules 

Treasury works closely with tax and legal teams to ensure structures are compliant and efficient.

Ignoring this part usually leads to problems later. Often with more paperwork than anyone enjoys.

Multi-Currency Challenges

Pooling becomes more complex when multiple currencies are involved.

Treasury needs to consider:

• FX exposure within the pool 
• Whether to pool per currency or cross-currency 
• Conversion costs and risks 

Some pools are single-currency. Others are multi-currency with FX overlays.

There is no one-size-fits-all solution. It depends on the company’s footprint and risk appetite.

Bank Structure and Selection

Not all banks support all pooling structures in all countries.

Treasury needs to:

• Select banks with the right capabilities 
• Align pooling structures with banking infrastructure 
• Ensure connectivity and reporting works properly 

Choosing the wrong setup creates operational friction. Which defeats the purpose of centralisation.

Implementation Complexity

Cash pooling is conceptually simple. Implementation is not.

Challenges include:

• Aligning multiple entities and stakeholders 
• Setting up legal agreements 
• Integrating systems and reporting 
• Managing local constraints 

It’s one of those projects that looks straightforward in a slide deck and then turns into a multi-month effort.

Sometimes longer.

Where It Goes Wrong

Some familiar issues:

• Overcomplicated structures that are hard to manage 
• Ignoring local legal or tax constraints 
• Lack of clarity on intercompany positions 
• Poor visibility into pool performance 
• Resistance from local entities losing control 

Most problems are not technical. They’re organisational and structural.

Treasury’s Role in Cash Pooling

Treasury designs and manages the structure.

It ensures:

• Liquidity is used efficiently across the group 
• External borrowing is minimised 
• Cash is visible and controllable 
• The structure remains compliant and scalable 

Done well, cash pooling creates immediate financial benefits.

Done poorly, it creates confusion, complexity, and a lot of internal discussions no one enjoys.

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Corporate treasury is one of those functions that quietly sits in the background of a company, until something goes wrong. When cash is tight, markets are volatile, or funding suddenly becomes an issue, treasury moves from invisible to critical very quickly.

At its core, corporate treasury is responsible for managing a company’s financial resources. That includes cash, liquidity, funding, and financial risks. It ensures the company can meet its obligations, operate smoothly, and support its strategic ambitions without running into financial trouble.

That sounds straightforward. It isn’t.

More Than Just Managing Cash

Treasury is often reduced to “managing cash.” Technically correct, but about as complete as saying a pilot “operates controls.”

In reality, treasury sits at the centre of financial decision-making. It connects daily operations with long-term strategy. It translates business activity into cash flow. It ensures that growth plans are financially sustainable.

Treasury answers questions like:

• Do we have enough cash to operate and invest? 
• Where is that cash, and can we access it when needed? 
• How exposed are we to currency or interest rate movements? 
• How should we finance our activities efficiently? 

These are not theoretical questions. They directly impact how a business performs.

The Position of Treasury in an Organisation

Treasury operates between multiple stakeholders.

Internally, it works with:

• Finance teams, including FP&A and accounting 
• Operations and procurement 
• Senior management and the CFO 

Externally, it interacts with:

• Banks and financial institutions 
• Investors and lenders 
• Regulators and auditors 

This positioning makes treasury a connector function. It brings together information from across the organisation and translates it into financial insight and action.

From Back Office to Strategic Function

Historically, treasury was seen as a back-office function. Focused on payments, bank accounts, and short-term liquidity.

That role has evolved.

Today, treasury is expected to:

• Support strategic decisions 
• Provide insight into financial risks 
• Optimise funding structures 
• Improve cash efficiency across the business 

In many organisations, treasury now plays a key role in enabling growth, managing uncertainty, and supporting long-term value creation.

Not everywhere, though. Some companies are still catching up.

The Complexity Behind the Role

Modern treasury operates in a complex environment:

• Multiple currencies and international operations 
• Volatile financial markets 
• Increasing regulatory requirements 
• Rapid technological change 

Managing cash across different countries, dealing with fluctuating exchange rates, ensuring compliance, and maintaining control over financial processes is not trivial.

It requires:

• Strong systems and data 
• Clear processes 
• Continuous coordination with other departments 

And a certain tolerance for things not always going according to plan.

Why Treasury Matters

Treasury does not generate revenue directly. That often leads to it being underestimated.

But its impact is significant:

• Poor liquidity management can disrupt operations 
• Weak risk management can erode margins 
• Inefficient structures can increase costs 
• Lack of planning can delay strategic initiatives 

On the other hand, a strong treasury function:

• Ensures stability 
• Reduces costs 
• Supports growth 
• Improves decision-making 

It doesn’t just protect the business. It enables it.

Treasury in Practice

In practice, treasury is a mix of:

• Operational tasks, such as payments and cash positioning 
• Analytical work, such as forecasting and risk assessment 
• Strategic involvement, such as funding and corporate planning 

No two days are exactly the same.

One moment you’re reviewing liquidity. The next, you’re discussing financing options. Then you’re dealing with a bank, fixing a data issue, or explaining why a forecast changed.

It’s structured, but never static.

Final Thought

Corporate treasury is often overlooked because it works best when nothing goes wrong.

But that’s exactly the point.

It ensures that the financial side of the business runs smoothly, even when everything else is changing.

Not bad for a function most people don’t actively choose, but tend to stay in once they understand it.

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Digital transformation in treasury sounds impressive. In reality, it’s mostly about fixing what’s already broken, removing manual work, and making sure data actually makes sense before someone tries to build dashboards on top of it.

It’s not a single project. It’s an ongoing shift in how treasury operates, uses data, and makes decisions.

What Digital Transformation Really Means

Strip away the buzzwords, and digital transformation in treasury comes down to:

• Moving from manual to automated processes 
• Replacing fragmented systems with integrated ones 
• Improving data quality and availability 
• Enabling faster and more reliable decision-making 

It’s less about innovation and more about efficiency, control, and scalability.

Which is slightly less exciting to say, but far more accurate.

Why Treasury Needs It

Treasury complexity has increased:

• More entities and bank accounts 
• More currencies and markets 
• Higher transaction volumes 
• Increased regulatory pressure 

Manual processes don’t scale with that.

Digital transformation allows treasury to:

• Handle complexity without increasing headcount endlessly 
• Reduce operational risk 
• Improve visibility and control 
• Free up time for more strategic activities 

Without it, treasury becomes reactive and overloaded.

The Starting Point: Process Before Technology

The biggest misconception is that digital transformation starts with tools.

It doesn’t.

It starts with:

• Understanding current processes (the “as-is”) 
• Identifying inefficiencies and pain points 
• Defining what “good” looks like 

Only then does technology make sense.

Otherwise, you automate broken processes and call it progress.

Key Areas of Transformation

Most treasury transformation efforts focus on:

• Cash visibility and positioning
  Automating bank data collection and consolidation 
• Payments and connectivity
  Standardising payment processes and integrating with banks 
• Cash flow forecasting
  Improving data inputs and reducing manual consolidation 
• Risk management
  Better tracking and analysis of exposures 
• Reporting and analytics
  Moving from static reports to dynamic dashboards 

Each area contributes to a more efficient and controlled treasury setup.

Automation as a Core Driver

Automation removes repetitive tasks:

• Manual data entry 
• File uploads and downloads 
• Reconciliation work 
• Basic reporting 

This reduces:

• Errors 
• Processing time 
• Dependency on individuals 

And creates space for:

• Analysis 
• Decision-making 
• Strategic input 

At least in theory. In practice, someone still needs to monitor everything.

Integration: Connecting the Ecosystem

Transformation requires systems to work together:

• ERP systems 
• TMS 
• Banks 
• Data platforms 

This involves:

• Standardised data formats 
• Reliable connectivity 
• Consistent data definitions 

Integration is where most of the effort sits. And where most timelines quietly expand.

Data Quality: The Unavoidable Reality

No transformation succeeds without good data.

Treasury needs:

• Accurate bank data 
• Clean master data 
• Reliable forecast inputs 
• Consistent definitions across systems 

Poor data leads to:

• Incorrect reporting 
• Misleading forecasts 
• Loss of trust in systems 

Which then leads people straight back to Excel.

Change Management: The Hidden Challenge

Transformation is not just technical. It’s organisational.

It requires:

• User adoption 
• Training 
• Clear communication 
• Ongoing support 

People need to:

• Understand the new processes 
• Trust the outputs 
• Actually use the systems 

Otherwise, the “new way of working” quietly becomes the old way plus extra steps.

Measuring Success

Transformation success is not measured by:

• Number of systems implemented 
• Budget spent 

It’s measured by:

• Reduced manual effort 
• Improved data quality 
• Faster and better decisions 
• Increased control and visibility 

If those don’t improve, the transformation didn’t really happen.

Where It Goes Wrong

Some recurring issues:

• Starting with technology instead of processes 
• Underestimating data challenges 
• Lack of stakeholder involvement 
• Overly ambitious scope 
• Ignoring user adoption 

Most failures are not technical. They’re practical.

Treasury’s Role in Transformation

Treasury defines what needs to change and why.

It ensures:

• Solutions match real needs 
• Processes are improved, not just digitised 
• Data becomes usable and reliable 
• Transformation delivers actual value 

Because at the end of the day, digital transformation is not about being “digital.”

It’s about making treasury work better.

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Cash is the one resource every company depends on. Without it, nothing moves. Salaries don’t get paid, suppliers don’t ship, banks get nervous, and strategy becomes irrelevant very quickly.

And yet, managing cash effectively across a company, especially an international one, is anything but simple.

Cash sits in different entities, different countries, different currencies, and different banks. It moves at different speeds, is subject to local restrictions, and depends on operational processes that treasury doesn’t fully control.

Cash management is about bringing structure to that complexity.

What Cash Management Actually Means

Cash management is not just knowing how much cash the company has. It’s about:

• Knowing where the cash is 
• Knowing when it is available 
• Knowing how it can be used or moved 
• Ensuring it is used efficiently 

It combines visibility, control, and optimisation.

If one of those is missing, decisions become slower, more expensive, or simply wrong.

The Core Objectives

Treasury focuses on three key objectives:

• Visibility
  Accurate, timely insight into cash positions across all entities and accounts 
• Control
  Ensuring cash movements are structured, authorised, and aligned with policies 
• Optimization
  Minimising idle cash, reducing external borrowing, and improving efficiency 

Simple in theory. In practice, each of these depends on systems, processes, and people all working together.

Cash Visibility: The Foundation

You cannot manage what you cannot see.

Cash visibility includes:

• Bank balances across all accounts 
• Intraday movements where relevant 
• Cash positions per entity and currency 
• Consolidated group-level positions 

This requires:

• Reliable bank connectivity 
• Consistent data formats 
• Integration with internal systems 

Without visibility, treasury operates reactively. With visibility, it can act proactively.

Cash Positioning and Forecasting

Daily cash positioning answers:

• What do we have today? 

Cash forecasting answers:

• What will we have tomorrow, next week, next month? 

Both are critical.

Positioning ensures short-term liquidity.
Forecasting supports planning and decision-making.

Together, they allow treasury to:

• Identify surpluses or deficits 
• Plan funding or investments 
• Avoid unnecessary borrowing 

Forecasting accuracy is rarely perfect. The goal is not perfection, but improvement and awareness of uncertainty.

Cash Centralisation and Structure

Decentralised cash is inefficient.

Multiple entities holding excess cash while others borrow externally is one of the most common inefficiencies.

Treasury addresses this through:

• Cash pooling structures 
• In-house banking setups 
• Intercompany funding mechanisms 

Centralisation improves:

• Liquidity usage 
• Control 
• Visibility 

But it also introduces legal, tax, and operational considerations that need to be managed carefully.

Payments and Collections

Cash management is not just about balances. It’s about flows.

Treasury ensures:

• Payments are executed efficiently and securely 
• Collections are structured to accelerate inflows 
• Processes are standardised where possible 

This includes:

• Payment factories 
• Payment approval workflows 
• Bank connectivity for execution 

Inefficient payment processes don’t just slow things down. They increase risk.

Working Capital Connection

Cash management is closely linked to working capital.

Receivables, payables, and inventory directly impact cash availability.

Treasury works with:

• Sales on collection terms 
• Procurement on payment terms 
• Operations on inventory levels 

Because improving working capital is often the fastest way to improve liquidity without external funding.

Optimization: Making Cash Work

Once visibility and control are in place, treasury focuses on optimisation.

This includes:

• Reducing idle balances 
• Minimising external borrowing 
• Investing excess liquidity 
• Streamlining bank account structures 

Small improvements here can create significant financial impact over time.

Where It Goes Wrong

Some recurring issues:

• Limited visibility across entities or regions 
• Excessive number of bank accounts 
• Poor forecasting accuracy 
• Lack of centralisation 
• Inefficient payment processes 

Most of these are not strategic problems. They are operational inefficiencies that accumulate.

Treasury’s Role in Cash Management

Treasury ensures that cash:

• Is visible 
• Is controlled 
• Is used efficiently 

It connects daily operations with strategic decision-making.

Because in the end, everything comes back to cash.

Profit is an opinion. Cash is reality.

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Treasury rarely shows up as a revenue generator. But it has a very direct impact on costs.

Funding costs, bank fees, FX margins, operational inefficiencies. These add up quickly. And unlike revenue, cost savings often go unnoticed unless someone actively points them out.

Which treasury occasionally has to do, just to remind people it exists.

Where Treasury Drives Cost Savings

Cost reduction in treasury typically comes from:

• Funding optimisation
  Lower interest expenses through better structuring and timing 
• Bank fee management
  Negotiating and monitoring transaction and service costs 
• FX optimisation
  Reducing spreads and improving execution 
• Cash efficiency
  Minimising idle balances and external borrowing 
• Operational efficiency
  Reducing manual work and process costs 

None of these are headline-grabbing individually. Together, they can be significant.

Funding Costs

Interest expense is often one of the largest controllable costs.

Treasury reduces this by:

• Negotiating better pricing 
• Optimising debt structures 
• Timing market access effectively 
• Maintaining strong relationships with lenders 

Even small improvements in basis points can translate into large savings over time.

Bank Fees and Charges

Bank fees are often underestimated.

They include:

• Payment transaction fees 
• Account maintenance costs 
• FX spreads 
• Connectivity and service charges 

Treasury manages these by:

• Negotiating pricing agreements 
• Benchmarking against market rates 
• Reviewing invoices and actual charges 

Many companies don’t actively manage this. Which means they overpay.

Quietly.

FX Costs and Margins

Foreign exchange is another area where costs hide.

Treasury optimises FX by:

• Centralising FX execution 
• Comparing pricing across providers 
• Using appropriate hedging strategies 
• Avoiding unnecessary conversions 

The difference between good and poor FX execution can be substantial. It just doesn’t always show up clearly.

Cash and Liquidity Efficiency

Inefficient cash structures create unnecessary costs.

Examples:

• Borrowing externally while holding idle cash elsewhere 
• Maintaining excess liquidity buffers 
• Poor working capital management 

Treasury reduces these costs through:

• Cash pooling 
• Centralisation 
• Improved forecasting 

This reduces interest expense and improves returns on cash.

Process and Operational Costs

Inefficient processes cost money.

Manual work leads to:

• Higher headcount requirements 
• Errors and rework 
• Delays 

Automation and standardisation reduce:

• Processing time 
• Error rates 
• Operational overhead 

These savings are less visible but equally important.

Hidden Costs

Some costs are not immediately visible:

• Poor data quality leading to wrong decisions 
• Delayed payments causing penalties 
• Inefficient structures increasing complexity 
• Lack of visibility leading to missed opportunities 

Treasury identifies and reduces these “hidden” inefficiencies.

Measuring Savings

Treasury savings can be measured through:

• Reduction in interest expense 
• Lower bank fees 
• Improved FX rates 
• Reduced operational costs 
• Improved working capital metrics 

Some savings are easy to quantify. Others are indirect but still real.

Where It Goes Wrong

Some common issues:

• Lack of visibility into costs 
• No regular review of bank fees 
• Decentralised FX execution 
• Inefficient cash structures 
• Ignoring small costs that accumulate 

Most cost inefficiencies are not strategic. They’re operational.

Treasury’s Role

Treasury ensures that:

• Financial resources are used efficiently 
• Costs are monitored and controlled 
• Opportunities for savings are identified 

It doesn’t always create visible impact.

But it consistently reduces unnecessary expense.

Which, despite the lack of celebration, improves the bottom line.

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Risk management is one of the primary responsibilities of treasury, helping organizations identify, evaluate, and mitigate potential financial risks that could impact their bottom line. Among the most critical types of risks managed by treasury professionals are foreign exchange (FX) risk, interest rate risk, and commodity price risk. These financial risks can have significant impacts on a company’s cash flow, profitability, and overall financial stability.

In this deep dive, we will explore each of these risk types, their potential impact on a business, and the strategies treasurers can use to mitigate them effectively.

What is Risk Management in Treasury?

Risk management in treasury involves identifying potential financial risks, assessing their potential impact, and implementing strategies to minimize or mitigate their effects. These risks can arise from various sources, including market fluctuations, economic changes, geopolitical events, and shifts in interest rates or commodity prices.

Treasury teams use a combination of financial instruments and hedging strategies to protect the company from risks that could disrupt business operations or financial performance.

1. FX Risk Management

Foreign exchange (FX) risk refers to the potential for loss due to fluctuations in currency exchange rates. This risk is particularly relevant for companies operating internationally or involved in cross-border transactions. If the value of one currency changes relative to another, it can impact the company’s revenue, costs, and overall financial performance.

Types of FX Risks:

• Transaction Risk: The risk that currency fluctuations will impact the value of future cash flows from transactions, such as payments or receipts in foreign currencies.
• Translation Risk: The risk that currency fluctuations will affect the value of a company’s foreign assets or liabilities when they are consolidated into the home currency for financial reporting purposes.
• Economic Risk: The risk that long-term currency movements could impact a company’s market competitiveness and profitability in a foreign market.

Mitigation Strategies for FX Risk:

• Hedging: One of the most common methods to mitigate FX risk is through hedging. This involves using financial instruments such as forwards, options, or swaps to lock in exchange rates for future transactions.
• Natural Hedging: Companies can offset currency risks by balancing foreign revenues with expenses in the same currency. For example, a business generating income in euros can also arrange for its suppliers to be paid in euros, reducing the risk of exchange rate fluctuations.
• Currency Diversification: Operating in multiple currencies and diversifying across regions can reduce overall exposure to FX risk.

2. Interest Rate Risk Management

Interest rate risk refers to the potential for financial losses due to fluctuations in interest rates. This risk primarily affects companies with variable-rate debt or significant investments in interest-sensitive instruments such as bonds. When interest rates rise, the cost of borrowing increases, and when they fall, returns on investments may decrease.

Types of Interest Rate Risks:

• Borrowing Risk: Companies with floating-rate loans or debt may face higher interest payments when rates rise.
• Investment Risk: Companies with fixed-income investments may see the value of their investments decline if interest rates rise.
• Reinvestment Risk: The risk that the company may not be able to reinvest its cash flows at the same rate as the original investment if interest rates decline.

Mitigation Strategies for Interest Rate Risk:

• Hedging with Derivatives: Treasury can use derivatives like interest rate swaps, forward rate agreements (FRAs), or interest rate options to hedge against interest rate fluctuations. These instruments allow companies to lock in interest rates or protect against rising rates.
• Refinancing: If interest rates are expected to rise, companies can refinance their debt to lock in favorable terms at current rates.
• Interest Rate Matching: By aligning the maturity profiles of their assets and liabilities, companies can reduce exposure to interest rate risk.

3. Commodity Price Risk Management

Commodity price risk refers to the potential for financial loss due to fluctuations in the prices of raw materials or commodities used in production. For businesses in industries such as manufacturing, energy, agriculture, or transportation, commodity price risk can have a significant impact on profit margins and operational costs.

Types of Commodity Price Risks:

• Input Cost Risk: Fluctuations in the price of raw materials or energy resources, such as oil, gas, metals, or agricultural products, can affect the cost of production.
• Revenue Risk: Companies selling commodities or commodity-based products may be exposed to revenue risk if prices for their products fluctuate significantly.
• Inventory Risk: Companies holding large inventories of commodities may face risks if prices drop before they can sell their stock.

Mitigation Strategies for Commodity Price Risk:

• Hedging: Like FX and interest rate risk, commodity price risk can be managed through hedging strategies, such as using futures contracts, options, and swaps to lock in prices for commodities used in production or sold to customers.
• Supply Chain Management: Companies can negotiate long-term contracts with suppliers to stabilize prices and protect against volatile fluctuations in commodity costs.
• Diversification: Companies can mitigate commodity price risks by sourcing from multiple suppliers or markets, which reduces dependence on a single commodity or market.

The Role of Technology in Risk Management

Advances in technology have revolutionized how treasury departments manage financial risks. Treasury management systems (TMS) now allow for real-time monitoring and analysis of FX, interest rate, and commodity price fluctuations. These systems provide treasurers with valuable insights into market conditions, enabling them to make data-driven decisions about risk management strategies.

Furthermore, tools like artificial intelligence (AI) and machine learning (ML) can predict market trends and help identify emerging risks. These technologies allow businesses to be proactive rather than reactive when it comes to managing financial risks.

Conclusion

Managing FX, interest rate, and commodity price risks is a vital component of treasury operations. With the right tools, strategies, and knowledge, companies can mitigate the financial impact of these risks and ensure long-term stability and profitability. Hedging, diversification, and effective financial planning are key to minimizing exposure and maintaining competitive advantage in an ever-changing market.

By leveraging modern technology and aligning risk management with corporate strategy, treasury departments can effectively navigate the complexities of global financial markets, safeguarding their company’s financial health.

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Treasury does not generate revenue directly. That’s the easy conclusion.

The more accurate one is that treasury influences how much of that revenue actually turns into profit.

Through funding, risk management, cash efficiency, and cost control, treasury shapes the financial outcome of business activities. Not visibly, not loudly, but consistently.

How Treasury Impacts Profitability

Treasury affects profitability through:

• Cost of funding
  Lower financing costs improve net profit 
• FX and interest rate management
  Reducing volatility protects margins 
• Cash utilisation
  Efficient use of cash reduces unnecessary costs 
• Working capital management
  Releasing cash reduces reliance on external funding 
• Operational efficiency
  Lower process costs improve overall margins 

Each of these may seem small individually. Together, they materially influence results.

Funding Costs and Profit

Interest expense directly reduces profit.

Treasury optimises:

• Debt structures 
• Pricing 
• Timing of financing 

Lower interest costs increase net income.

This is one of the most direct links between treasury and profitability.

Protecting Margins Through Risk Management

Unmanaged risk creates volatility.

• FX movements can erode margins 
• Interest rate changes can increase costs 
• Market fluctuations can impact cash flows 

Treasury reduces this through:

• Hedging strategies 
• Risk policies 
• Exposure management 

This does not necessarily increase profit. It protects it.

Which is often more important.

Cash Efficiency and Profitability

Cash that is not used efficiently has a cost.

Examples:

• Idle cash earning low returns 
• Excess borrowing increasing interest expense 
• Poor working capital tying up funds 

Treasury improves efficiency by:

• Centralising cash 
• Optimising structures 
• Improving visibility 

This reduces costs and improves returns.

Working Capital and Profit Impact

Improving working capital:

• Reduces financing needs 
• Improves liquidity 
• Frees up cash for investment 

This indirectly improves profitability by:

• Lowering interest costs 
• Enabling better use of capital 

Again, not always visible. But real.

Operational Efficiency and Margins

Inefficient processes:

• Increase cost 
• Create errors 
• Require more resources 

Treasury improves:

• Automation 
• Standardisation 
• Integration 

This reduces operational cost and improves margins.

Not dramatic. Consistent.

Investment of Excess Cash

Treasury manages short-term investments.

While not a major profit driver, it:

• Generates additional income 
• Improves overall financial return 

Within controlled risk limits.

Because chasing yield is not the objective.

Avoiding Negative Impact

One of treasury’s biggest contributions is avoiding losses.

Examples:

• Preventing liquidity shortages 
• Avoiding excessive borrowing costs 
• Managing risk exposures 
• Reducing fraud and errors 

These do not show up as profit increases.

They show up as problems that didn’t happen.

The Visibility Challenge

Treasury’s impact on profitability is often:

• Indirect 
• Preventative 
• Distributed across multiple areas 

Which makes it harder to isolate.

Revenue increases are visible. Cost avoidance is not.

Until something goes wrong.

Where It Gets Misunderstood

Some common misconceptions:

• Treasury only manages cash 
• Profitability is driven purely by operations 
• Risk management is optional 
• Cost savings are marginal 

These overlook the cumulative impact of treasury decisions.

Treasury’s Role

Treasury ensures that:

• Financial structures support profitability 
• Risks do not erode margins 
• Cash is used efficiently 

It doesn’t create profit on its own.

It protects and enhances the profit generated by the business.

Which is less visible, but just as important.

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Banks sit at the center of almost everything treasury does. Payments flow through them, cash sits with them, funding comes from them, and risk is often managed with them.

Which means one thing: if your banking setup is weak, everything else becomes harder, slower, and more expensive.

Managing banking relationships is not about being friendly. It’s about control, access, pricing, and reliability. Treasury needs banks, but it also needs to manage them actively. Otherwise, banks will happily manage you.

The Role of Banks in Treasury

Banks provide a wide range of services:

• Payment processing and collections 
• Cash management and account structures 
• Lending and credit facilities 
• FX and hedging products 
• Trade finance and guarantees 
• Market access and advisory 

Most companies don’t rely on a single bank. They operate with a panel of banks across regions and services. That creates flexibility, but also complexity.

Treasury’s job is to structure that landscape in a way that balances efficiency, cost, and risk.

Bank Selection: More Than Just Pricing

Choosing a bank is rarely about who offers the lowest fee. At least, it shouldn’t be.

Treasury evaluates:

• Geographic coverage and local presence 
• Product capabilities and technical infrastructure 
• Credit strength and stability 
• Connectivity options (APIs, SWIFT, host-to-host) 
• Service quality and responsiveness 

A cheap bank that fails operationally or lacks capability will cost more in the long run. Usually in ways that only become visible after you’ve already committed.

Concentration vs Diversification

This is a constant balancing act.

Too few banks:

• High dependency 
• Increased counterparty risk 
• Limited negotiation leverage 

Too many banks:

• Operational complexity 
• Fragmented cash visibility 
• Higher administrative burden 

Treasury aims for a structure where:

• Core banks handle the majority of activity 
• Secondary banks provide backup and regional support 
• No single point of failure exists 

It’s not about having many banks. It’s about having the right ones, in the right roles.

Pricing and Bank Fees

Bank fees are one of those areas where companies quietly lose money for years.

Payment fees, FX margins, account charges, connectivity costs. Individually small, collectively significant.

Treasury is responsible for:

• Negotiating pricing structures 
• Monitoring actual charges versus agreements 
• Running periodic fee reviews or benchmarks 

The uncomfortable truth is that many companies don’t actively manage this. Banks notice. And they price accordingly.

Negotiating with Banks

Negotiation is not a one-time event. It’s an ongoing process.

Leverage comes from:

• Volume of business 
• Breadth of services 
• Competitive tension between banks 
• Long-term relationship potential 

Treasury needs to:

• Clearly define requirements 
• Run structured RFP processes where needed 
• Compare offers beyond headline pricing 
• Understand where banks actually make their margin 

And then there’s timing. Negotiating when you urgently need something is the worst possible moment. Negotiating when you have options is where value is created.

Credit Facilities and Liquidity Access

One of the most critical aspects of banking relationships is access to funding.

Revolving credit facilities, overdrafts, bilateral loans, syndicated facilities. These provide liquidity buffers and flexibility.

Treasury ensures:

• Sufficient committed facilities are in place 
• Maturities are spread over time 
• Covenants are manageable 
• Headroom is maintained 

Because access to liquidity is easy… until it isn’t.

Bank Connectivity and Integration

Modern treasury relies heavily on automation and data. That requires strong connectivity with banks.

Options include:

• SWIFT connectivity 
• APIs 
• Host-to-host connections 

The goal is simple: reliable, automated, and secure data exchange.

The reality is less simple. Integration projects can be complex, and not all banks are equally advanced. Treasury needs to balance innovation with practicality.

Relationship Management: The Human Layer

Despite all the systems and contracts, banking is still a relationship business.

Treasury interacts with:

• Relationship managers 
• Product specialists 
• Credit teams 

Good relationships can:

• Improve responsiveness 
• Provide early access to solutions 
• Help in difficult situations 

But relationships should never replace structure. Being on good terms doesn’t mean you stop challenging pricing or performance.

Where It Goes Wrong

Some classic issues:

• Too many banks with overlapping roles 
• No clear ownership of bank relationships 
• Lack of fee transparency 
• Over-reliance on one key bank 
• Weak negotiation due to lack of preparation 

Most of these are not strategic failures. They’re the result of neglect over time.

Treasury’s Real Objective

Treasury doesn’t aim to have “good” banking relationships. It aims to have effective ones.

Banks should:

• Deliver reliable services 
• Provide competitive pricing 
• Support the company’s strategy 
• Offer access to liquidity when needed 

Anything less becomes friction. And treasury’s job is to reduce friction, not live with it.

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