Definition, purpose & responsibilities

The definition, purpose and responsibilities of a treasury

Treasury definition

Treasuries are used for managing the assets of nation states, corporations, organisations and communities. Treasuries handle how assets get deposited, stored and disbursed.

Purpose of a treasury

Each ecosystem that manages their own assets through a treasury can have very different intentions and goals on what they want to achieve when managing and disbursing treasury assets. Some ecosystems may have the goal of making the treasury sustainable so that the value of assets in the treasury are maintained or grow over time. Others could be more highly focussed on a particular mission, where they are looking to direct assets towards initiatives that help them achieve that mission. Ecosystems will often have a combination of these goals that they want to achieve.

Responsibilities of a treasury

  • Asset management - Treasuries will usually be responsible for the management of the cash, debt, capital structure and investments of an ecosystem. Cash management involves ensuring there is enough liquidity for an ecosystem to meet its short term obligations as well as forecasting future cash flows and balances. Debt management involves handling any short or long term debts and responsibly managing any debt levels. Capital structure management involves determining what the optimal mix is of debt and equity for the ecosystem at that point in time. Investment management involves managing how any surplus of assets are invested to earn a return or if invested could help with addressing any ecosystem priorities. How effectively assets are managed across these areas will highly impact the overall sustainability and growth of an ecosystem over the long term.

  • Risk management - Treasuries that are responsible for other peoples assets will often need to manage any existing or emerging risks. Risk management can help with how accounts and transactions are secured and handled as well as dealing with external risks such as inflation, foreign exchange risks or any other economic changes. A big part of risk management is planning for these risks ahead of time and preparing accordingly so that treasury assets are well protected.

  • Compliance with regulation - Ecosystems accepting any form of income and disbursing assets to fund different initiatives will be responsible for ensuring that those activities comply with any regulations that are applicable to the jurisdictions they operate in. Managing regulatory concerns will include looking at existing and future policies of these nations and then supporting any internal efforts to ensure that the treasuries operations comply with these regulations.

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