Good Practice in Treasury

Published: 24 October 2024

Good practice in treasury is everything leading treasurers and treasuries do that isn’t already mandated by law, rules or regulation. Treasury good practices range from formal publications you need to read, such as the ACT’s treasury best practice guide, to applied sound judgement. The hallmark of treasury good practice is collaboration, and it is essential for your career progression.

Developing and sharing treasury good practice is at the heart of the Association of Corporate Treasurers (ACT)’s work. Caroline Stockmann, former ACT Chief Executive, describes it as follows, "Best practice in treasury isn’t just about technical skill, it’s about understanding your role within the larger business. A good treasurer integrates treasury goals with overall corporate strategy to drive growth and mitigate risk".

ACT best practice resources

Accordingly, the ACT publishes best practice resources on a wide range of important technical and other skills. These include the business of treasury, cash management, sustainable finance, strategic insight podcasts, borrowing documentation and the ACT international treasury peer review best practice guide.

Good, better or best practice?

The terms “good practice”, “better practice” and “best practice” are largely interchangeable. Naturally, treasury practice evolves and leading treasurers will improve it over time. Some publications favour one term over another. For example, the Financial Markets Standards Board refers to good practice, while the ACT refers to best practice. The most important thing is that you get up to speed and keep up to date.

Build good practice experience for career progression

"Currently, key areas of good practice experience are getting the basics right, cash flow forecasting and visibility, and managing working capital. Treasury and finance knowledge is key, and always will be, but developing soft skills is essential as well.

Collaboration with internal and external stakeholders is a fundamental part of a treasurer’s development as they progress their career, especially when partnering with C-Suite, tax and operations teams. Organisations need treasurers that are comfortable being strategic but not afraid to roll up their sleeves and get into the detail too.” Fi Wallace, Associate Director, Treasury & finance recruitment, Renoir (Renovata and Company)

Stress test regularly

"A key best practice is to regularly stress test your liquidity and risk management strategies. Market conditions can shift rapidly, and treasury teams must be equipped to respond to worst-case scenarios effectively".

(Vice President Treasury)

Build relationships with banking partners

"One of the best practices for any corporate treasury is to build strong relationships with banking partners. In times of crisis, having these established relationships ensures smoother negotiations and better access to capital". (Group Treasurer)

Understand your capital structure and cash in depth

“Good practice in treasury starts with a deep understanding of the company’s capital structure and cash needs. From there, you can develop flexible strategies that prioritize stability while still seeking opportunities for growth". (Treasurer)

Respond quickly to needs

"A treasury function should focus on agility. The ability to respond quickly to market changes and operational needs is key in a fast-paced business environment. Best practices come from being prepared for the unexpected".

(Group Treasurer)

Case study 1: FMSB Statements of Good Practice

The Financial Markets Standards Board (FMSB) was set up by market participants in 2015, following conduct problems that arose in the global wholesale Fixed Income, Currencies and Commodities (FICC) markets during the global financial crisis of 2007-08.

The FMSB publishes voluntary standards, statements of good practice and guidance notes designed to illustrate best practice and improve standards of conduct in wholesale FICC markets.

Relevance for financial institutions and non-financial corporates

The relevance for treasurers who work in financial institutions is fundamental, particularly given the regulator's recognition of voluntary codes, and taking them into consideration when reviewing regulated organisations. But why should non-financial corporates be interested in them?

The answer is that these standards of best practice may influence how banks operate. They describe a level of behaviour that corporates can expect from their financial counterparties. They also act as a valuable resource for corporates trying to understand market mechanics and what their own behaviours should be when transacting in those markets.

The ACT is a partner member of the FMSB. In addition, there are a number of non-financial corporates that are full members, including BAE Systems, BHP, BP, Rio Tinto, Royal Dutch Shell, Royal Mail Group and Vodafone.

Relevance for financial institutions and non-financial corporates

FMSB Standards set out core principles and accompanying guidance on the most important aspects of practice where ambiguity risks undermining the transparency, fairness and effectiveness of markets. FMSB Statements of Good Practice set out clear expectations and guidance on good practice in relation to broader areas of uncertainty in wholesale FICC markets.

Scope of FMSB Statements of Good Practice (SoGPs)

Statements of Good Practice reflect FMSB’s view of what constitutes good or best practice in the areas covered by the SoGPs in question.

Member firms are expected, and other firms are invited, to consider their own practices in light of the relevant SoGP and make any changes that they deem appropriate.

Relationship of good practices with law and regulation

Statements of Good Practice do not impose legal or regulatory obligations, nor do they take the place of regulation. In the event of any inconsistency, applicable law, rules, and regulation prevail.

In developing Standards and SoGPs, certain regulators may have commented on their drafting, alongside member firms and other bodies, such that the Standards and SoGPs, once finalised and published, are intended to represent an authoritative statement of global good practices and processes. However, they are not normally expressly endorsed by regulators.

(Source – FMSB)

Case study 2: the ACT’s best practice guide

Caroline Stockmann concludes, “The ACT’s best practice guide should not only provide you with a good read, but also inspire you to think about how you might do things differently in the future… The ACT continues to represent the treasury community as well as the real economy in all that it does, and I’d again like to thank our members for their ongoing contributions to make the treasury community a vibrant and exciting place to be".

Author: Doug Williamson FCT