WHAT IS THE STRUCTURE OF A TREASURY DEPARTMENT?

Treasury departments are structured in different ways to best meet the needs of an organisation. They vary in size and structure according to the complexity of a business. In smaller companies, treasury operations are sometimes carried out by just one person or may be a role conducted by a finance department.

In a large, complex, international business, however, it is likely to involve a number of staff, who might be either professional managers, such as a regional treasurer, or specialists in particular treasury activities, such as foreign exchange dealers or investment managers. Because treasury activities involve transactions with large sums of money, processes are often set up so that no one single person carries out an end-to-end transaction. This is to prevent errors and also fraud!

Most commonly a treasury department will be set up into three different departments:

1. Front office

Responsible for carrying out day-to-day analysis and transactions relating to the management of funding, risk, cash and liquidity.

2. Middle office

Only larger treasuries will have a middle office often picking up some of the roles under ‘back office’, commonly the reporting and analysis type roles, but it varies enormously by organisation.

3. Back office

Administers and supports the front office and its main functions are to validate (confirm and verify), settle, and account for deals.

Depending on the size of a company, treasury departments can be centralised, decentralised or a combination of both.

Companies that are geographically dispersed can benefit from decentralisation, particularly where local knowledge can be beneficial. Centralisation on the other hand is often more cost effective for an organisation.

In a decentralised set up, there will often be a small group of specialists located at the head office who act as advisors. In a more centralised operation, treasury may undertake an agency role where the day-to-day treasury decisions are still made at local level by operational management but the execution is centralised to obtain efficiencies and economies of scale. An in-house banking role is where the central treasury acts as an internal bank with which all the subsidiaries deal.