What is Treasury Management?
Treasury management is the corporate finance function responsible for managing a company’s cash, short-term investments, banking relationships, debt, foreign exchange, and financial risk. Its objectives are to ensure adequate liquidity, optimize the return on idle cash, fund the business at the lowest sustainable cost, and protect earnings from currency, interest rate, and counterparty risk.
How It Works
- Cash forecasting and pooling across bank accounts and entities.
- Short-term investment of surplus cash in money market and sukuk.
- Debt and capital structure management (term loans, sukuk, revolvers).
- FX and interest rate risk hedging via forwards, swaps, and options.
- Banking relationship management and counterparty risk monitoring.
Saudi Context
Saudi corporates run treasury operations across SAMA-supervised banks (Al Rajhi, SNB, Riyad, ANB, Alinma) using SAR cash pooling, sukuk investment, and FX hedging primarily against EUR, GBP, JPY, INR, and CNY (the SAR/USD peg minimizes USD hedging needs). PIF, Saudi Aramco, and the major Tadawul blue chips operate sophisticated in-house treasuries with structured product capability and centralized risk policies.
Example
A multinational group’s Riyadh treasury manages SAR 4 billion of cash across 18 bank accounts. Daily cash pooling sweeps balances into a master account earning short-term sukuk yields. The team hedges EUR 80 million of expected payables over the next 12 months through forward contracts and reports liquidity, FX exposure, and counterparty risk to the CFO weekly.