Treasury to-do’s: your top-nine tasks

Tariq Kazi,  Associate Consultant at Campbell Tickell,  identifies what you need on your treasury to-do list.

What should your board and executive prioritise on the treasury agenda? In the post-Brexit economy, the answer today could well be different from 12 months ago. And indeed, what it might be 12 month from now. What is not changing –and rightly so – are the expectations of the Regulator of Social Housing.

Staying on top of your treasury risks is crucial to complying with the Governance and Financial Viability Standard. It also provides the financial capacity to continue delivering your corporate and social aims.

Here is your top-nine treasury topics list:
1. Day-to-day banking

Ask your treasury team to review all the bank accounts in your group and confirm whether they clear into a central pool. Do you need them all or can you close some? At the very least, it is good housekeeping. Perhaps you’ll discover some cash efficiencies too.

2.  Liquidity & funding

Model a liquidity stress in your cash flows, with a slow-down or stop in property sales income for a period of time, together with a cost overrun on capital investment. Can your funding lines see you through a liquidity stress?

3. Loan portfolio management

Look at the repayment/maturity profile of your loan portfolio. Is there an implicit refinancing assumption that you should probe? Are you assured that the bank will say yes at the right time? What are your options if not?

4. Interest rate management

If you have standalone derivative swaps, you’ll already know all about mark-to-market valuations and providing property security to cover those movements.  But do you have visibility on the fair value of your embedded fixed-rate loans? What is the hidden economic value of your loan book obligations, after adjusting for fixed rates? Does the economic value of your social housing assets (valued using the Existing Use Value-Social Housing approach, assuming you continue using them for their intended purpose) still comfortably exceed the economic value of your loan obligations? If not, what is your long-term strategy for addressing this?

5. Security management

When was the last four-way reconciliation undertaken across your:

(i) loan security register;
(ii) fixed assets register;
(iii) housing management system;
(iv) Land Registry records?

How much of your uncharged security is ready-to-charge? How much of your security is overcharged to lenders? This is about good housekeeping and making best use of all your assets. And it will help show the regulator that you fulfil its expectations laid out in the Governance and Financial Viability Code of Practice.

6. Financial covenants

Are all key external reporting dates diarised? Is there enough lead time for management review and to provide quality  assurance over your information? Are all the definitions of your financial covenant tests understood? Remember, there are many different definitions of interest cover and gearing. More than one management team has discovered that the ‘tightest covenant’ and the ‘second-tightest’ can switch places without much prior warning.

7. Platform and processes

Are you managing your loan portfolio on a standalone spreadsheet? How do you keep on top of version control? Does your spreadsheet capture 100% of the risks in your underlying loan agreement? Putting in place a Treasury Management  system may work best if you’ve got a growing loan portfolio across a range of products. Sometimes paying for a good  system is the best way to deal with complexity of loan instruments and interest rate products.

8. Investor relations

When a lender asks about your strategic plan, can you direct them to a clear set of documents demonstrating that their investments are safe? And how it is helping you to deliver your corporate and social aims? Are you happy that your investor relations literature balances how your social heart works with your commercial head? Remember your audience.

9. Professional advisers

Have you got all the right skills, knowledge and experience at your disposal? Have you given your in-house treasury team the ability to tap into a range of advisors’ expertise across the market? This will give you the flexibility to adapt your task according to what you need and what each advisor is best at delivering. Treasury can sometimes become a complex and challenging part of running a housing business, especially when external market conditions are evolving. You may wish to focus on simplifying your arrangements, managing risks, or preparing for the future.


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This article also appears in: CT Brief – Issue 37

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