Corporate treasury encompasses the functions responsible for managing a company's liquidity, cash position, banking relationships, short-term borrowings, and financial risk (interest rate, foreign exchange, and commodity). For credit professionals, understanding treasury functions is important because treasury decisions directly affect a company's liquidity profile, its ability to draw on credit facilities, and its relationship with lending banks.
Cash management is the most fundamental treasury function. Treasury teams manage the flow of cash across the organization — concentrating cash from operating subsidiaries into a central pool, investing surplus cash in short-duration, high-quality instruments (money market funds, Treasury bills, commercial paper), and ensuring sufficient liquidity for operational needs. Effective cash management reduces the company's need for external borrowing and improves interest income on surplus balances.
Short-term borrowing instruments available to corporate treasurers include commercial paper (CP), revolving credit facilities, and bilateral credit lines. Investment-grade companies with strong credit ratings often issue CP — short-maturity (1–270 days) unsecured promissory notes sold to money market funds and institutional investors at rates below what bank revolvers charge. CP programs require "backstop" revolving credit facilities — committed bank lines that can be drawn if the CP market becomes unavailable — ensuring the company can always refinance maturing paper.
Treasury also manages banking relationships — maintaining relationships with enough banking institutions to ensure continued credit access, competitive pricing, and ancillary services (foreign exchange, cash management, derivatives, letters of credit). Multi-bank relationship management reduces single-counterparty risk and provides leverage in pricing negotiations.
Interest rate risk management is another key treasury responsibility. Companies with floating-rate debt exposure often use interest rate swaps to convert some or all of their floating-rate obligations to fixed rate, providing earnings predictability. The timing and sizing of hedging programs requires the treasury team to form views on interest rate direction and balance hedging cost against the uncertainty it eliminates.