Course Overview

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This 12-hour course brings a fundamental understanding of how financial risk is managed in the Treasury group of a bank from an active practitioner’s viewpoint: a first-person account from a mentor currently responsible for managing interest rate risk and FX risk for Treasury in a major bank who also needs to understand the liquidity, funding, and capital constraints, in order to optimize performance within financial risk and resource limits.  The course provides a deep inside look into how Treasury contributes to stable profit generation for an institution as well as a far-reaching view, through a strategic lens, of how Treasury is a critical partner in a bank’s strategy to grow and expand into new product and geographic markets.

Using practical examples and review of actual public disclosures, this course will connect the theoretical, high level concepts of treasury management with the real-world decisions Treasury professionals on the front-line face everyday to balance risk and opportunity for an institution. 

Each session or workshop has a duration of 1.5 hours.

Session 1 – Working in Treasury and How Treasury Works

• Overview of how the Treasury group is commonly structured in a bank

• Develop an understanding of how each department in Treasury commonly operates individually

• Learn about what skills and qualifications each department commonly values from candidates

• Forming the “big picture” of how the different departments interact within Treasury to ultimately interact with other banking groups to deliver value for a bank

• A brief overview of the technical curriculum and the purpose and structure of the workshops

 Session 2 – Interest Rate Risk Management: Internal Framework

• Define interest rate risk

• Overview of how banking products generate interest rate risk

• Understand the basic ways to analyze interest rate risk through repricing gaps and mismatches

• Understand the more advanced ways to analyze interest rate risk through behavioural models and maturity assumptions

• Discussion of the difference between linear and non-linear interest rate risks

• Understanding the commonly used metrics for interest rate risk: earnings at risk, EVE, DV01 etc.

Session 3 – The Financial Risk Management Toolbox

• Understanding the financial instruments used for managing risk in Treasury, i.e. bonds and derivatives

• Understanding why and when to use these fixed income products

• Deep dive into the derivative toolkit: swaps, futures, options

• Understanding of derivative markets and valuation

Session 4 – Interest Rate Risk Management: Detailed Hedging Framework

 • Putting it altogether: first the exposure, then the toolbox, now the actual hedging

• Formulate and design a hedging framework

• Building off the fundamentals, understand the process of hedging; from front office execution to middle office support to back-office settlements, and everything + anything in between (for eg. market risk limits, capital usage, etc)

• Understand why hedge accounting is an important requirement for a bank

• Overview of hedge accounting essentials to formulate a high-level understanding

• Understand the difference between mark-to-market and accrual accounting and why it’s critical

Session 5 – FX Management Framework

• Understand how foreign exchange risk arises

• Learn about basic framework of describing FX risk as transaction or translation risk

• Understand how FX forwards, swaps, and/or options can be used in each type of situation where FX risk arises

• Understand the short-term as well as the long-term risk/return trade offs

Session 6 – Liquidity, Funding, Capital Management

• Basic understanding of liquidity management

• Basic understanding of funding management from the perspectives of short-term and long-term needs

• Basic understanding of capital management and capital adequacy requirements

• Unifying the basic understanding of liquidity, funding, and capital management to formulate a mental map of why managing these financial resources is critical for a bank’s profitability

Workshop 1 – Exercise: building a Treasury department from scratch

• Apply the knowledge from the six sessions to build a hypothetical Treasury department from inception

Workshop 2 – Exercise: challenging the Treasury department in steady state + emerging tech & issues

• Subject the hypothetical Treasury department to simulated scenarios of financial market shocks and regulatory challenges, linking to real-world examples

• A discussion of current and emerging technology and regulatory trends and requirements that may shape or change the Treasury industry for the years ahead

• Summarize what we learned and build a mental map of how Treasury works

Course Highlights

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Establish a foundational knowledge of Treasury with an active practitioner responsible for a wide portfolio for risks.  Gain inside insights into how Treasury operates within the “big picture” of a bank.  Understand the risk and return trade-offs a portfolio risk manager in Treasury faces every day.  Learn about the rewards of choosing this career path.  Engage the understanding of Treasury from a “first principles” perspective.  I.e., always ask “So what?” – this inquiry is the main tool of learning in the course.

Qualifications

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This course is suitable for current students or new graduates who wants to be equipped with a real-world understanding of treasury, finance, and risk management to prepare for entrance into the finance workforce.  This course is also designed for people who are currently working in the finance field with a strong interest in treasury management, looking to make their mark in this growing discipline.

Mentor Profile

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The mentor for this course has been working in the front-line of Treasury risk management in a major bank for over 15 years.  Before that, he worked as an auditor and a financial risk consultant for a Big 4 firm.  Through the episodes experienced in the market environment over this time, from the financial crisis – to the long low yield environment – to the COVID market shock – to the current inflationary/tightening conditions, he has accumulated learnings and gained insights, forming a mental map of how Treasury works in a bank.  Currently serving as Director of Balance Sheet Management, he has been active in mentoring and provide learning opportunities within his organization and is now keen to share learnings and insights collected over the years, and help others build their mental maps, across a wider landscape.