Corporate Treasury Functions: Managing Capital for Liquidity

Learn how to manage your corporate treasury functions to maintain your liquidity and preserve your funds. Managing capital is a key to cash flow.
corporate treasury functions

As your business grows, so does the importance of corporate treasury functions for managing capital and your liquid funds.

This applies equally to cash-rich businesses, who need to protect their funds from inflationary growth, and to leveraged businesses who need to maintain a certain level of liquidity to avoid breaching funder covenants.

Corporate Treasure Functions

Capital management is a crucial skill for corporate treasury functions to maintain alongside trading; even the best traders will only achieve a little with poor management skills.

Your performance as a forex trader via the TradingView platform determines how you grow your capital and finances.

This article covers the essential strategies you need to manage your capital effectively when trading. Learn them and adopt them as it suits your trading style.

Set Clear Financial Goals

Before you start trading, you must set clear financial goals for yourself. This will help you stay focused and motivated as you achieve them. Your goals should be specific, measurable, attainable, relevant, and time-bound. Most importantly, they need to tie into your business’ needs.

Think about when you will need funds for investment, or which times of the year you are most likely to draw down on financing facilities. Tie your trading to strategies that mature when you need them to.

Develop a Trading Policy

A trading policy is a written document that outlines your trading strategy and tactics. It should include details such as your risk tolerance, delegated authorities, the types of trades you will make, and the timeframe in which you will execute them. Having a trading policy in place will help you to stay disciplined and avoid making impulsive decisions.

Remember that many of the day to day trading decisions will be taken by employees, having a clear policy in place they can refer back to will make sure the right trades are being made by your treasury function.

Use Risk Management Techniques

You should always have a plan that limits your position, such as setting stop-loss orders or using position sizing techniques. By managing your position effectively, you can minimize the impact of losses on your trading capital. Investment diversification is an essential aspect of portfolio management. Investing in various assets can reduce the impact of any single bad investment on your overall portfolio. For example, invest in a mix of stocks, bonds, and commodities to diversify your company’s portfolio.

Never assume that your risk limits and trading policy is being followed. Have in place a strategy, such as via an internal audit function, to check your plan is being followed.

Use Leverage Wisely

Leverage allows you to trade with more funds than you have in your account, which can amplify your profits. While leverage can be a helpful tool, it is essential to use it wisely and avoid over-leveraging your account. If you are new to trading or have limited capital, start with a lower level of leverage and gradually increase it as you gain experience and build up your capital.

Make sure that any leverage fits into your company’s overall financing strategy, and,  especially, any covenants you have agreed with funders.

Monitor Your Trades and Performance

It is essential to regularly monitor your trades and performance to ensure that you are on track to achieve your financial goals. This might involve keeping track of your profits and losses, analyzing your trade history, and adjusting your strategy. Regularly reviewing your performance can identify areas where you can improve and make adjustments to maximize your success.

Including a regular report with key metrics at board meetings is desirable, to ensure that the trading performance is monitored at the highest levels of your company.

Set Realistic Expectations

If your treasury function is new to forex trading, it’s easy to get carried away with grandiose plans of total market domination and an avalanche of profits. While these dreams may be fun to think about, they don’t look so good in reality.

To really make the most of your trading journey, it’s important to set realistic expectations and scope your ambitions accordingly. Taking a measured approach will help you use careful planning and organizational skills to keep yourself on track.

Most importantly, it’s worth hiring an employee, or consultant, who does have some experience, at least for the initial set up phase of corporate treasury functions.

Stay Disciplined and Manage Your Emotions

Discipline is crucial when trading. It is essential you ensure your trading policy is adhered to and that your employees are sticking to your strategies, even when things are not going according to plan. This can help avoid rash decisions, and keep everyone focused on your business’ goals.

Keep a Trading Log

A centralized trading log can be a valuable tool for tracking decisions and identifying areas for improvement. It can help you to review your traders’ history, analyze their performance, and identify patterns or trends in their trading. Regularly reviewing your trading log can help you gain valuable insights and adjust your strategy as needed.

By following these strategies, you can effectively manage your capital when trading and work towards achieving your financial goals. Managing capital is an essential skill you must hone to grow your finances and corporate treasury functions. Whether you trade with a small or large capital, the principles remain the same and will help you achieve your trading goals.

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