Treasury Risk Management

Euromoney Learning Solutions

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Euromoney Learning Solutions


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Explore current techniques to ensure liquidity through good Treasury Risk Management

Treasury is at the heart of every banking and financing operation. Ensuring liquidity must be the top priority, as the fundamental survival of any institution depends on it. Market, interest rate, and operational risk can never be eliminated, but instead must be measured, monitored, and controlled to ensure profitability. In managing risk, treasury professionals utilise the full array of funding and hedging instruments to respond to changing balance sheet and market scenarios. Sound treasury risk management is possible only through an effective and efficient governance and policy structure, with senior management fully engaged with the Asset Liability Committee (ALCO).

By the end of this program, participants will be better able to:

  • Analyse and assess the different types of risks arising from the assets and liabilities on the balance sheet
  • Use and understand the basic tools to measure risk and its sensitivity to changing market conditions
  • Know which funding instruments and hedging strategies are available and when to best put them into practice
  • Evaluate the extent of liquidity risk exposure in a bank, via the application of a full suite of liquidity risk metrics
  • Understand liquidity buffers and their management
  • Appreciate liquidity risks beyond basic loans and deposits
  • Evaluate the appropriate level of liquidity risk controls, with the consequences for lending;
  • Grasp the formulation and value of stress tests
  • Understand the concept of internal funds transfer pricing and evaluate the appropriateness of a particular model to any type of institution
  • Formulate a range of funding policies for the banking and trading books
  • Understand the role and influence of the Asset Liability Committee (ALCO) of a bank, and its appropriate governance framework


Day 1

Interest Rate, Market, and Operational Risk

Introduction to Risk and Risk Management in the Treasury

Interest Rate Risk

Earnings at Risk Net interest income: what’s at stake Types of interest rate risk:

  • Gap
  • Yield curve
  • Duration and Convexity
  • Optionality
  • Basis

Mark-to-market and portfolio valuation

Risk Measurement and Sensitivity

Basis point values Value at Risk (VaR):

  • Parametric, Non-Parametric and Monte Carlo models
  • Confidence levels
  • Limitations
  • Back Testing

Risk Management Limits

Types and use Reporting Sanctions Risks and regulatory oversight:

  • Standardized
  • Internal Model
  • Basel 2.5 Stressed Var
  • Economic and Regulatory Capital

Operational Risk

  • Identifying the range of risks
  • Controls and improving processes
  • Approaches to modelling: frequency and severity
  • Capital requirements

Exercise: Participants will perform interest rate gap and risk analysis on hypothetical asset/liability management positions, assess overall risk, and make funding decisions.

Day 2

Funding Instruments and Hedging Money Market Funding Instruments

  • Cash management
  • Deposits, CDs/CP, repo
  • FRA and Futures in Money Market
  • Exchange Traded and OTC instruments
  • Market characteristics: size, liquidity, investors

Term Issuance

Structuring debt programs

  • Market selection
  • Legal framework, listings
  • Features: fixed/floating,

Basel III capital rules

  • Additional Tier I and II, CoCos
  • Securitisation


  • Settlement risk
  • Exchange controls
  • Trading platforms
  • Forward and FX futures


  • Interest Rate Swaps
  • Options
  • Black Scholes
  • Caps, collars and floors
  • Participating Cap

Exercises: Participants will -test their understanding of treasury mechanics by calculating futures/FRA/Forward FX pricing, swap pricing, -Determine pricing of caps/collars and floors -form teams to construct hedges and monitor their performance

Day 3


Managing Liquidity Risk

Define Liquidity Risk

Diversification and concentration:

  • Stability and sustainability of funding sources
  • Central banks
  • Collateral management

Measurement metrics and monitoring:

  • Key metrics
  • Basel III: liquidity coverage ratio, net stable funding ratio
  • Scenario and back testing


  • Types and use
  • Reporting
  • Sanctions

Internal funds transfer pricing

  • Charging for liquidity
  • Building a curve
  • Setting policy

Liquidity asset buffer

  • Choosing appropriate assets
  • Managing the portfolio

Exercise: Participants will: -calculate liquidity risk gaps and ratios, and evaluate the liquidity profile of a bank -develop an internal fund transfer pricing policy for a bank -Case Study: Northern Rock

Day 4

Treasury Risk Management Operating Model

Treasury structure

  • Role and responsibilities
  • Utility or profit centre?
  • Capital allocation: treasury as an agent of change

Trading and funding policy

  • Objectives
  • Risk appetite and tolerance that suits the institution


  • Oversight
  • Information flow: communication and interaction
  • Contingency planning and recovery

Regulation and Proprietary Trading

  • Ring fencing
  • Where is the line between market making and prop trading?

Exercise: Participants will analyse case studies of notable treasury risk management failures. Special attention will be paid to policy and procedure, funding sources, management, limit enforcement, risk measurement, and supervisory reporting failures. Participants will propose and discuss risk management policies that could have produced markedly better outcomes.

Course summary and conclusion


Thierry Fuller

Thierry is a highly experienced trainer and consultant in Treasury Management. Since 1997 he has worked as a consultant and trainer with the Top Three Investment Banks in the World (Goldman Sachs, Morgan Stanley, BofA Mer-rill Lynch), most of the largest 20 Banks in the World (Citi, J.P. Morgan C...

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Treasury Risk Management at Euromoney Learning Solutions

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