CIPFA’s risk study registration: Losing interest in treasury management?
0The following communication is written by Jackie Shute of PS Live. Jackie will be analysing the results of CIPFA’s treasury management risk survey here on Room151.
Losing interest in treasury management?
Then let CIPFA’s Treasury Management Risk Study help rectify that! Yes, CIPFA’s FREE OF CHARGE Risk Study is returning on 30th September giving your authority the opportunity to access an objective analysis of your treasury position to provide that key tool in your financial planning process.
If you can answer yes to any of the following questions, then this risk study is perfect for you:
- Would you like to know the affordability of your capital spending plans over the medium and long term?
- Do you want to find out the likelihood of meeting your net interest budget over the medium term?
- Are you interested in finding out how much of your net revenue budget is at risk from unfavourable movements in interest rates?
- Would you like to know whether your level of external borrowing in both the General Fund and HRA is on benchmark, and what this means for risk within the respective revenue accounts?
- Would you like more clarity on whether the credit risk/return position of your authority compares favourably to that of your peers?
- Is it worth allocating a small amount of resource to complete the data request in order to better inform you about your treasury risk position?
You don’t need me to tell you that the return you may now be looking at on your investment portfolio may not be quite that which was budgeted for back in February, so why not take advantage of the ability to inform this coming budget cycle with the downside possibilities in mind. If you don’t know the risks, you can’t attempt to mitigate them. The risk study can highlight exposures, and provide the framework for any uncomfortable positions to be managed.
Many authorities are now suffering the after-effects of past long term decisions regarding portfolio structures, which were made without the benefit of tools and a framework within which to project the underlying need for the duration of the deals being made. This has impacted heavily on the carry cost burden being suffered by many authorities, which could have been reduced if different decisions had been made. It is therefore essential that authorities take advantage of opportunities to utilise these tools in order to manage the evolving position on a forward looking basis, to improve resilience and reduce risk.
The risk study will provide that pivotal role of linking the capital spending plans to the treasury strategy to provide the revenue implications on an expected and risk based approach. The modelling will apply the Best Practice concepts of the CIPFA Treasury Risk Management Toolkit to enable the liability benchmark to be determined, which will consequently drive the projected loan and investment portfolio balances. These balance sheet projections, driven by the authority’s spending plans, will form the key building blocks upon which strategic decisions can be made.
The analysis then applies live market data to those positions, and the impact of any future anticipated borrowing and investments is combined with the current portfolio trades to produce the expected interest impact. New trades at future unknown rates of interest create uncertainty and risk to this expectation, as does the impact of any variable rate trades. This uncertainty is captured within the analysis which applies thousands of alternative interest rate scenarios to the positions, allowing you to see not just the possible upside potential if rates move favourably, but also the downside possibilities which can be managed away with appropriate strategies, that can be identified from the analysis.
The risk study has attracted over 200 participants in previous years, and this year CIPFA hope to make it bigger and better than before. In addition to the professional risk study providing the full strategic analysis outlined above, there is a ‘lite’ participation option for those authorities who may not wish to obtain that strategic view, and will provide a sub-set of the full results.
The lite version provides your credit risk / return positioning relative to the universe measured objectively using live market data. It will dig into investment duration and investment returns as well as borrowing profiles and rates. These results, and many more, will be available to participants immediately following submission of the portfolio data.
The participation window will be open from 30th September until 14th October, and registration for the Study is open now on this link CIPFA Risk Study Registration
So let CIPFA help you avoid losing interest in treasury management, engage in the Risk Study and use the framework and results to bring resilience to your financial planning process.
