Sample interview questions: How do you assess and manage liquidity risks in treasury operations?
Sample answer:
Assessment and Management of Treasury Operations
1. Risk Assessment
- Identify and quantify financial, operational, and compliance risks (e.g., liquidity, counterparty, currency, interest rate).
- Establish risk limits and tolerance thresholds.
- Implement robust risk monitoring systems to track and escalate potential threats.
2. Liquidity Management
- Forecast cash flows and maintain optimal liquidity levels to meet short-term obligations.
- Utilize various sources of funding (e.g., lines of credit, commercial paper).
- Develop contingency plans for managing liquidity crises.
3. Counterparty Risk Management
- Due diligence on counterparties to assess financial health and creditworthiness.
- Monitor and mitigate counterparty exposure through diversification and risk-weighting.
- Implement clear credit policies and establish limits for exposure to specific counterparties.
4. Currency Risk Management
- Identify and quantify currency exposure through foreign currency assets and liabilities.
- Implement hedging strategies (e.g., forwards, options) to mitigate the impact of exchange rate fluctuations.
- Monitor and manage currency positions to optimize returns and minimize losses.
5. Interest Rate Risk Management
- Assess the sensitivity of treasury operations to changes in interest rates.
- Implement interest r… Read full answer