LIQUIDITY MANAGEMENT, PERFORMANCE MEASUREMENT AND BENCHMARKING

1. INTRODUCTION

Performance measurement in corporate treasury is the subject of increasing interest.In this paper, we present a summary of the most practical and most important approaches to liquidity management performance measurement in a single currency. The focus is restricted to companies with net debt but similar conclusions would apply in other situations too.Inevitably, a large part of any discussion on liquidity management appraisal revolves around the choice of a benchmark.In this article, we explore approaches to liquidity management assessment in corporate treasury and we pursue that most elusive of will-o-the-wisps, the choice of a benchmark of performance. The sections that follow focus upon the purposes of performance measurement in corporate treasury, main methods of measurement, benchmarking problems, financial market based benchmarks, reference strategy based benchmarks, optimum strategy based benchmarks, benchmarking without a treasury, value-at-risk and conclusions.


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