As an insurance company, ACE Insurance has substantial operational cash flow together with fiduciary money owed to insurance carriers. With such high cash balances managed by the company but owed to third parties, the financial and reputational risk of counterparty default is huge. Cash management and short-term investment is a priority for treasury, and principle preservation is the primary investment objective. With many of the banks experiencing a downgrade in credit rating, treasury is increasingly finding that it needs to spread its bank exposure risk. This is easy to do for short-term investment activity such as deposits, but it becomes more difficult when it comes to treasury management. Corporates need to make decisions about the banks they want to work with based on those that are most likely to be around in the future. Like many other firms, the company has needed to focus carefully on where to place the companys cash. Even in situations when a national government has stepped in to support a bank, and not every bank can be bailed out, it could easily take three to four months to retrieve the cash, creating potentially serious liquidity problems and a loss of return over this period. A company in this position may have to borrow to cover the liquidity gap or lose out on business investment opportunities.

The above case displays the importance of treasury as guardian of organizations assets Illustrate in detail the appropriate models that you can propose to the company in stewarding liquidity, optimizing capital structures and supporting the execution of strategies that generate value for all stakeholders.