CTP Stakeholder Relationship Management 3 — Questions and Answers
Question 1: Which of the following BEST describes the concept of 'relationship banking' from a CTP perspective?
- Maintaining personal friendships with bank officers to secure favorable rates
- A strategic, long-term partnership where the bank provides services beyond pure transactions in exchange for wallet share (Correct answer)
- Using a single bank exclusively to qualify for premium service tiers
- Negotiating the lowest possible fees on every transaction regardless of relationship history
Correct answer: A strategic, long-term partnership where the bank provides services beyond pure transactions in exchange for wallet share
Relationship banking involves a strategic exchange: the company provides wallet share and multiple business lines in return for credit availability, pricing advantages, and advisory services.
Question 2: A treasury manager discovers that covenant compliance for the revolving credit facility will be breached next quarter due to an acquisition. The FIRST action should be:
- Wait until the breach occurs and then notify the lenders
- Proactively contact the lenders to disclose the anticipated breach and negotiate a waiver or amendment (Correct answer)
- Accelerate drawdowns on the facility before the breach is detected
- Record the violation and offset it with unreported positive metrics
Correct answer: Proactively contact the lenders to disclose the anticipated breach and negotiate a waiver or amendment
Proactive disclosure of anticipated covenant breaches preserves trust with lenders and provides the best opportunity to negotiate a waiver before default occurs.
Question 3: In treasury stakeholder management, the term 'wallet share' refers to:
- The percentage of cash holdings at a specific bank relative to total corporate cash
- The proportion of a company's banking business allocated to a particular bank (Correct answer)
- The bank's market share within the financial services industry
- The amount of electronic payments processed through a single payment platform
Correct answer: The proportion of a company's banking business allocated to a particular bank
Wallet share is the fraction of total banking business (deposits, loans, FX, payments) that a company allocates to a specific bank, used as leverage in relationship negotiations.
Question 4: Which treasury activity requires the MOST coordination with the accounting and controller functions?
- Daily cash position reporting
- Financial covenant compliance monitoring and external reporting (Correct answer)
- Initiating wire transfers for accounts payable
- Selecting a new treasury management system vendor
Correct answer: Financial covenant compliance monitoring and external reporting
Covenant compliance requires coordinated effort between treasury and accounting to ensure reported financial ratios accurately reflect loan agreement definitions.
Question 5: A company is considering switching its primary banking partner. Which factor should weigh MOST heavily in the decision?
- The new bank's technology platform and digital capabilities
- The potential loss of credit availability and existing credit facility terms (Correct answer)
- The personal preferences of the treasurer regarding bank representatives
- The new bank's brand recognition and marketing presence
Correct answer: The potential loss of credit availability and existing credit facility terms
Switching primary banks risks losing committed credit facilities and relationship-based credit terms that may not be replicated immediately by a new banking partner.
Question 6: When presenting treasury strategy to senior management, a treasurer should PRIMARILY focus on:
- Demonstrating technical mastery of financial instruments used
- Linking treasury activities to enterprise risk management and business objectives (Correct answer)
- Providing detailed reconciliation of all bank account transactions
- Reporting on specific bank relationship personnel changes
Correct answer: Linking treasury activities to enterprise risk management and business objectives
Senior management presentations are most effective when treasury activities are framed within enterprise risk and strategic business goals rather than technical detail.
Question 7: In managing external auditor relationships, treasury's primary responsibility is to:
- Provide advocacy for favorable audit opinions on financial instruments
- Supply accurate, complete documentation of treasury transactions and controls (Correct answer)
- Limit auditor access to sensitive banking relationship correspondence
- Negotiate audit fees on behalf of the CFO
Correct answer: Supply accurate, complete documentation of treasury transactions and controls
Treasury must provide auditors with transparent, complete documentation of positions, transactions, and internal controls to support an accurate audit.
CTP Stakeholder Relationship Management 3
Which of the following BEST describes the concept of 'relationship banking' from a CTP perspective?