1.1. The Role of Capital Markets

Capital markets are essential for the efficient allocation of capital. They consist of primary markets, where new securities are issued, and secondary markets, where existing securities are traded . They can be broadly categorised as:

• Public Markets: Where securities are traded openly on exchanges.

• Private Markets: Where transactions occur directly between parties without public exchange.

Understanding the link between financial markets and the global economy is essential for treasury professionals. The ACT syllabus highlights the importance of understanding how organisations “access and manage financial resources, and interact with debt and equity markets” .

1.2. The Treasury as an Intermediary

The treasury function acts as a bridge between the organisation and these markets. Treasurers are responsible for:

• Securing cost-effective funding.

• Managing investor and lender relationships.

• Making decisions on the organisation’s capital structure .

• Accessing funding “in a cost-effective way and with an appropriate level of risk, thus maximising long-term shareholder wealth while safeguarding the assets, cash flows and operational flexibility of the organisation.”

1.3. The Risk-Return Dynamic

The core principle of investing and funding is the relationship between risk and expected return. Investors require a higher return for accepting higher risk . Treasurers must understand this dynamic when evaluating both funding options and investment opportunities.