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Mitigating Risk at Transport for London

by Michael Blake, Group Treasury - Corporate Finance, Transport for London

The treasury department at Transport for London (TfL) consists of a team of ten people working under the Group Treasurer. It is a fully centralised department responsible for the group’s banking arrangements, investments, debt activities and risk management associated with these areas.

In 2008 TfL received government approval to enter into derivative instruments for the purposes of risk mitigation (Section 49 TfL Act 2008). This was a landmark agreement as no other local authority has the power to do this. As such, the development and implementation of the derivatives programme was closely scrutinised not only by its executive management team, but also by the following external bodies: the TfL Board, chaired by the Mayor of London Boris Johnson, its auditors, the Greater London Authority, the Department for Transport and Her Majesty’s Treasury.

Selecting a derivative risk management solution

In order to give our stakeholder’s confidence in our ability to manage a derivatives programme, we set about looking for a solution that would help us implement best practices. We were in the process of choosing a new treasury management system (TMS) and decided that the best solution for TfL was to opt for a TMS and a separate valuation tool. We chose Reval as the most capable of supporting our requirements. Reval was also highly regarded by our auditors and banks with which we have relationships. Having the right solution in place gave confidence to all parties concerned that our treasury team was able to manage and mitigate our risk effectively.

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