The benchmarks set depend on the companies’ attitude to risk, so the fact that Tesco should operate it’s treasury on a profit centre basis pre-determines some benchmarks, such as the fact that they are able to leave some exposures un-hedged in expectance of rates going up and extra profit being made, or the fact that their hedge selectively policy and profit centre based treasury allows them to shop around for better rates for deals, not just being tied to one particular dealer means they have to search for the best rates and is thus measurable on past and future performance.Using the exchange rate available at the beginning of the exposure as found on Reuter’s pages, the profit centre treasurer would be able to deal with other banks and negotiate a more favourable rate, or they could even leave the exposure un-hedged if they believe the rates will change in their favour. Benchmarking the rate received against that on the Reuters page is a good method as it will measure what the market got compared with what the treasurer got, as a profit centre the treasurer hedges selectively and this means that on occasions they might get a much higher rate by leaving it un-hedged. However, they might also get a less favourable rate in which case the treasurer would not have met this target when comparing it with its benchmark. This is slightly unfair as they have a more risky profile company to play exposure trade offs with, but it also clearly shows what the treasurer would of got as a rate if they were not prepared to take risks like they do.

Or the ability of the treasurer to manage the exposure by internal techniques, e.g. matching of long and short positions by multilateral netting, but they would need to show that they did this to eliminate the exposure and add value.

 The treasurer’s performance could be measured against whether they have followed policies in a sense that they have not breached their limits, they have taken appropriate risks as defined in the policy and they have met their reporting needs for derivatives. This is a very good way of measuring the performance, however, on occasions the limits might be breached and reporting might not be done due to circumstances beyond their control.You could also benchmark against bank costs, dealer performance, exposure management and service levels to other departments. When looking at bank costs, you could compare them with other banks to see if you are paying more with your bank, or compare them with previous years to see whether you have negotiated lower costs. This is a valuable method because sometimes people just use the same bank regardless of cost but more for ease of transaction and time, but on a profit centre they should be seeking to reduce costs and increase profit at all times.When looking at dealer performance it would be along similar lines as the bank costs, comparing them with previous years and different dealers to see whether you got the best rate, again this is a good benchmark as it is quantifiable, as you could calculate what you have saved by using certain dealers. The relationship of the treasury function with the rest of the company could be assessed by focus groups or questionnaires, where speed of response and quality of advice are factors considered. However, the treasury function may feel this benchmark is rather unfair since good quality advice and speed of response are taken for granted within the company.

Benchmarks could be based on what competitors have done, although this may be hard to find out exactly what they have done to give an accurate comparison. According to http://www.financedirectoreurope.

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com/articles/hackettgroup.htm “It is natural for companies to wish to benchmark their performance against a handpicked group of major competitors. However, depending on individual objectives and business strategy, different companies, even within the same industry, have different strategic goals”.A REPORT ON THE IMPLICATIONS OF POSSIBLE PENSION LIABILITIES FOR COMPANIES:The Pensions Act 2004 has given the pensions regulator specific powers to reduce the risk to member’s benefits that is caused by employer actions; this includes the contributions, financial directions of the company and restoration orders. Possible pension liabilities for companies include the ageing population, we are entering an era where the amount of people that are drawing a pension will be far greater than those working and paying into the pension pot. This means that many companies will struggle to pay out large pensions and as such are closing schemes like final salary ones to try and limit their liability.All pension liabilities must now be shown on the balance sheet; this produces a reduced profitability figure for the company and could result in increased borrowing rates, down-grading of the companies rating with Standard ; Poors or other similar rating agencies.

 Appendix 1 shows notes from Tesco’s 2005 annual accounts and reports brochure that relate directly to the company’s pension liability.Changes in pension regulations mean that individuals will be able to take more cash tax-free from their pot from April 2010, this will have a diverse effect on any companies pension liability as it means instead of being able to invest their money for them and pay them out a monthly sum, they will have to release vast amounts of it in lump sums. This reduces the amount they have left to invest and can mean they get poorer deals and less returns for those currently paying into the pension pot.As from April 2005 individuals can also take their pension and carry on working for some companies, Tesco in particular offer this option. It means that once they start receiving their pension the employers and employees contribution will stop, but they will have to not only pay out a pension each month or year but they will also have to pay out a wage each month meaning increased expense as you usually expect to be at the highest salary point when you wish to retire.