Building financial resilience under Local Water Done Well

Treasury risk management is a critical enabler of long-term service delivery, affordability, and financial sustainability for new water service providers navigating Local Water Done Well.

As the sector faces significant infrastructure renewals and network upgrades, providers must balance affordability for communities with meeting heightened regulatory expectations. The transition brings a material increase in borrowing requirements, funding complexity, and financial risk. Water service providers must manage treasury risk effectively.

Why treasury risk management matters

Most water service providers will operate with substantially larger balance sheets and debt portfolios than their predecessor organisations. This creates greater exposure to key treasury risks including liquidity constraints, refinancing pressures, debt serviceability challenges, and interest rate volatility. Effective management of these risks is essential to ensure that capital investment programmes can be delivered without placing undue pressure on customer charges or organisational resilience.

Treasury decisions should form part of delivering your organisational strategy. Funding structures, risk appetite settings, liquidity buffers, and governance arrangements influence investment timing, borrowing costs, lender confidence, and ultimately the affordability of water services. Organisations that establish robust treasury frameworks are better positioned to demonstrate financial credibility to regulators, councils, communities, credit rating agencies, and capital providers.

Key treasury risks for water entities include:

Liquidity and funding
Debt serviceability
Investment sufficiency
Interest rate
Operational and model
Compliance and governance

A framework for effective treasury management

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Strategic alignment

Treasury activities should directly support an organisation’s long-term service delivery plans and funding strategies. This requires strong governance, clear accountability, and decision-making processes aligned with organisational objectives and statutory obligations.

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Risk identification

Water service providers need a comprehensive understanding of the financial risks arising from their operating model, capital programme, and funding profile. Organisations should assess how external market conditions, borrowing requirements, and operational factors could affect their ability to fund investment and maintain financial resilience.

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Practical risk management

Risk identification alone is insufficient. Organisations need policies, frameworks, delegated authorities, controls, and reporting processes that enable risks to be monitored, managed, and mitigated in practice.

The six pillars of treasury excellence

KPMG’s treasury operating model provides a practical framework for establishing a treasury function capable of supporting long-term growth and investment requirements.

The model focuses on six interrelated areas:

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Treasury framework & governance

Defines organisational structure, responsibilities, policies, systems, regulatory compliance requirements, and risk management expectations. Strong governance forms the foundation for effective treasury decision-making.

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Financial risk management

Addresses key financial exposures including interest
rate risk, foreign exchange risk, counterparty risk, and other market-related risks that can affect funding costs and financial performance.

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Liquidity & cash management

Ensures organisations maintain sufficient liquidity to meet operational and capital requirements through forecasting, liquidity monitoring, and cash management disciplines.

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Funding strategy

Focuses on sourcing and diversifying capital, managing debt profiles, assessing funding options, and maintaining access to financing markets over the long term.

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Operational risk management

Establishes controls, delegated authorities, segregation of duties, and procedures that reduce operational and model risk within treasury activities.

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Reporting & decision support

Provides timely reporting on cashflows, funding, risk exposures, covenant compliance, and treasury performance to support informed decision-making.

Looking ahead

The success of New Zealand’s water reforms will depend not only on engineering and operational delivery, but also on the financial resilience of the organisations responsible for delivering them.

Treasury risk management plays a vital role in ensuring that investment ambitions are supported by sustainable funding, prudent risk management, and robust governance. Organisations that embed treasury risk management into strategic planning will be better positioned to navigate market volatility, maintain stakeholder confidence, and deliver affordable and reliable water services for future generations

Let’s continue the conversation

Rajesh Megchiani

Partner, Financial Risk Management

KPMG in New Zealand

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KPMG works with water service providers to support them through the next phase of reform, helping providers balance community and regulatory expectations.

Get in touch if you are considering how to manage your treasury risk effectively, how to strengthen your client-side capability, or align your delivery methods with Local Water Done Well.