Treasury Management - Functions
Treasury management has become an specialized function. Treasury function helps in managing the Risk-return profile as well as the tax-efficiency of investment instruments. In larger firms, it may also include trading in bonds, currencies and financial derivatives. Learn about the various tasks, activities and imperatives, undertaken by treasuries in in today's context.
Treasury management has become an specialized function and in today's context, treasuries are expected to perform following critical functions:
1. Financial risk management
Financial risk management, is aimed at significantly reducing financial risks which includes currency risk management, commodity price risk management, interest rate risk management and other market risks management. This is necessary to keep business margins insulated from market volatility. This is aimed at planning, controlling and monitoring the market risks a company is exposed to. This also takes care of managing regulatory compliance-related aspects.
2. Cash Management
On the other hand, the financial cash management is focused on
- Managing Collections & Disbursements
- Optimizing Cash Flows
- Cash Pooling across enterprise
- Minimizing float across the business value chain and optimizing working capital
- Cash Budget Management
3. Funding Management
Treasury management is also focused on loan management to reduce financial costs of a business enterprise which includes reducing the cost of borrowings. It is also focused on investment management by redeploying business cash flows efficiently and optimizing the risk-return profile of investible surplus. Treasury function helps in managing the Risk-return profile as well as the tax-efficiency of investment instruments. In larger firms, it may also include trading in bonds, currencies and financial derivatives.
Now we will study some of these functions in detail in subsequent articles.
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Treasury Management - Functions
Treasury management has become an specialized function. Treasury function helps in managing the Risk-return profile as well as the tax-efficiency of investment instruments. In larger firms, it may also include trading in bonds, currencies and financial derivatives. Learn about the various tasks, activities and imperatives, undertaken by treasuries in in today's context.
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The objective of funding Management is to implement strategies that lead to the best borrowing rates and lower investment costs. Learn how treasury aids in loans and investment management functions.
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The objective of Financial risk management is to protect assets and cash flows from any risk. Treasury function works to accurately assess financial risks by identifying financial exposures including foreign exchange, interest rate, credit, commodity and other enterprise risks. Learn about the various risks that are managed by treasury.
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Technology has enabled the treasury function by providing various solutions to manage it's complicated tasks. This article explains various types of treasury management systems available in the market.
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Treasury has increasingly become a strategic business partner across all areas of the business, adding value to the operating divisions of the company. Managing activities that were traditionally carried out within the general finance function. Learn about the drivers for this change.
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Although there is no straight forward answer to the question, how to best organize a treasury function, this article provides an generic view of the way large MNCs creates departments or sub-functions within the treasury function.
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The terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger and includes funding and investment activities as well. Learn all about Treasury Management here!
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Treasury Management - Benefits
Effectively using treasury management with cash management and trade finance products brings tangible benefits to both corporates and financial institutions. Let us discuss some tangible benefits of treasury function.
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The Cash Management component ensures that the enterprise has sufficient liquidity for payments that are due and to monitor payment flows. Learn how treasury plays an important role in cash management for the enterprise.
