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
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