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Treasury management 123
- 1. Under the guidance of: R. Balasubramanian Sir Section A, Group 8 Chandni Soni Manjari Priya Ankur Kumar Akshat Srivastava Dheeraj Singh Rohit Sharma Rahul Kumar
- 2. TOPICS PRESENTOR Introduction to Treasury Management Dheeraj Singh Structure of an Integrated Treasury Department Rahul Kumar Functions of Treasury Department Akshat Srivastava Deal Execution Process Manjari Priya Deal Settlement Process Ankur Kumar Treasury Components – Domestic Treasury Chandni Soni Treasury Components – Forex Treasury Rohit Sharma Conclusion Dheeraj Singh Overview
- 3. Treasury Management Interface between business and its financial providers. Guardians of organization’s assets: Responsibility for stewarding liquidity, optimizing capital structures and supporting the execution of strategies that generate value for all stakeholders. Treasury Management monitors the internal processes and decisions that cause changes in working capital and profitability. Improve profits, maintain firm’s liquidity and mitigate operational and financial risks. Planning, organizing, controlling funds and working capital of the enterprise in order to make the optimize use of the same. Maintains key relationships with investors and lenders.
- 4. Treasury Management via Banks Perspective Treasury generally refers to the funds and revenue at the disposal of the bank and day-to-day management of the same. With its emphasis on cash, risk and markets, treasury differs from other finance activities. The treasury acts as the custodian of cash and other liquid assets. It is the window through which banks raise funds or place funds for its operations.
- 5. Traditionally The role of treasury in banks was limited to ensuring the maintenance of RBI stipulated norms CRR SLR Activity in foreign exchange was confined to meeting merchants and customers their requirements in: Imports Exports Remittances Deposits Then and Now
- 6. At Present Asset Liability Management Capital and Reserve Requirements Liquid Investments in Government Securities Liaison with Regulatory Bodies Risk Management Operational Decisions Monitor current and projected cash flows Back Office Functions – Branches – Forex Department They safeguard existing assets : Prudent investment of funds Guard against excessive losses: interest rates and foreign exchange positions. Then and Now
- 8. Structure Of An Integrated Treasury Department
- 9. An Integrated Treasury Department An integrated treasury acts as a centre of arbitrage and hedging activities. The treasury department is manned by: Font office: Dealing – Risk Taking Mid office: Risk Management and Management Information Back office: Confirmations, Settlements, Accounting and Reconciliation Audit group (In some cases the audit group forms a part of the middle office.)
- 10. The dealers and traders constitute the front office. In the course of their buying and selling transactions, they are the first point of interface with the other participants in the market (dealers of other banks, brokers and customers). Acts as the bank’s interface to international and domestic financial markets. It is the clearing house for risk and has the responsibility to manage the treasury risks taken in all areas of the bank. They report to their department heads. They also interact amongst themselves to exploit arbitrage opportunities. FRONT OFFICE
- 11. Responsible for onsite risk measurement, monitoring and management reporting. Assessing likely market movements based on internal assessments and external/internal research. Interact with Risk management department on liquidity and market risk. Provides risk assessment to Asset Liability Committee (ALCO) and is responsible for daily tracking of risk exposures, individually as well as collectively. MID OFFICE
- 12. Accounting. Settlement. Reconciliation operations. Monitoring receipt of forex funds in interbank contracts. Statutory reports to the RBI. BACK OFFICE AUDIT GROUP Independently inspects/audits daily operations Ensure adherence to internal/regulatory systems and procedures
- 13. Maximize portfolio profitability. Improves risk insulation. Synergize banking assets with trading assets. Single window service to customers. Effective MIS. Improved internal control. Minimization of risks and better regulatory compliance. Efficient utilization of funds Cost effective sourcing of liability Proper transfer pricing Availing arbitrage opportunities Online and offline exchange of information between the money and forex dealers Advantages Of Integrating Treasury Operations
- 14. Functions Of Treasury Department Cash Forecasting Working Capital Management Cash Management Investment Management Treasury Risk Management Management Advice Credit Rating Agency Relations Bank Relationships Fund Raising Credit Granting Other Activities
- 15. Cash Management Maintain an effective collection and payment system. Management Information System (MIS). 1. Inventory Management 2. Receivables Management 3. Payables Management
- 16. Liquidity Management An optimum level of liquidity should be maintained in the business. The most important tools for treasury management, to achieve its strategic goals are: 1) Cash Flow Analysis 2) Working Capital Management
- 17. Deployment of funds • In right quantity and at the right time. • Like the acquisition of fixed assets, purchase of raw material, payment of expenses like rent, salary, bills and interest. • To achieve this it needs to keep an eye on all receipts of funds and the application. Availability of funds • In adequate quantity • At the right time Optimum Utilization of resources • Ensure the effective utilization of the firms resources. • Reduce Operating Costs. • Prevent Liquidity Shortage.
- 18. Risk Management • Manage financial risk. • Ensure predictable performance of the business. • It tends to identify, measure, analyze and manage risk in order to mitigate losses. • Make such investments which have higher return and low risk.
- 20. Front Office Front Office Back Office Back Office
- 22. Various Types Of Settlement
- 28. • Foreign exchange market is an institutional arrangement for buying and selling of foreign currencies. • Exporter sell the Foreign currencies and importers buy them.
- 31. Conclusion The treasury department is the heart of the banking industry. Executives working in this department get a bird’s eye view of the operations of a bank that are spread out over cities, nations and even continents. They understand the concept of cost of funds and oversee its application. Dynamic nature of Treasury needs specialized skills: Complexity of instruments, systems and interactions with the business (both operationally and strategically).
Notas del editor
- Whether it knows it or not, almost every business of any size ‘does’ treasury: the administration of its financial assets and holdings with the aim of optimizing liquidity, ensuring the right investments are made and reducing risk. The Principles outline the importance of relationships and communication that drives better decision making. They also provide guidance on the process of presenting the insight gained from analyzing relevant information that is critical to the value creation process.
- It covers working capital management, currency management, corporate finance and financial risk management. enable its functions to run smoothly. By optimizing liquidity and cost of capital, it actually has a core role in increasing return on equity and driving shareholder returns.
- The treasury department is responsible for a company’s liquidity treasury to compare plan, actual and forecasts results when asked the following questions by the CFO: a. Its 9AM - where in the world is my cash and in what currency?? (cash position) b. It is 11AM – Do I invest or borrow? (liquidity management) c. End of the day – Will I be over borrowed, over exposed or under invested next period and how will I know? (risk management and proper use of metrics)
- Asset Liability Management (ALM) : is critical for both lowering the risk of not having enough funds to operate and to increase the competitiveness of the business through its cost of funds. Trading And Hedging Portfolio Management company-wide Integration/Projects Funds Transfer Pricing (FTP)
- Treasury Management includes cash management.
- for the better and smooth functioning of the business, i.e. the company must be able to fulfil its financial obligation when they become due for payment, such as payment to suppliers, employees, creditors, etc.
- Manage financial risk to allow the financial institution to meet its financial obligations, as they fall due and also ensure predictable performance of the business. Mitigate Losses that has the potential to affect the company’s profitability and growth in any way.