Question

Treasury management in a large company covers several areas including funding management, liquidity management, currency management and corporate finance.

(i) explain the benefits of having a separate centralised treasury department.
(ii) Describe areas covered by treasury.

Answer 1

(i) Benefits of separate centralised treasury department:

• Manage risk more effectively.
• Leverage scale to reduce cost and ratios.
• Increase efficiency by reducing redundancies.
• Optimize liquidity across the organization.
• Enhance visibility into cash flows.
• Improved working capital management through increased access to cash, resulting in reduced debt and increased return on investments of excess cash.

(ii) Areas covered by treasury.

• Cash Management
• Liquidity planning and control.
• Management of interest, currency, and commodity risks.
• Procurement of finance and financial investment.
• Contacts with banks and rating agenecies.
• Corporate finance.
• Asset Liability management
• Funds Transfer Pricing
• Trading and Hedging
• Portfolio Management