SMU MBA ASSIGNMENTS

Treasury management is the process of planning, organising and managing the organisation’s holdings, trading’s, corporate bonds, currencies, financial futures, associated risks, options, derivatives, and payment systems. It handles all the financial matters including external and internal funds for business, complex strategies, and procedures of corporate finance to optimise interest and currency flows. It helps in planning and executing communication programmes to enhance investors’ confidence in the organisation.

According to Teigen Lee E (July 2001), “Treasury is the place of deposit reserved for storing treasures and disbursement of collected funds”. The responsibility of treasury management lies with the Chief Financial Officer (CFO) of the organisation. The CFO’s responsibilities include capital and risk management, planning strategies, investor relations and financial reporting. In large organisations, these responsibilities are divided among the accounting and treasury sectors. Hence the workflow between these two sectors must be ethical.

Figure 1.1 depicts treasury management in an organisation.

 

 

 

Treasury management is important for the following reasons:

· The development in technology, breakdown of exchange controls, unpredictable changes in interest and exchange rates, and globalisation of businesses requires treasury management.

· To actively manage financial environment, organisations require treasury management that provides the ability to undertake business opportunities and their exposure to risks.

· The expanding range of hybrid capital instruments like convertible preference issued with respect to subsidiary registration of the government need treasury management to select the appropriate businesses in the various circumstances.

· It provides the caliber to develop appropriate skills in achieving economies of scale, lower borrowing rates and netting-off balances.

· It enhances relationship between entity and its financial stakeholders which include shareholders, fund lenders and taxation authorities.

· The treasury management acts as a centralised head office in the organisation and provides financial service to various departments and enhances the financial growth in the organisation.

Few benefits of treasury management are:

· Implementation of treasury management in the organisation increases sales of the products.

· It helps in providing confident employees who work effectively in the organisation.

· It enhances better guidelines and methods to manage risks especially in the areas like foreign currency, and helps in maintaining banking relationships in the organisation.

· The treasury management model helps in identifying risks based on changes in the business conditions and operations, and implements relevant methods to reduce the risk.

· The forecasted cash flow exposures can be derived from the historical data.

· In banking organisations, it helps to optimise asset and debt performance while minimising the needs for external funding.

· The financial sector in the organisation will be able to analyse a variety of data which include funds, transactions, foreign exchange rates, market data and third party information.

· The treasury management system advises the organisation management on aspects of liquidity of its short and long term planning.

· The organisation obtains a well maintained system of policies and procedures to impose adequate level of control over treasury activities.

· An organisation investing in treasury management can expect increase in cash visibility, better management of financial risk and enhancement of treasury efficiency and accuracy.

In this section we discussed about treasury management and its need and benefits. Next section deals with treasury exposure; need to manage risk, and the concepts of corporate and hidden risks.

 

2. What are the features of ADRs and GDRs?

3. Define the role of RBI in exchange management

4. Explain the framework for measuring and managing the liquidity risks.

5. Discuss the interest rate management using FRAs and swaps .

6. Write short notes on the following:

a. VaR

b. Back testing

 

 

Spring 2012

Master of Business Administration – Semester 4

MA 0042: “Treasury Management”

(4 credits) (Book ID: B1311)ASSIGNMENT- Set 1 Marks 60

Note: Each Question carries 10 marks. Answer all the questions.

 

1. What are the benefits of future commodity markets.?

2. What are the objectives of working capital management?

3. Describe the concept of foreign exchange risk management?

4. Explain the process of risk management and various tools involved in managing risks

5. What are treasury management practices?

6. Write short notes on the following:

a. Asset Liability Management

b. Exchange Rate mechanism

Spring 2012