SMU MBA ASSIGNMENTS

Answer :  Treasury Organisation

The treasury organisation deals with analysing, planning, and implementing treasury functions. It deals with issues of profit centre, cost centre etc. The organisations managing interfaces with treasury functions include intragroupcommunications, taxation, recharging, measurement and cultural aspects.

Structure of treasury organisation

Figure depicts the structure of treasury organisation which is divided into five groups.

 

Fiscal: This group includes budget policy planning division, industrial and environmental division, common wealth state relationships, and social policydivision.Macroeconomic: This group deals with economic sector of the organisation. It includes domestic and international economic divisions, macroeconomic policy and modelling division.

Revenue: This group is concerned with the taxes in an organisation. It includes business tax division, indirect tax, international and treaties division, personal and income division, tax analysis and tax design division. Markets: This group mainly deals with selling of products in the competitive market. It includes competition and consumer policy, corporations and financial services policy, foreign investments and trade policy division. Corporate services: This group deals with overall management of the treasury organisation. It includes financial and facilities division, human resource division, business solutions and information management division.

Treasury as a profit centre

The implementation of treasury in the organisation gains profits in several aspects rather than considering it as a cost centre. It helps in providing market rates to the individual business units for the services provided and thereby making operating costs more realistic. The treasurer is motivated to ensure that more services are provided to make profits in market rate. Organisations also experiences the following disadvantages when considering treasury as a profit centre: Profit is a tempting factor to speculate as it sometimes encourages the organisation to invest in wrong direction that brings depreciation in economy as well growth of organisation. Most of the time is duly spent in arguing with business units with respect to charges over services. There may be excessive additional administrative costs.

Centralised and decentralised treasury management

Most of the multinational organisations face huge challenges in managing transactions globally. As the organisation expands geographically, it is difficult to access and track accurate and timely cash flow information. As the technology has been adversely developed, the need for centralising treasury has evolved; theoretically centralisation allows the treasurers to exercise greater control over operating organisations. The process of centralisation consists of: Providing centralised foreign exchange and interest rate risk management Dealing with cash management Providing fully centralised treasury including incoming and outgoing payments Centralising business treasury functions enhances the organisation to build economies of scale and rationalise costs during acquisition. Centralisation helps to achieve low cost debts, increase investment returns, reduce financial risks and ensure liquidity across the organisation. Decentralisation refers to the challenges of producing overall view of cash position and exposure to risk on a timely basis. Since the organisation contains various recording and reporting information methods, it will be difficult to construct a global risk position while combining information from different sources. In such cases it is impossible to make strategic decisions without access to timely and accurate information during the periods of economic volatility. In a decentralised environment, the company allows its subsidiaries to manage their own payables and payment processes. A lack of standardisation across subsidiaries and automation can lead to risks in transactions like incorrect payments and data redundancy.

Treasury management in banks

In recent days, most of the Indian banks have classified their business into two primary business segments like treasury operations (investments) and banking operations (excluding treasury).

The treasury operations in banks are divided into:

Rupee treasury: The rupee treasury carries out various rupee based treasury functions like asset liability management, investments and trading. It helps in managing the banks position in terms of statutory requirements like cash reserve ratio, statutory liquidity ratio according to the norms of the Reserve Bank of India (RBI). The various products in rupee treasury are:= Money market instruments Call, term, and notice money, commercial papers, treasury bonds, repo, reverse repo and interbank participation etc.= Bonds Government securities, debentures etc= Equities Foreign exchange treasury: The banks provide trading of currencies across the globe. It deals with buying and selling currencies. Derivatives The banks make foundation for Over the Counter (OTC). It helps in developing new products, trading in order to lay off risks and form apparatus for much of the industries self-regulation. The role of policies in strategic management was described in this section. The next section deals with inter-dependency between policy and strategy.

Q.2 Bring out in a table format the features of certificate of deposits and commercial papers. [10 marks]

Q.3 Critically evaluate participatory notes. Detail the regulatory aspects on it. [10 Marks]

Q.4 What is capital account convertibility? What are the implications on implementing CAC? [10 Marks]

 

 

Q.5 Detail domestic and international cash management system [10 Marks]

Q.6 Distinguish between CRR and SLR [10 Marks]