SMU MBA ASSIGNMENTS

Answer: – 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.

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.

Q2. Classify various money market instruments

 Answer: – Money market – It’s just a market where money is traded as goods. Pro-active trading happens in these markets when Capital markets (Stock market)

Q3. What are the features of ADRs and GDRs?

 Answer: – ADRs and GDRs – A Depository Receipt (DR) is a versatile financial security that is traded on a local stock exchange but it represents a security that is issued by a foreign publicly listed company. Two of the most common types

Q4. Describe ERM and classify the differences between futures and forwards contracts

 Enterprise risk management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities related to

Q5. Explain the process of risk management and various tools involved in managing risks

 Answer: – The Risk Management Process– Risk Management is defined in the standard (AS/NZS 4360:2004) as “the systematic application of management policies, procedures and practices to the tasks of establishing the context, identifying, analysing, assessing, treating, monitoring and communicating”.

Q6. Explain the framework for measuring and managing the liquidity risks.

 Answer:  Measuring Liquidity Risk

The earlier section dealt with the risks associated with liquidity,