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Week 1 - Lesson 1: Treasury Department

Treasury management aims to make the best use of a company's funds by planning, organizing, and controlling its cash flows, working capital, and financial risks. It involves raising funds from various sources, managing currency risks, analyzing cash flows, and implementing corporate finance strategies. The key functions of treasury management are cash management, liquidity management, ensuring adequate and timely availability of funds, deploying funds appropriately, optimizing resource use, and managing financial risks. Overall, treasury management's goals are to maintain a company's liquidity and reduce its costs of funds while mitigating operational and financial risks.

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33 views2 pages

Week 1 - Lesson 1: Treasury Department

Treasury management aims to make the best use of a company's funds by planning, organizing, and controlling its cash flows, working capital, and financial risks. It involves raising funds from various sources, managing currency risks, analyzing cash flows, and implementing corporate finance strategies. The key functions of treasury management are cash management, liquidity management, ensuring adequate and timely availability of funds, deploying funds appropriately, optimizing resource use, and managing financial risks. Overall, treasury management's goals are to maintain a company's liquidity and reduce its costs of funds while mitigating operational and financial risks.

Uploaded by

IMEE
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Week 1 - Lesson 1 : Treasury Department

INTRODUCTION

INTRODUCTION

Treasury Management can be understood as the planning, organizing and controlling


holding, funds and working capital of the enterprise in order to make the best possible use
of the funds, maintain firm’s liquidity, reduce the overall cost of funds, and mitigate
operational and financial risk.

It covers working capital management, currency management, corporate finance and


financial risk management.

Simply put, treasury management is the management of all financial affairs of the business
such as raising funds for the business from various sources, currency management, cash
flows and various strategies and procedures of corporate finance.

Treasury Management aims to ensure that adequate cash is available with the organization,
during the outflow of funds. Further, it also contributes to optimum utilization of funds and
makes sure that there are no unutilized funds kept in the firm for a very long term. The
functions of treasury management are discussed below:
1. Cash Management: Treasury Management includes cash management, and so it
ensures that there are an effective collection and payment system in the
organization.
2. Liquidity Management: An optimum level of liquidity should be maintained in the
business, 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. And to do so, cash flow analysis
and working capital management act as the most important tool for treasury
management, to achieve its strategic goals.
3. Availability of funds in adequate quantity and at the right time: The treasury
manager has to ensure that the funds are available with the organization in sufficient
quantity, i.e. neither be more nor less, to fulfil the day to day cash requirement for the
smooth functioning of the enterprise. Further, timely availability of funds also
smoothens the firm’s operations, resulting in the certainty as to the amount of inflows
available with the company at a particular point in time.
4. Deployment of funds in adequate quantity and at the right time: The deployment
of funds has to be done in right quantity such as the acquisition of fixed assets,
purchase of raw material, payment of expenses like rent, salary, bills, interest and so
forth. For this purpose, the treasury manager has to keep an eye on all receipts of
funds and the application thereof. Further, the funds must be available at the time of
need, which may be different for different firms and also for the purpose for which
they are used. The period may differ from a week to month when it comes to
acquisition of the fixed assets and two to three days in case of working capital
requirement.
5. Optimum utilization of resources: Treasury Management also aims at ensuring
the effective utilization of the firm’s resources, to reduce the operating costs and also
prevent liquidity shortage in the coming time.
6. Risk Management: One of the primary objectives of the treasury management is to
manage financial risk to allow the enterprise to meet its financial obligations, as they
fall due and also ensure predictable performance of the business. It tends to identify,
measure, analyse and manage risk in order to mitigate losses, that has the potential
to affect the company’s profitability and growth in any way.Hence, treasury
management is accountable for all types of risk that can influence the business
entity.

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