Q1: Revision on the concepts learned in L1.

It is extremely
important to grasp the correct understanding of the concepts
and the meaning of the respective terms to pave the
foundation for the subsequent lessons.

What is Treasury?
The efficient management of the liquidity and
financial risk in the business i.e. treasury
management is best described as the proper
use and administration of the funds flow
through an organisation that results in the
maximum level of profitability within its risk
and return profile (which reflect the attitude
of the BOD- risk tolerance and goal)

Nature of treasury managementIts origin

Increasing complexity and dynamism- rate of change in

the identified risks and factors is very fast (as compared to
fixed exchange rate system under Breton Wood Agreement which the treasurer's job
could be very dull)

The impact of external factors i.e. PEST and Porter 5

Forces exerted on the organisation.

P: impose control on the currency transaction can increase biz cost; E: economy indicator; S: consumer
behaviour; T: smoothen treasury management.

Therefore company need to proactively manage

corporate financial resources in the most efficient and
effective way through the use of hybrid capital
instruments.

Skills needed in Treasurer

Treasurer must be able to understand all risk on
cash flow and decide the most appropriate
decision to maximize the companys profitability
and increase liquidity.
Risk averse
Able to communicate with bod explaining the
risks and choices that increase companys
profitability.

Linkage with corporate strategywhat types of decisions to be made by treasurer?

Investment decision
Financing decision
Dividend decision
how many awards should to given

Treasurers Role
3 level of strategy
Strategic level (set objective)
Tactical level (how to make this workable)
Operational level (implementation)

4 main functions

Funding management
Liquidity management
Currency management
Banking relationship management
Special case in CTM*

Strategic

Tactical

Operational

Fund management

Liquidity management
Currency management
Bank relationship management
Special case in CTM

Treasury Control Framework (TCF)

Governance issues- set treasury management policy
Organisational control issues- segregation of duties to
front (daily operation), middle (risk management) and back office
(support, settlement and control)

Access control issues- assess to physical and intellectual

asset, system, and documents

Process control issues- monitor dealing activities

Informational control issues- how to obtain, keep and
distribute information (management reporting and operational reporting)

Treasury management in modern era

Decentralised to centralised (to obtain cost savings:
centralised companies can lower borrowing and fx trading cost more easily
than decentralised companies)

Cost (support) function to profit centre

function (cost function- to control cost. Profit function- to generate
profit. High performing treasuries systematically identify, mitigate, and
profit from market risk)