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5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College Alabang
Ian Abalos, MBA
ntroduction to TreasuryManagement
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management2
June 24, 2014
Treasury Management
Overall Objective:
Informative and practical/functional grounding in
Treasury Management
Appreciate how companies maximize cash flows through
effective fund allocation, while minimizing risk using
appropriate measurement and management strategies.
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management3
Treasury Management
Proposed Course Flow (note: compare with Syllabus)
Treasurys
Role
Treasuryand itsOperatingEnvironm
ent
Treasury
Management
Overview
Treasury
Organization
& Structure
Treasury and
the Financial
SystemSpecial focus
on Financial
Institutions and
Markets
Fundrai
sing
Loan Financing
Debt
EquityAlternative
Forms of
Financing
TreasuryStrategiesand Risk
Management
Working Capital
Management
Capital BudgetingRisks associated
with Treasury
Activities
Treasury Tools
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management4
What is Treasury Management
The management of the organizations:
Cash flows (cash and working capital management)
Financing and investing decisions
Banking relationship
Financial market transactions
Effective control of risks associated with above-
mentioned treasury activities
Pursuit of optimum performance consistent with the risks
Side note: recall earlier stated Course Objective
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
5/10
San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management5
Treasury Management Core Activities
Asset Liability Management (ALM) - technique that companiesemploy in coordinating the management of assets and liabilities tosatisfy various obligations (side note: also a form of riskmanagement)
aka Surplus Management
Maturity mismatch
Interest rate mismatch
Currency mismatch
Sales and trading (Proprietary and non-proprietary)
Currency, interest rate, and credit products
Short-term and long-term instrument
Derivative products Risk Management
Liquidity risk, credit risk, currency risk, interest rate risk, etc.
Back Office Processing, Settlement, and Accounting
Customer and Regulatory Reporting
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management6
Treasury Organization & Structure
Treasury organization model is based on two importantdimensions:
Scope/Range of activities covered by Treasury
Extent of centralization of management control
SCOPEany organization can exercise its choice onthe scope of Treasury roles it undertakes. It may begoverned by a variety of considerations:
Driven by purely utilitarian motives
Core organization process, hence handle full range ofservices
Outsource some processes or not
Extent of centralization
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management7
Treasury Organization & Structure
Extent of Centralization
Centralized Control*
Decentralized Control*
Combined (Regional)
Shared Service Center
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management8
Treasury Organization & Structure
Advantages of Centralized Control Optimizes risk and portfolio management
Reduces regulatory compliance costs
Standardizes processes and policy setting
Lowers transaction costs for banking services
Enhances opportunities for concentrated relationshi
ps with external counterparties
Allows for Shared Services Centers
Decreases technology costs when using a sophisticated treasury management system
Concentrates treasury expertise
Reduces global staff requirements for MNCs
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San Beda College
Alabang
June 24, 2014 FEL109R - Treasury Management9
Treasury Organization & Structure
Disadvantages of Centralized Control
Reduces subsidiary interaction
Potentially clouds the regional cash and risk management pi
cture
Decreases flexibility in addressing taxation, regulatoryand time zone issues
5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management
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San Beda College
Alabang
End
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