FEL109R Lecture 1 - Intro to Treasury Management

5/24/2018 FEL109R Lecture 1 - Intro to Treasury Management

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San Beda College Alabang

Ian Abalos, MBA

ntroduction to TreasuryManagement


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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.


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Alabang


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


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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


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Alabang


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


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Alabang


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


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Alabang



Extent of Centralization

Centralized Control*

Decentralized Control*

Combined (Regional)

Shared Service Center


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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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Alabang



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


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Alabang

End


FEL109R Lecture 1 - Intro to Treasury Management

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