Free Essay Sample Assignment: Treasury Management

Free Essay: Treasury Management

Entrepreneurship is never an easy undertaking. There is a lot that investors and stakeholders or consumers should be well-versed with all the time. Treasury management is one of the great strategies that corporations rely on to control their liquidity and financial position through the manipulation of its cash, debts and investments. Majority of corporations in the world have a treasury management department that plays great roles in its day-to-day operations. This department entails a company’s collections, disbursements, funding and investment activities.

In larger organizations, treasury management may entail trading in bonds, financial derivatives, currencies and financial risk management. In many firms, the treasurer management department is will fall under the office of the chief financial officer [CFO] with the support or aid of cash mangers or treasury. At all times, any entrepreneurship should be ready to maximize the value of shareholders and in the most appropriate manner. It is a fiduciary duty of every corporation to run a trustworthy and profitable business.

A good business should be managed in the sense any excess earnings is easily reinvested in operations, distributed to stakeholders as required and as dividends, used to expand the business or retained in the treasury as part of the firm’s money. If the treasury management team opts to retain the money as company’s cash on hand, then it should be put to its best use as a recorded liquid asset. The money cannot just sit in another location as a security for the firm’s in case of a slump or any other financial crisis.

The scope of treasury management is immense and one of its key responsibilities is to design the plan for investing excess funds and identify the most profitable investment opportunities. Treasuries responsible for conducting treasury management activities have to hold certain skills. They should be able to handle wide range of capital tools especially those issued for the sake of offshore subsidiary. Those with immeasurable skills in treasury management will also be able to determine the most apt way to protect their firm against any foreign exchange risk, which usually require good market know-how and capabilities to choose the finest ways of hedging.

In any financial organization, the treasury management department can be centralized or decentralized. There are numerous advantages of a centralized treasury department in any country. These include;

  • It is able to shun mixing cash surpluses and overdrafts in different bank accounts.
  • Simplifies bulk cash flows making it easy to negotiate on low bank charges.
  • Borrowing can be arranged in large amount at the lowest interest rates
  • Makes it easy to match up foreign currency income earned by subsidiaries using the same currencies.
  • It is easy for the central treasury management department to employ experts with exceptional knowledge in undertaking different financial activities.

For a decentralized treasury department, it is more responsive to the needs of individual units, it can offer greater autonomy to subsidiaries and divisions because of close relations they have with the treasury management function and lastly, sources of finance can be diversified to match local assets. Treasury management departments can also act as cost center or profits center and guarantee approval of financial, funding, banking, liquidity and foreign exchange policies.

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