The process of managing to the financial assets and holdings of a business. Most treasury management departments aim to optimize their company's liquidity, make sound financial investments for the future with any excess cash, and decrease or enter into hedges against its economic risks. It also means that ‘the corporate administration of all financial matters, the generation of external and internal funds for business, the administration of currencies and cash flows and the complex strategies, policies, and procedures of corporate finance.’
The critical goal of treasury management is planning, organizing and managing cash assets to satisfy the financial purposes of the organization. The aim may be to maximize the return on the possible cash, or minimize interest cost or mobilize as much cash as feasible for corporate investments. Dealing in forex, money and stock markets involves complex risks of varying exchange rates, interest rates and prices which can influence the profitability of the organization. Treasury administrators try to reduce losses by adopting risk transfer and hedging systems that suit the internal policies of the organization. Options, futures, and swap are a few of the significant derivative instruments, and the Treasury Managers use to hedge their opportunities.
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Role and Functions of Treasurer
The Treasurer will manage the cordial relationship with the banks and include in working capital and money administration. The Treasurer will guarantee that the business has the liquid funds it requires and invests surplus funds. The Treasurer should have a thorough knowledge of funding demands of the organization, sources of finance available and the value of those sources and the risk associated with it.
The Treasurer would be responsible for executing the business with projections of exchange rate movements, exposure to currency risk and interest rate risk. He should adopt appropriate policies for foreign exchange risk management. He should be ready to advise effectively on systems such as international transfer pricing, international tax policies and its impact on the firm.
Functions of Treasury Management
1. To maintain the liquidity of business: This is the primary function of treasury management. Without proper liquidity, it is risky for companies to operate smoothly. Cash flow review and working capital control are useful in treasury management.
2. Mergers and acquisitions: The department may direct on the company’s acquisition projects and may be called upon to combine the treasury functions of an acquirer.
3. To Implement Quick Finance to Companies: The treasury board has to arrange modern finance for a company when it requires the money. For this, a good system in the financial market is required.
4. To Forecast Cash: Gather all the data from around the company to create an ongoing cash estimate. This data may come from the accounting records, the budget, capital budget, and even the CEO.
