San Beda College Alabang

Introduction to Treasury Management

Ian Abalos, MBA

Treasury Management

San Beda College Alabang

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.

December 7, 2013

FEL109R - Treasury Management

Treasury Management

San Beda College Alabang

Proposed Course Flow (note: compare with Syllabus)

Treasury and its Operating Environm ent Treasury Strategies and Risk Manageme nt

Treasurys Role

Fundrai sing

Treasury Management Overview

Treasury Organization & Structure
December 7, 2013

Treasury and the Financial System Special focus on Financial Institutions and Markets

Loan Financing Debt Equity Alternative Forms of Financing

Working Capital Management Capital Budgeting Risks associated with Treasury Activities Treasury Tools

FEL109R - Treasury Management

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

San Beda College Alabang

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

December 7, 2013

FEL109R - Treasury Management

Treasury Management Core Activities

San Beda College Alabang

Asset Liability Management (ALM) - technique that companies employ in coordinating the management of assets and liabilities to satisfy various obligations (side note: also a form of risk management) 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
December 7, 2013 FEL109R - Treasury Management

Treasury Organization & Structure Treasury organization model is based on two important dimensions:
Scope/Range of activities covered by Treasury Extent of centralization of management control

San Beda College Alabang

SCOPE any organization can exercise its choice on the scope of Treasury roles it undertakes. It may be governed by a variety of considerations:
Driven by purely utilitarian motives Core organization process, hence handle full range of services Outsource some processes or not Extent of centralization
FEL109R - Treasury Management

December 7, 2013

Treasury Organization & Structure Extent of Centralization

Centralized Control* Decentralized Control* Combined (Regional) Shared Service Center

San Beda College Alabang

December 7, 2013

FEL109R - Treasury Management

Treasury Organization & Structure

San Beda College Alabang

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 relationships 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
FEL109R - Treasury Management

December 7, 2013

Treasury Organization & Structure Disadvantages of Centralized Control

San Beda College Alabang

Reduces subsidiary interaction Potentially clouds the regional cash and risk management picture Decreases flexibility in addressing taxation, regulatory and time zone issues

December 7, 2013

FEL109R - Treasury Management

San Beda College Alabang

End

December 7, 2013

FEL109R - Treasury Management

10