What does the treasury function do? Main activitivies of the treasury department 1.

The primary role is dealing with the management of a company's funds 2. Raising Equity capital and working capital 3. Investing surplus funds

The treasury dept. is responsible for the timely availability of those funds when needed for the support of the business. The treasury is a key head office function that enables business managers to focus on their key areas of expertise, be it manufacturing or sales. Whether any company has a separate treasury function or, whether it is incorporated into a finance department, for example, does not change the nature of the underlying activity. The key is that it is a function that supports the main business activity.

The aim ought to be to improve the net worth of a company by managing funds in the most appropriate manner. - Increasing net worth - This will require a detailed knowledge of a variety of areas of the company - Key will be an understanding of the overall business strategy - This will be the foundation that sets the framework that will drive the treasury function - Areas of control and oversight - The management of balance sheet exposures (funding, liquidity and cash management).

How? By understanding and being responsible for: 1. The provision of capital and working capital 2. Functions and characteristics of financial markets, including offshore financial centres 3. Controls over dealing operations (segregation of duties, mandates, audit and accounting etc.) 4. Risk management principles for market, operational and credit risks 5. Understanding financial products, practice and procedures (such as money, FX, money market instruments, bonds and derivatives)

Function of Treasury Management 1. To maintain the liquidity of business It is the main function of treasury management to maintain the liquidity of business. Without proper liquidity, it is risk for business to operate smoothly. By using cash flow analysis and working capital management. Treasury officer make good ratio of liquid assets and liquid liability.

2. To Minimize Currency Risk For this, treasury managers touch with currency market of world. They analyze the reason of crisis in currency market. Sometime this crisis will be benefited for them because they have to pay less to other country for getting their service at cheap rates.

3. To provide quick finance to Company It is also function of treasury department to supply quick finance to company, when it needs the money. For this, a good network in financial market is required.

TREASURY MANAGEMENT AND ITS FUNCTIONS If we have to describe treasury management, then we can state that it is the management of cash, fund, currency, bank and financial risk. So, it is an imperative tool of finance. In this management, finance manager checks the cash inflow and outflow. He makes the list of all receivable amounts which will increase treasure house of company. He also tracks the dates in

which he has to receive the fund from debtors. Under this management, he estimates all financial risk for investment of cash. All investment is on the basis of investment policy. Many organizations have separate treasury department. If company deals with foreign currency, then management of foreign currency risk is the duty of treasury department. Suppose, Google Inc.

USA Company which is a MNC and it receives the fund from advertisers and shares with adsense publisher. A good treasury officer can give the advice to Google Inc. about when company should pay the bill of adsense publishers.

Suppose, there are 90, 00,000 adsense publishers and approximate $ 100 which company has to pay to each Indian adsense publisher after one month. Now within 15 days, Google Inc. will choose that day when the price of dollar in Rupees will be minimum. Suppose, if company paid on 21st Feb. 2010 $100 to one publisher when the price of dollar is Rs. 46.5 and pays Rs. 2139 and if the next day, price will decrease 0 .5 dollar. Then, it means Google Inc. is in foreign

currency loss Rs. 50 each publisher because, company has power to pay in next day and save Rs. 50 for each adsense publisher. If company has to pay $100, then company can receive loss of Rs. 45 Crore due to foreign currency loss. So, to manage foreign currency and control is major project under treasury management. In government departments, fund management is under treasury management. Treasury department makes map to collect for govt. treasure and decide how to use it for welfare works. Finance manager creates good relationship for getting locker

facility at cheap rates and company can keep its important documents in locker of banks. These documents and commercial papers can be sold by banks in money market and company can take part in money market by indirect way. Finance manager also do the duty to sell companys fixed assets at high price and he also acquire the properties for company at cheap rate for effective utilization of treasure of company.

Treasury Management Versus Cash Management Major changes of corporate treasury management policies have been in the past few decades. Treasury management has gradually taken up more and more responsibilities. In the 1960s treasury-related tasks entailed purely routine work in what was no more than an ancillary function as a centralising cash management unit linked to administrative tasks. In the 1970s the

first significant changes began to take place as the economic environment was hit by recession, which favoured the emergence of new short-term monetary policy instruments and the first hints of deregulation of financial markets, but treasury management was still restricted to the obtaining of funding, the management of payments and collections and the maintenance of bank balance positions. It was not until the 1980s that it became integrated into general corporate

management and finally outgrew its purely administrative function linked to the accounting department. Treasury functions began to be based essentially on a financial cash management or liquidity management perspective. More recent advances (development of new information and communication technologies, emergence and use of new financial instruments and an approach to business focused on increasing the value of organizations in all

areas) have favoured the development of new treasury management functions, and increased the importance of treasury departments within companies. In this way, now the techniques and instruments required for optimum development are available (Fernndez, 2001). The functions now linked to treasury management extend beyond the mere control of monetary flows and positions. Exchange-rate and interest-rate volatility in the wake of the

internationalization and deregulation of currency markets, the need to increase control of credit risk in increasingly competitive markets and the appearance of new financial instruments have forced treasury management to become more forecast-based in its actions, with more emphasis on the management of investments, treasury deficits and different financial risks. Basic responsibilities of treasury departments will be those tasks that enable companies to use the

techniques and information needed to minimise the financial costs of resources and maximise returns on cash surpluses, thus providing them with the necessary treasury funding in the desired currency at the appropriate time, as argued by Lpez (2003), and others. In the terminology of cash management literature this term brings together various

functions associated with short-term financial flow management: liquidity management, banking management, management of treasury surpluses and deficits and financial risk management; it is a broader concept than the mere management of payments and collections (treasury management).