Treasury Operations in Liquidity Management

Treasury Operations in Liquidity Management

Overview

• Treasury operations play a crucial role in liquidity management by ensuring the efficient use of a company's financial resources.
• The primary objective of treasury operations is to manage the company's cash, investments, and funding to achieve optimal liquidity.

Key Functions

• Cash Management: Managing cash inflows and outflows to ensure adequate liquidity and minimize cash shortages.
• Investment Management: Investing excess cash in low-risk, liquid instruments to generate returns while maintaining liquidity.
• Funding Management: Raising capital through debt or equity instruments to meet business needs and maintain liquidity.

Cash Flow Forecasting

• Short-term Forecasting: Predicting cash inflows and outflows over a short period (e.g., 13 weeks) to manage daily liquidity.
• Medium-term Forecasting: Predicting cash flows over a medium period (e.g., 6-12 months) to manage funding and investment decisions.
• Long-term Forecasting: Predicting cash flows over a long period (e.g., 1-5 years) to inform strategic business decisions.

Cash Concentration and Disbursement

• Cash Concentration: Gathering cash from various business units and bank accounts into a central location to optimize liquidity.
• Cash Disbursement: Managing the distribution of cash to various business units and vendors to ensure efficient use of funds.

Bank Relationship Management

• Bank Selection: Selecting banks that offer the best services, rates, and terms to meet the company's liquidity needs.
• Account Management: Managing bank accounts, including account opening, maintenance, and closure.
• Service Level Agreements: Negotiating service level agreements with banks to ensure timely and efficient cash management services.

Risk Management

• Liquidity Risk Management: Managing the risk of cash shortages or excesses to ensure optimal liquidity.
• Foreign Exchange Risk Management: Managing the risk of exchange rate fluctuations to minimize the impact on liquidity.
• Interest Rate Risk Management: Managing the risk of interest rate changes to optimize liquidity and minimize costs.

Treasury Operations in Liquidity Management

• Treasury operations ensure efficient use of financial resources to achieve optimal liquidity.
• The primary objective is to manage cash, investments, and funding.

Key Functions

• Cash management: managing cash inflows and outflows to ensure adequate liquidity and minimize cash shortages.
• Investment management: investing excess cash in low-risk, liquid instruments to generate returns while maintaining liquidity.
• Funding management: raising capital through debt or equity instruments to meet business needs and maintain liquidity.

Cash Flow Forecasting

• Short-term forecasting: predicting cash inflows and outflows over 13 weeks to manage daily liquidity.
• Medium-term forecasting: predicting cash flows over 6-12 months to manage funding and investment decisions.
• Long-term forecasting: predicting cash flows over 1-5 years to inform strategic business decisions.

Cash Concentration and Disbursement

• Cash concentration: gathering cash from various business units and bank accounts into a central location to optimize liquidity.
• Cash disbursement: managing the distribution of cash to various business units and vendors to ensure efficient use of funds.

Bank Relationship Management

• Bank selection: selecting banks that offer the best services, rates, and terms to meet the company's liquidity needs.
• Account management: managing bank accounts, including account opening, maintenance, and closure.
• Service level agreements: negotiating service level agreements with banks to ensure timely and efficient cash management services.

Risk Management

• Liquidity risk management: managing the risk of cash shortages or excesses to ensure optimal liquidity.
• Foreign exchange risk management: managing the risk of exchange rate fluctuations to minimize the impact on liquidity.
• Interest rate risk management: managing the risk of interest rate changes to optimize liquidity and minimize costs.