This lesson describes how the treasury function ensures that the key financial risks and requirements of the organisation are identified and appropriately managed. The Treasury function encompasses both operational and strategic elements .

5.1 Cash and Liquidity Management

Cash and liquidity management is the foundation of treasury. This includes analysis of working capital, ensuring efficient cash collection and payment processes, and optimising the use of surplus funds . Cash management strategies involve forecasting, organising collections and disbursements, and using cash concentration and pooling techniques .

5.2 Corporate Financial Management

Corporate financial management includes corporate finance and investment management . The corporate finance function focuses on corporate objectives and financial management, the risk/return dynamic and shareholder value, measures of shareholder value, capital structure theory and funding requirements .

5.3 Capital Markets and Funding

Capital markets and funding includes funding management and bank relationship management . This involves managing relationships with banks and other financial service providers, securing appropriate funding, and managing the organisation’s exposure to financial markets.

5.4 Risk Management

Risk management includes a basic risk management framework and general responses to risk . Treasury is responsible for identifying, measuring, and mitigating financial risks including foreign exchange, interest rate, and credit risk. Treasury’s role in risk management is to act as the company’s financial defense mechanism, tasked with identifying, quantifying, and mitigating various financial exposures .

5.5 Relationship Management

Relationship management with key internal and external stakeholders is essential . Treasury must build effective relationships with banks, investors, and internal departments to ensure the organisation’s financial needs are met.