Meaning and Functions of Integrated Treasury

 A comprehensive strategy for funding the balance sheet and allocating capital across domestic, international, and foreign exchange markets is known as integrated treasury. With this strategy, the bank is able to maximize asset-liability management and take advantage of arbitrage opportunities. In the past, a bank's forex dealing room handled foreign exchange dealings that mostly resulted from merchant transactions (forex purchases from and sales to customers) and cover activities that followed in the interbank market. The domestic treasury and investment operations were separate from a bank's foreign exchange transactions.

 

Treasury operations were classified as a cost center that was solely responsible for managing reserves (CRR and SLR) and the funds that result from such management. Additionally, the Treasury invested in both government and non-government securities. Due to interest rate deregulation, exchange control liberalization, the growth of the forex market, the introduction of derivative products, and technological advancements in settlement systems and dealing environments, there is a need for integration of foreign exchange dealings and domestic treasury operations. The integrated treasury performs a variety of tasks in addition to its usual activities as a forex dealing room and treasury unit.

Functions of Treasury Management

 Treasury Management aims to ensure that adequate cash is available with the organization, during the outflow of funds. Further, it also contributes to optimum utilization of funds and makes sure that there are no unutilized funds kept in the firm for a very long term. The functions of treasury management are discussed below:

 

Cash Management: Treasury Management includes cash management, and so it ensures that there are an effective collection and payment system in the organization.

Liquidity Management: An optimum level of liquidity should be maintained in the business, for the better and smooth functioning of the business, i.e. the company must be able to fulfil its financial  obligation  when  they  become  due  for  payment,  such  as  payment  to  suppliers, employees, creditors, etc.And to do so, cash flow analysis and working capital management act as the most important tool for treasury management, to achieve its strategic goals.

  Availability of funds in adequate quantity and at the right time: The treasury manager has to ensure that the funds are available with the organization in sufficient quantity, i.e. neither be more nor  less,  to  fulfil  the  day  to  day  cash  requirement  for  the  smooth  functioning  of  the

enterprise.Further, timely availability of funds also smoothens the firm‘s operations, resulting in the certainty as to the amount of inflows available with the company at a particular point in time.

     Deployment of funds in adequate quantity and at the right time: The deployment of funds has to be done in right quantity such as the acquisition of fixed assets, purchase of raw material, payment of expenses like rent, salary, bills, interest and so forth. For this purpose, the treasury manager has to keep an eye on all receipts of funds and the application thereof.Further, the funds must be available at the time of need, which may be different for different firms and also for the purpose for which they are used. The period may differ from a week to month when it comes to acquisition of the fixed assets and two to three days in case of working capital requirement.

     Optimum utilization of resources: Treasury Management also aims at ensuring the effective utilization  of  the  firm‘s  resources,  to  reduce  the  operating  costs  and  also  prevent  liquidity shortage in the coming time.

     Risk Management: One of the primary objectives of the treasury management is to manage financial risk to allow the enterprise to meet its financial obligations, as they fall due and also ensure predictable performance of the business. It tends to identify, measure, analyze and manage risk in order to mitigate losses that has the potential to affect the company‘s profitability and growth in any way.Hence, treasury management is accountable for all types of risk that can influence the business entity.

 

Further,  the  treasury  management  intends  to  maximize  return  on  the  funds  available  with  the company, by making such investments which have higher return and low risk.

 

Treasury Management

 Treasury Management can be understood as the planning, organizing and controlling holding, funds and working capital of the enterprise in order to make the best possible use of the funds, maintain firm‘s liquidity, reduce the overall cost of funds, and mitigate operational and financial risk.Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include financial risk management. Most banks have whole departments devoted to treasury management and supporting their clients' needs in this area.It covers working capital management, currency management, corporate finance and financial risk management. Simply put, treasury management is the management of all financial affairs of the business such as raising funds for the business from various sources, currency management, cash flows and various strategies and procedures of corporate finance. The key goal of treasury management is planning, organizing and controlling cash assets to satisfy the financial objectives of the organization. The goal may be to maximize the return on the available cash, or minimize interest cost or mobilize as much cash as possible for corporate ventures.