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Treasury

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DEFINATION OF KEY TERMS.
DISCUSS
This is to investigate or examine by arguments. Examining the key points and possible interpretations, sift and debate, giving reasons for and against and then draw conclusion.(The Learning Centre 2012).
ORGANISATION
This is an institution, an association consisting of a group of people having common aim and objective, working in a common platform.

Profit making organization:
The organizations which are working for their benefit as well as for the benefit of the common people are called as the Profit Making Organization, for example cooperatives.
A profit organization exists primarily to generate a profit, that is, to take in more money than it spends. The owners can decide to keep all the profit themselves, or they can spend some or all of it on the business itself. Or, they may decide to share some of it with employees through the use of various types of compensation plans, e.g., employee profit sharing.
Non profit making organisation:
A non profit organization exists to provide a particular service to the community. The word "non profit" refers to a type of business one which is organized under rules that forbid the distribution of profits to owners. "Profit" in this context is a relatively technical accounting term, related to but not identical with the notion of a surplus of revenues over expenditures. The main aim of these organisations is helping the community and is concerned with money only as much as necessary to keep the organisation operating.
TREASURY MANAGEMENT.
Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial and reputational risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include trading in bonds, currencies, financial derivatives and the management. (Polak and Klusacek 2010). Emer (2001) also define it as the process of administering to the assets and holdings of a business. The goal of most treasury management departments is to optimize their company's liquidity, make sound financial investment for the future with any excess cash, and reduce or enter into hedges against its financial risks. INTRODUCTION
Treasury management was once viewed as a peripheral activity conducted by bank office boffins. Nowadays because of increasing scope of business operations in organisations, treasury management now plays a vital role in the management of profit making organisations. Most large organisations that have poor treasury management in the past have experienced problems, for example Queens Moat Houses. The decisions that are made by business have implications on the cash flow and risk, of which both are of direct relevance to treasury management. The treasury function in many organisations like Willovale Mazda Motor Company is very important in making sure that the business has sufficient liquidity to meet its obligations, whilst managing payments, receipts and financial risks effectively. However the treasury function may be rendered less important in small organisations were the businesses operations are less complex. However Cheol (2007) argues that having a separate treasury department in small business is a waste of organisational resources especially where all the treasury duties can be carried out by someone else like the company secretary or accountant.
DICUSSING THE IMPORTANCE OF TREASURY MANAGEMENT FUNCTION ACCORDING TO ITS DUTIES OR RESPONSIBILITIES.
Deutscher (2009) claims that treasury management means financial management that is related to a future financial balance and cash flows of any corporation. Treasury and its responsibilities fall under the scope of the Chief Financial Officer,(C.F.O). In many organisations, the treasurer will be responsible for treasury function and also holds the position of Chief Financial Officer. (Polak and Klusacek 2010), they go on to say; high‐level treasury responsibilities will normally include capital management, risk management and relationship management. Treasury is a staff service function that supports many different areas of the organization. As an internal consultant to the teams in the different functional areas, treasury provides advice in the areas of cost of capital, risk analysis and mitigation, and the effects of the teams' actions on vendors, customers or investors.
Treasury function in any corporate has always been important in making sure that the business has sufficient liquidity to meet its obligations, whilst managing payments, receipts and financial risks effectively.
Polak and Klusacek (2010), believes that the specific tasks of a typical treasury function include cash management, financial risk management, and assets and liabilities management. The following figure adapted from his writing shows the main three main functions of treasury management and their subsidiaries.

Figure1. Treasury management and its main responsibilities.

-------------------------------------------------
Source: Adapted from Petr Polak and Ivan Klusacek 2010; Centralisation of Treasury, Business Perspectives, Dzerzhynsky lan 10, Summy 40022 Ukraine; First Ed, p :14
Looking into each of the treasury management functions shown in the above chart we can now clearly come out with the importances of the treasury management function in a profit making organisation like Willovale Mazda Motor Company.
CASH MANAGEMENT
Cash management is defined as the management of bank accounts balances, either positive or negative, and cash flows of an organisation. By undertaking this duty the treasury management keeps the costs of cash flow as low as possible whilst minimising interest expenditure and maximizing interest income. (Ronald 2003)
The management of cash in an organisation by the treasury department allows the organisation to control spending, implementing efficient budgets, minimising the cost of borrowing while maximising the opportunity cost of the resources. (David 1999).
In his writing, David (1999) indicated that, the management of cash allows the implementation of an efficient budget which ensure that claims will be paid according to the contract terms and revenues being collected on time, this will enables an organisation to minimise its transaction costs while making additional cash by investing in revenue yielding papers bills and bonds, all this is facilitated by the treasury management function of an organisation.
Cash flow management
Gounopoulos (2008) argues that the treasury management function also includes the management of cash flows. Cash flow management is a process of monitoring, reviewing and regulating a company’s cash flows. Brigham and Gapenski (1997) argue that effective cash management encompasses efficient processing of both inflows and outflows which entails synchronising cash flows, using float, accelerating collections and getting funds where they are needed and controlling disbursements. He indicated that cash flow is basically the business’ oxygen and the main indicator of a company’s financial health; therefore there is need for good management of it. The management of cash flow helps a business to survive and prosper. Cash flow management helps to avoid shortages of cash and idle balances on the corporation’s accounts and it also helps strengthen the business through the timely estimation of overall cash inflows and outflows that is aided by the treasury. This idea is supported by Polak and Klusacek (2010) who claims that the treasury management is of much more importance to profit making organisation if it is to know its financial health.
Business analysts reported that poor management of cash flow is probably the most stumbling block for organisations. Having a treasury management team is the biggest solution for a profit making organisation. Deutscher (2009) argues that a business can be profitable in terms of the money it is expected to make but in real business the company’s profit can be of less importance if it is not accompanied by a positive net cash flow, as he argues that a business cannot spend profit but it can spend cash, which is ready money in the bank or in the business.
Liquidity management
Peter (2007) argues that treasury management is a vital function in an organisation on the grounds that it takes care of liquidity management, which is aimed at achieving the highest possible return on invested liquidity. Both long and short term liquidity are well planned for and this enables an organisation to operate efficiently.
In addition Polak and Klusacek (2010) highlighted the importance of this function on its management of an organisation’s working capital. Good working capital management ensures an organisation sufficient cash flow in order to meet short term obligations and operating expenses.
As shown by the above chart, the treasury management function is of importance to facilitate other functions like banking relationship, cash pooling, cash concentration and many others.
However other authors on the contrary argue that it is not the treasury management function which is important on the above matters but it is an integration of different organisational functions. This is to say all organisational functions are very important in the management of cash.
RISK MANAGEMENT. Risk is broadly defined as the probability of an unforeseen incident and its resulting penalty. Risk management is the identification, assessment and economic control of those risks that can endanger the assets and earning capacity of a business. (Olsson 2002) In identifying the risks for a specific business, it’s critical to encompass every facet of the business, from the most obvious risks common to many enterprises to any unique risks a particular business might have. Risk management is important in an organisation because without it, a firm cannot possibly define its objectives for the future. If a company defines objectives without taking the risks into consideration, chances are that they will lose direction once any of these risks hit home.
Financial risk management
An organisation can be exposed to a number of risks like financial risk which are market risks (e.g. interest risk, currency risk, commodity risk and equity risk) or credit risk, physical risk, intellectual property risk, legal risk and also operational risk. (Polak and Klusacek 2010). Risk management can help an organisation seize opportunity not just avoid danger (Dan Borge cited by Olsson 2002). Olsson (2002) believes that, in order to survive companies take risks, but these risks have to be managed and well monitored this is to say by managing risks the treasury management function is very important to profit making organisation.
The treasury management team is more concerned about financial risk management, this includes customer credit management, contractor/vendor financial analysis, liability claims management, business recovery, and employee benefits program risk (Polak and Klusack 2010). Vendor/ contractor risk analysis involves advising the purchasing management for viability and risks associated with different vendor and contracts to the business.
Aengus (2000) argues that without the treasury management function, a profit making organisation may incur losses as a result of several aspects like, the adverse movement of money and capital markets price or rates (foreign exchange rate, interest rate and securities prices), adverse change in financial markets. The treasury management function helps an organisation to foresee all these adverse changes that might affect the organisation’s profit level. For example without treasury management team, an organisation like Willovale Mazda Motor Company which import some of the parts used in the manufacturing of vehicles might experience the blow of exchange rate and interest rate risks if their fluctuation is not well monitored.
Ronald (2003) indicates that the best effective way of preventing business from foreign exchange risk is by having the treasury management team that have good knowledge about forward markets and the relevant skills to choose the most appropriate method of hedging and foreign exchange cover in the organisation .The treasury management helps an organisation to assess the various methods that can be used against risks, for example the use derivatives. By speculating and forecasting the company’s exposure to risk in the future, the treasury management helps on the decision of whether hedging or not hedging.
It is also very important for an organisation to have financial risk management because according to the Capital Asset Pricing Model (CAPM), shareholders require compensation for assuming risks. An investment or security’s risk is measured by the volatility of its returns to the investor over and above the vitality of the return from the overall market. Volatility is affected by three major factors of which financial risk is one of them. (Cheol 2007). So it is worthwhile to manage financial risk in order to reduce the volatility of returns of investment or security, so as to increase the overall return to existing shareholders.
Michele (2008) argues that by managing financial risk, the treasury team helps to avoid financial distress that is usually reflected in the inability of an organisation to raise finance for new projects, or refinancing the existing financial activities. It also help to prevent any adverse impact on the company’s chosen strategy.
The Turn ball Report recognises the importance of risk management (ICAEW 1999). The report suggests that the maintenance of an effective system of financial controls, including the maintenance of proper accounting records helps to ensure that the organisation is not unnecessarily exposed to avoidable financial risk and helps in safeguarding of assets and prevention and detection of fraud. To support, Hogan (1997) in his study find that the collapse of Barings Group in 1995 was greatly as a result of failure to manage, monitor and analyse their trading activities and the risks associated with them.
However the treasury management function is mainly important in the management of financial risks yet there are some risks which must be taken care of which are of importance to an organisation. Physical risks like fire, explosions and floods have to be managed too. Also intellectual property risk and legal risks management are among the most important activities in an organisation. This is to say that the treasury management function is not sorely important in the management of organisational risks.
ASSETS AND LIABILITIES MANAGEMENT/WORKING CAPITALMANAGEMENT.
As a function the treasury management is very essential in managing the assets and liabilities of an organisation. The firm’s balance sheet can be optimized through this function. (Polak and Klusacek 2010). The assets of an organisation must be well managed in order to avoid insolvency.
All business requires money or funding. The funds can be obtained from different sources either internal or external, however for business to enjoy good funding which does not have adverse effects on its operation it needs the help of the treasury management with the necessary knowledge of the sources that are available, the cost of the different sources. Without this knowledge the business can be funded in an unhealthy manner for instance too much external source (debt) or too much internal (equity) this might cause problems of high gearing and low shareholders’ wealthy respectively. (David 1999).
Again the close monitoring of funds (cash) and other current assets will provide sufficient liquid funds to support current and potential needs. Treasury management function also helps an organisation to choose on the best type of loan.
TREASURY MANAGEMENT IN NON PROFITMAKING ORGANISATION
Although the aim of non profit organisations is to maximise their social impact and benefits that they provide to the community as opposed to profit maximisation by for profit organisation, both organisations still have expenses (Harvard Business School 1999).
Many non profit making organisations like football clubs and Non Governmental Organisation have staff of paid full time employees, managers and directors. So it is these reasons that there is also need for these organisations to continuously stay financially solvent, as running out of cash will sooner or later result in financial difficulties. Liner and Linzer (2006) argue that, the treasury management function is important for non profit organisations for the management of their cash flows. Unlike profit organisation, non profit organisations usually do not have a regular inflow of money. Cash flow typically fluctuate in the organisations and in most cases it is in form of grants, donations and fundraising that occur in discrete during the year. It is due to this nature of cash receipt and uncertainty of their cash flow, proper cash flow forecast and management by the treasury team is very relevant for all non profit organisations.
Zietlow (1997) argues that, the treasury management functions very important for the liquidity of management in a non profit organisation. He goes on to say these organisations have to have cash at their disposal so as to pay for bills ad liabilities.
In addition Zietlow and Seidner (2007) argue that it is important for a non profit making organisation to have the treasury management function.
CONCLUSION
With the diversity of responsibilities of treasury management discussed above it has come clear that the treasury management function is of great importance to both profit making and non profit making organisations. According to many authors it has also been noted that the survival and prosperity of organisations depends good management of financial resources by the treasury management function. However there are some certain areas where the importance of treasury management alone is not significant. The complimentary element between the treasurer and controller shows that the treasury management function alone cannot be enough for the organisation. This is to say treasury management function is very fundamental to organisations even though other functions are also essential.

REFERENCES 1) Allman Ward, Michele (2008). The Treasurer’s Guid to International Cash Management, First Ed, London WWCP. 2) Blair, David (1999) Corporate Treasury in Singapore; The Treasurer May p:15-17 3) Chang Ronald W. (2003) The UPS Model for Shared Service Centre. Treasury Management International-A Treasurer’s Guide to Treasury Locations. October p: 31-34 4) Carl Olsson (2002) Risk Management in Emerging Markets: How to survive and prosper, Pearson Education Limited. 5) Dorsman, Andre and Dimitrios Gounopoulos (2008) Controlling Working Capital in Multinational Enterprise. Journal of Corporate Treasury Management, Volume 2, No 2 p: 152-159. 6) Eugene F. Brigham and Louis C. Gapenski (1997), Financial Management, Theory and Practice. The Dryclen Press Harcourt Brace College Publisher. Eighth Ed. 7) Eun,Cheol S and Bruce G. Resnick (2007), International Financial Management, New York, McGraw, Hill/Irwin, Fourth Ed. 8) Hogan, W.P (1997), Corporate Governance: lessons from Barings, Abacus Volume33, No1 p: 1-23. 9) Harvard Business School (1999), Harvard Business Review on Non Profits, Harvard Business School Press. 10) ICAEW (1999) ,Internal Control Working Party, Internal Control: Guidance for Directors on the Combined Code, Institute of Chartered Accountants in England and Wales, London. 11) John Zietlow (1998);Financial Management forNon Profit Organisation, Wiley Non profit law, Finance and Management Series, John Wiley and Sons, Volume 109. 12) John Zietlow and Alan Seidner (2007); Cash and Investment Management for Non Profit Organisation, John Wiley and Sons, Inc, Hoboken, New York. 13) Murphy Aengus (2000); Solving the problems of globalisation, Treasury Management International, May p: 49-54. 14) Petr Polak and Ivan Klusacek (2010); Centralisation of Treasury, Business Perspectives, Dzerzhynsky lan 10, Summy 40022 Ukraine, First Ed. 15) Richard Liner an Anna Linzer (2006); The Cash flow Solution: The Non profit Board Member’s Guide to Financial Success, John Wiley and Sons.…...

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...CURRICULUM VITAE ARADHYA SRIVASTAVA B 37/175, A-4, Birdopur, Baijanatha, Varanasi, 221010 Uttar Pradesh. Tel: 0542-2363829 ARADHYA SRIVASTAVA +919616164414 Email: - aradhyasrivastava@ymail.com OBJECTIVE:-. * To work in challenging environment in the organization and by using my capability to enhance the growth and prosperity of organization and to simultaneously enrich my skills. PERSONAL SKILLS:- * Comprehensive problem solving abilities, excellent verbal & written communication skill, ability to deal with people diplomatically willingness to learn, team, facilitator. ACADEMIC QUALIFICATION:- * High school from CBSE board in 2004 with 60%. * Intermediate from CBSE board in 2006 with 74% * Completed B.com for SCHOOL OF MANAGEMENT SCIENCE VARANASI affiliated to VBSP university in 2009 with 62% * Completed M.com from FACULTY OF COMMERCE BHU in 2011 with 68% * Pursuing PGDM (financial services) from JAIPUIAN INSTITUTE OF MANAGEMENT lucknow EXPERIENCE Six month experience with an C.A as an assistant audit officer in different office COMPUTER SKILLS:- * DIPLOMA IN FINANCE AND ACCOUNTING in 2011 from NIIT * ADVANCE DIPLOMA IN COMPUTER APPLICATION in 2009 from * TALLEY 7.2 form tally academy * Certificate of merit from school of management science PERSONAL DETAILS:- * Name : ...

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