Scope of Treasury Management

The scope of treasury management encompasses a wide range of activities related to managing an organization’s financial resources, including cash, investments, and risk exposures. Some of the key areas of scope for treasury management include:

Cash management: This involves managing an organization’s cash flows to ensure that it has sufficient liquidity to meet its short-term and long-term obligations. This includes managing bank accounts, monitoring cash balances, forecasting cash flows, and optimizing cash usage.

Investment management: Treasury management is responsible for managing an organization’s investment portfolio to maximize returns while minimizing risks. This includes selecting appropriate investment vehicles, monitoring performance, and implementing investment strategies.

Risk management: This involves identifying, assessing, and mitigating various types of financial risks, including credit risk, market risk, interest rate risk, foreign exchange risk, and commodity risk. Treasury management uses various risk management techniques such as hedging and insurance to mitigate these risks.

Funding and capital management: Treasury management is responsible for managing an organization’s funding and capital structure to ensure that it has sufficient capital to support its operations and growth objectives. This includes raising capital through debt and equity financing, and managing debt repayment schedules.

Treasury operations: This involves managing the day-to-day operations of the treasury function, including transaction processing, cash positioning, cash forecasting, and bank account reconciliation.

Strategic planning: Treasury management is also responsible for providing strategic guidance to support an organization’s growth and development objectives. This includes developing and implementing financial strategies, analyzing market trends and risks, and identifying opportunities for growth and expansion.

The scope of treasury management function is quite vast and it continues to expand. A treasury manager should be able to understand and appreciate the link between business strategy, and organization. Treasury management includes the management of cash flows, banking, money-market and capital-market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. This definition is intended to embrace an organizations use of capital and project financings, borrowing, investment, and hedging instruments and techniques.