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Treasury Management System has a central role in the control of treasury environment. It provides functionality for front, middle and back office activities and controls. The key word today is “Straight through Processing” meaning human intervention will happen only in case of exceptions.
Treasury Management has become more forecast based in its actions with more emphasis on the optimization of investments and reduction of financial risks. The Treasury Management System covers
- Forecasting system
- Risk management system
- Accounting system
- Reporting system
Treasury Management System
Treasury management includes i) maximizing cash efficiency ii) optimizing investment, credit and asset return iii) managing risk exposures iv) managing capital costs v) developing human capital
Cash Management includes the following:
- Collection of treasury information from different sources
- Management of collections and payments
- Liquidity monitoring in banking operations
- Short term treasury forecasts
- Management of banking balances
- Mitigate business risks and support business decisions
Major Trends
FROM TO
Spreadsheet based forecasting Cash Forecasting Models
Manual preparation of forecasts Automated forecasts
Ad hoc management of cash Centralized cash management
Numerous bank accounts Optimum bank accounts
High bank charges Reduced bank charges
Lack of visibility of cash requirements Integrated systems
The integrated treasury management approach covers the following activities:
- Forex risk management
- Funds and interest rate risk management
- Liquidity and investment management
- Banking relationship management
- Risk monitoring and management
- MIS management
- Management reporting
Due to volatility in financial markets, the assessment and valuation of financial instruments has become very complex and the accounting rules and accounting results should be in line with market logic for the product
The following diagram depicts the integrated treasury management approach.
Sanjeev Kumar, Senior Consultant, IDEALINVENT
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