Importance of Treasury management in an organisation
Question: Discuss the importance of the Treasury Management function in a profit making organisation with relevance to an organisation of your choice. Also comment on whether the Treasury function is of any relevance to non-profit making organisations such as Non-Governmental organisations, football clubs, churches and charity organisations.
Introduction
According to Ogilvie (2002) the practice of establishing a specialist treasury function in the finance department can be traced back to the late 1960s. Technological developments, the breakdown of exchange controls and increasingly volatile interest rates and exchange rates, combined with the globalisation of business, have all created greater opportunities and risks for businesses over the past three decades. To survive in today’s complex financial environment, businesses must be able to manage both their ability to take these opportunities and their exposure to the risks they create. It is the job of the treasurer to reduce the company’s exposure to risks it is not in business to take while reshaping its exposure to those risks it does wish to take. Treasury management now plays a vital role in the management of operations because most business decisions have implications for cash flow and risk, both of which are of direct relevance to treasury management. The objective of this essay is to discuss the importance of the treasury function to a profit making organisation using an example of Hyundai and also commenting on its importance to non-profit making organisations.
Definition of terms
Globalisation
According to Giddens(1990) globalisation is the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice-versa.
Liquidity
Horcher(2006) defines liquidity is the ability of an organisation to meet its short term financial obligations.
Derivative
A financial instrument whose value depends on or
Introduction
According to Ogilvie (2002) the practice of establishing a specialist treasury function in the finance department can be traced back to the late 1960s. Technological developments, the breakdown of exchange controls and increasingly volatile interest rates and exchange rates, combined with the globalisation of business, have all created greater opportunities and risks for businesses over the past three decades. To survive in today’s complex financial environment, businesses must be able to manage both their ability to take these opportunities and their exposure to the risks they create. It is the job of the treasurer to reduce the company’s exposure to risks it is not in business to take while reshaping its exposure to those risks it does wish to take. Treasury management now plays a vital role in the management of operations because most business decisions have implications for cash flow and risk, both of which are of direct relevance to treasury management. The objective of this essay is to discuss the importance of the treasury function to a profit making organisation using an example of Hyundai and also commenting on its importance to non-profit making organisations.
Definition of terms
Globalisation
According to Giddens(1990) globalisation is the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice-versa.
Liquidity
Horcher(2006) defines liquidity is the ability of an organisation to meet its short term financial obligations.
Derivative
A financial instrument whose value depends on or