MF0016 & TREASURY MANAGEMENT

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DRIVE	WINTER 2015
PROGRAM	MBADS (SEM 4/SEM 6) MBAFLEX/ MBA (SEM 4) PGDFMN (SEM 2)
SUBJECT CODE & NAME	MF0016 & TREASURY MANAGEMENT
BK ID	B1814
CREDITS	4
MARKS	60

1 Give the meaning of treasury management. Explain the need for specialized handling of treasury and benefits of treasury.

Answer : Treasury management is the administration of a company’s cash flow as well as the creation and governance of policies and procedures that ensure the company manages risk successfully.

Treasury management is the creation and governance of policies and procedures that ensure the company manages financial risk successfully.

Because a primary function of treasury management is to establish levels for cash or cash equivalents so that a company can meet its financial obligations on time, treasury management is sometimes simply referred to as cash management.

2 Explain foreign exchange market. Write about all the types of foreign exchange markets. Explain the participants in foreign exchange markets.

Answer : The foreign exchange currency markets allow buying and selling of various currencies all over the world. Business houses and banks can purchase currency in another country in order to do business in that particular company. The forex market also known as FX market has a worldwide presence and a network of different currency traders who work around the clock to complete these forex transactions, and their work drives the exchange rate for currencies around the world. Since the foreign exchange currency market is one of the biggest markets of the world, the market is sub divided into different kinds of foreign exchange market. There are different features and characteristics associated with the different foreign exchange markets have different trading characteristics. The main three types of

3. Write an overview of risk mitigation. Explain the processes of risk containment. Write about the tools available for managing risks.

Answer : Risk mitigation planning is the process of developing options and actions to enhance opportunities and reduce threats to project objectives. Risk mitigation implementation is the process of executing risk mitigation actions. Risk mitigation progress monitoring includes tracking identified risks, identifying new risks, and evaluating risk process effectiveness throughout the project.

Process of risk containment:

Risk Assessment

The goal of risk assessment is to identify the risk factors that are a part of the activity being undertaken. Basically, it's about working out what could go wrong. For example, the task could be attending a client meeting. The possible risk factors would include

4 What is Interest Rate Risk Management (IRRM)? Write the components and features of IRRM. Explain the macro and micro factors affecting interest rate.

Answer : Interest rate risk (IRR) is defined as the potential for changing market interest rates to adversely affect a bank's earnings or capital protection. Two previous issues of Community Banking Connections included articles on IRR management for community banks.1 The first article provided an overview of key elements of an IRR management program and common pitfalls faced at community banks. The second article focused more attention on directors' and senior managers' specific responsibilities, including development of sound policies and IRR exposure limits. In this article, the discussion proceeds to IRR measurement issues, including the appropriateness of certain measures and some of the challenges faced in modeling risk exposures.

5 Explain the contents of working capital. Write down the need for working capital.

Answer : Working capital is the life blood and nerve center of business. Working capital is very essential to maintain smooth running of a business. No business can run successfully without an adequate amount of working capital.

Contents of working capital:

·         Needs that are Short Term: Working capital is being utilized in acquiring current assets which will be converted to cash for a short period only.

·         Circular Movement: Working capital is being converted to cash constantly which will just be turned as a working capital all over again.

·         Permanency: Although it is just a kind of short term capital, working capital is needed by a business forever and always.

6 Explain the concepts and benefits of integrated treasury. Explain the advantages and disadvantages of operating treasury.

Answer : Integrated Treasury basically does the same thing as the traditional Treasury i.e. effective management of the funds. The difference is that the Integrated Treasury paints on a wider canvas. It is necessary that the Treasury has an eye on every market of the world, and every type of financial market in the country. Funds have to be moved from one sector to another to achieve maximum returns. With the full current account convertibility and financial sector reforms, the Indian corporates are also able to achieve this. Integrated

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