Global Treasury Management - Essay Example

Global Treasury Management is the process of administering and managing financial assets and holdings of business. It aims at optimizing the liquidity of a company and ensuring that sound financial investments with the excess cash are made to protect the business from any form of financial risks (Polak, 2009). The global economy in the recent years has shown great resilience despite the numerous natural disasters and a significant increase in oil prices. The economy still experiences growth in liquidity and interest rates resulting in increased rates of investments on a global basis.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Objectives of Global Treasury Management

One of the main objectives of global treasury management includes controlling cash and risk in an economy. Global treasury management evaluates the economys exposure to foreign currency and interest. There is a direct relationship between currencies and financial risk management (Matz and Neu, 2006). It, therefore, becomes paramount to manage treasury activities in an economy to influence cash flows and risks that can be managed from a global point of view. Global treasury management plays a critical role in pushing for sound financial investments and reduces the possibility of an economy to enter into ventures that pose financial risks.

Global treasury management also aims at optimizing and controlling global cash and liquidity. Ideally, cash and liquidity are always the top priority for most of the corporate treasures (Volosov, Mitra, Spagnolo, and Lucas, 2005). Global treasury management works towards ensuring that the global economy has visible cash flows. It also aims at mobilizing and transferring working capital within developing markets. Global treasury management maximizes the use of interest optimization influencing cash flow and liquidity in the global economy. Global treasury management aims at ensuring that the global economy adopts an integrated treasury management approach to ensure that common treasury problems are resolved (Storkey, 2003).

Every economy experiences unique treasury management problems. However, other common treasury management problems influence a set of economies in most cases because of the forces from the macroeconomic variables. Further, global treasury management aims at increasing shareholder value. This is done through employing proper and effective cash and risk management techniques. As such, techniques such as global cash management, treasury technology, working capital management, and cash forecasting techniques are employed to understand and influence global treasury management. Global treasury management aims at tightening market liquidities and encouraging economies to invest their surplus cash (Polak, 2009). It guides the economies on the right investment choice to make based on possible returns.

Tools of Trade Finance

Trade finance includes financing arrangement with lenders based on a commercial transaction that is a function of the movement of goods, services, and performance. Open account is one of the tools under trade finance that can be implemented to influence the performance of global treasury management (Giovannucci, 2001). The open account will ensure that shipment and delivery of goods are done before payment is due. This tool is of great advantage to the importer. It plays a critical role in influencing cost terms and cash flow in the economy, which consequently influences global treasury management. Government assisted trade financing also influences cash flow and liquidity disbursed by the commercial banks for managing the supply chain in an economy. Letters of credit also influence global treasury management when the bank commits on behalf of the buying country to make payments to the exporting country with complete adherence to the terms and conditions presented (Giovannucci, 2001).

Conclusion

Global treasury management plays a critical role in increasing a countrys liquidity. Further, a country is also able to make sound decisions in as far as financial investments are concerned with a proper view of how the economy is likely to perform.

Reference List

Giovannucci, D., 2001. Basic Trade Finance Tools: Payment Methods in International Trade.

Matz, L. and Neu, P. eds., 2006. Liquidity risk measurement and management: a practitioner's guide to global best practices (Vol. 408). John Wiley & Sons.

Polak, P., 2009. 'The Centre Holds'-From the Decentralised Treasury Towards Fully Centralised Cash and Treasury Management.

Storkey, I., 2003. The Governance Brief: Government Cash and Treasury Management Reform (Issue 7-2003).

Volosov, K., Mitra, G., Spagnolo, F. and Lucas, C., 2005. Treasury management model with foreign exchange exposure. Computational Optimization and Applications, 32(1-2), pp.179-207.