COURSE: Management Module: MN 30067: Semester 1
YEAR: 4
Treasury Management
Objective
The course is designed to take those with an interest in finance into a more detailed study of the day to day
functions of a treasury department than is possible on the Financial Management course. The objective is to
allow students to obtain a clear view as to what is involved and to move, without too much difficulty, from a
degree course to a working environment. To this end the course material is developed from the perspective
of a corporate treasurer but also makes reference to the viewpoints and practices of international banks.
Course Structure
The basic structure of the course is designed so that, as far as is possible, subjects flow in some logical
sequence. The course will start with a simple, domestic, company problem and then gradually develop the
complexities that arise with growth and a move into overseas markets. See attached for detailed course
structure.
Methodology
The course consists of 11 two-hour lectures and one one hour seminar every two weeks. Within this
structure, as much open discussion as is possible is encouraged to flesh out the bare bones of treasury
practice. Case studies are used both to familiarise students with the inevitable calculations and also to extend
the analysis into areas of policy and practice. Students are expected to apply themselves to the problems and
to bring their own ideas, experiences and questions into the classroom and seminar discussions.
You should all have looked at the PRI case studies prior to the sessions and be prepared to answer questions
on them.
Assessment
Assessment is by: 2 hour Examination 100%
Reading
There is a course handbook that covers the majority of the subject matter. This must be studied. It is
available on my website as are all overheads and some additional reading.
Recommended additional reading:
Multinational Business Finance 13th ed by Eitman, Stonehill and Moffett. Pub, Addison Wesley (ref E&S)
Multinational Finance-, 5th ed Adrian Buckley
Also
International Financial Management 4th Ed, by Eun and Resnick. Published by McGraw Hill
Financial Institutions and Markets, 10th edition, Madura
International Finance, A Practical Perspective, Adrian Buckley especially Part E.
US Cash Management: A Practical Guide a research report authored by Michele Allman-Ward and
published by Treasury Today
ACT International Cash Management, Certificate Paper, course manual. Various years, latest is best! Two or
three copies available in library. Excellent for lectures 1 to 5. Note the references may not be accurate
depending on the version you get hold of but it should be obvious! Referred to below as ACTM.
Others:
Guide to Treasury Best Practice and Terminology, FTI and WWCP
ISBN 1 899518 08 8
Practical Forecasting for Managers, by John C and Mary M Nash, pub by Arnold
Corporate Finance, Peter Moles, Robert Parrino and David Kidwell
The Treasurer, the official Journal of the Association of Corporate Treasurers.
Treasury Today at www.treasurytoday.com
Gtnews.com
Very good for current articles on treasury issues. Mainly free.
Lecturer: Mr Anthony BIRTS. ACT Cert ICM, BSc, MBA
Extension 3675
Room WH 8.56
Email mnsanb@management.bath.ac.uk
Guest Lecturer: Dr Elena Veprauskaite for sessions 6,7 and 8
Treasury Management
Course Outline
Session 1
Introduction
a) The Role of The Treasurer
b) Treasury Management
c) Cash Management
- Definition
i)
Domestic Cash Management
Payables and Receivables Management
PRI Case A pti
PRI Case A ptii
ACT CertICM manual Chs 1-4 (ACTM)
ii)
Money movement
Float, Finality, Value Dating and Repudiation.
ACTM Chs 6 to 10
Reading:
Course book Chs 1- 3
www.apacs.org.uk/
For all sessions see articles on my website
Practice: Seminar 1. Work on the Consys case and be ready to discuss it.
Lockbox problem
Session 2
Part A
Cash Management: Account Structures
PRI Case B
PRI Case C
i)
ii)
Account Structures – When and where to open accounts
Some types of accounts
Lockbox
Zero Balance
Controlled Disbursement
Remote disbursement
Intervention account
Reading
Course book: Ch 4
E&S Ch 19
ACTM Ch 5 and 11for accounts and 22.
MN30067
Oct 2013
Session 2
Part B
Foreign Exchange Exposure Management (FX)
Introduction to Foreign Exchange Risk Management
Course Book: Ch 5
E & S Ch 9-12
Practice:
Seminar 2
Definition of Exposures
Reading FX rates
1) Case Study : Primrose and Percy
2) Reading FX rates practice
Session 3
See Boughtright problem before this session.
Basic ways to cover exposure
Reading FX Rates and Money Market Rates
Linkage between FX and money markets
Decisions based on cash flow
Other considerations
Case study: PRI Case D
Reading Course book: Chs 6
E & S Chs 6-8
And Chs 1-5 if time
Buckley Chs 4 to 9 and 10
Practice: Seminar 3. Schokolardentorten part i)
Session 4. FX continued.
Short-term currency swaps
Tiering and banding
Reading
Course book: Ch 7
E & S Ch 4 and 14
Practice: Schoko part ii) plus Swap practice 1 and 2
Also Seminar 4. Question i)
Session 5. FX continued again.
i) Foreign Exchange Options
ii) Forecasting
Reading
Course book: Ch 8
Buckley Ch 17
E & S Ch 5
Practice: Seminar 4. Question ii)
Session 6
Enterprise Risk Management
The lecture will provide a short introduction to ERM and the role of the treasurer in ERM. Specifically it
will cover the following areas:
 Definition of ERM
 Framework of ERM
 Differences between ERM and traditional risk management
 Benefits of ERM
 The role of the Treasurer in ERM.
Reading:
Robert R. Moeller. (2007). COSO enterprise risk management understanding the new integrated ERM
framework. John Wiley & Sons, New Jersey (Ch. 1., 2., 3).
Association of Corporate Treasurer. (2006). The Role of Treasurer in the Enterprise Risk Management.
Mercer Oliver Wyman & The Association of Corporate Treasurer, London
Mikes, A. (2005). Enterprise Risk Management in Action. ESRC Centre for Analysis of Risk and
Regulation, London.
Sessions 7 and 8
Interest Rate Risk Management
Forward Forward Money
Futures
FRAs
Interest Rate Swaps
Caps and Collars
Reading:
Course book Ch 9
Practice: Seminar 5. Interest rate risk
Session 9
i)
Pooling, cash concentration and interest enhancement.
ii)
Cash Flow Forecasting
iii)
Some short term funding and investment issues
Reading: Course book, Ch 4for pooling etc. For cash flow forecasting, ACTM Ch 13
and look at Ch17 for pooling etc and 18 for tax implications. Chs 14 and 15 for short term investment and
funding
Practice: Seminar 5b, Qs 1-4 for interest Qs and Q 5 for forecasting
Session 10
i) Centralisation Issues
- Netting (if not dealt with earlier!)
- Re-invoicing
- Factoring
- Payment factories
- Shared service centres
- In-House Bank
ii) Managing the Treasury function
- Policy
- Procedures
- Performance
- Setting Limits
Reading: Course notes Ch10 for netting, ACTM Ch 16 for netting and Ch 20 for Treasury Organisation
Practice: Netting problem
Session 11 Revision.
i)
Everything not covered so far
ii) Revision. Everything covered so far
iii) Questions you may have
Practice: Week 11 seminar Qs, mixed batch
Reading:
Everything not read so far or if you have read everything, read it again if you did not understand it.