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.
No prior knowledge of treasury or international banking practices is assumed but any experience brought
into the lectures will be useful. A prior knowledge of basic accounting and finance is assumed.
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 my overheads* and some additional reading.
*Note that overheads are for guidance as to what issues/subjects need to be considered and will not in
themselves contain sufficient information to do well on the course. They must be supplemented with the
background 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
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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
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Treasury Management
Course Outline
MN30067
Oct 2014
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) Note: refs are for edition 7
ii)
Money movement
Float, Finality, Value Dating and Repudiation.
Reading:
ACTM Chs 6 to 10 and Ch 23 for US and European payment systems and Ch 24 for other major
international markets
Course book Chs 1- 3
www.apacs.org.uk/
For all sessions see articles on my website/moodle
Practice: Seminar 1. Work on the Consys case and be ready to discuss it.
Session 2
Part A
Cash Management: Account Structures (part1)
PRI Case B
PRI Case C
i)
Account Structures – When and where to open accounts
ii)
Some particular types of accounts used for cash management
Lockbox
Zero balance
Controlled Disbursement
Remote disbursement
Intervention account
Practice: Lockbox problem
3
Reading:
Course book: Ch 4
E&S Ch 19
ACTM Ch 10, 16 and 23 .
Session 2
Part B
Foreign Exchange Exposure Management (FX)
-
Should managers manage risk?
Reading: E&S Chs 6-7
Introduction to Foreign Exchange Risk Management
Reading
Course Book: Ch 5
E & S Ch 9-12
ACTM Chs 17 and 18
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
Reading:
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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 8
Practice: Seminar 4. Question ii)
Session 6
Interest Rate Risk Management
Forward Forward Money
Futures
FRAs
Interest Rate Swaps
Caps and Collars
Reading:
Course book Ch 9
E & S page 29 – 31
Practice: Seminar 5. Interest rate risk
Session 7
Netting
Pooling, cash concentration and interest enhancement.
Practice: Netting problem
Reading:
Course book Ch 10 and Ch 4
ACTM Chs 14 and 15 and Ch 20 for a bit on tax
E & S Ch 15 for tax
Session 8
i)
Cash Flow Forecasting
5
ii)
Some short term funding and investment issues
Reading: For cash flow forecasting, ACTM Ch 11
Chs 12 and 13 for short term investment and funding
Practice: Seminar 5b, Qs 1-4 for interest Qs and Q 5 for forecasting
Session 9
Trade Finance
Reading:
ACTM Ch 5
Session 10
i) Centralisation Issues
- Re-invoicing
- Factoring
- Payment factories
- Shared service centres
- In-House Bank
ii) Managing the Treasury function
- Policy
- Procedures
- Performance
- Setting Limits
Reading:
ACTM Ch 19 for Treasury Organisation
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.
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