Investment in Portfolio Management

1. SILVESTRE, NIGEL JACOB N.
BSBA – FM – 4A
1.) Why is it important for a company to have an effective treasury management?
 Treasury Management does include management of company’s holdings, with the ultimate
goal of managing the firm’s liquidity and mitigating its operational, financial and
reputational risk. Treasury Management includes a firm's collections, disbursements,
concentration, investment and funding activities. In larger firms, it may also
include trading in bonds, currencies, financial derivatives and the associated financial risk
management. A company must have an effective treasury management because all of the
cash inflows and outflows are to be monitored, maintaining the working capital and
profitability of a company and to assure all investment are far from risk.
2.) Why is it important to have treasury controls?
 It is important to have a broad set of controls that help to ensure that transactions are
appropriate, it is important to have a proper separation of critical duties of treasury staff
to avoid. Aside from segregation, treasury should impose limit control, this prohibits or
severely restrict the treasury staff from investing in certain type of financial instruments
that present an unduly high risk of capital loss.
3.) Treasurer’s bonus must not be based on high returns of investments. What is the reason
for this?

4.) Why is it important for the treasurers to have good relationship with banks?
 Corporates need banks; no treasurer wants to spend un-necessary time on too many bank
relationships, but there is great risk in relying on the single bank model or spending
insufficient time talking to other providers, especially as bank economics have become
more volatile causing banks to impose new ‘hurdle rates’ on relationships. Other banks
(such as RBS) have exited complete segments such as cash management or certain
countries (HSBC, Barclays). This is a real treasury risk and having active dialogue with
alternative banks can anticipate and mitigate some corporate risk associated with
unexpected bank actions. Relationships that took years to build can now disappear in a
matter of months due to items out of the corporates control such as policy change.
5.) What problems may arise if the company doesn’t have efficient treasury procedures and
controls?
 Without proper Treasury Control, the company’s cash flows will become unstable,
buying investments on any type of financial instruments with the company’s unstable
situation on its inflows and outflows would result to mismanagement of treasury and
would result to loss in the company’s portfolio, Risk Management should also be
considered on controlling the treasury’s