# Treasury Management
## What it is
Treasury management is the part of finance that handles a firm's cash, funds, and financial risk. It mainly deals with two things:
1. Working capital management — keeping enough cash and liquidity for day-to-day operations.
2. Financial risk management — managing forex (exchange-rate) risk and interest-rate risk.
## Key goals
- Maximize return on available (idle/surplus) cash.
- Minimize interest cost on borrowings.
- Mobilise as much cash as possible for corporate ventures so it earns maximum returns.
- Deal effectively in forex, money and commodity markets to reduce risk from fluctuating exchange rates, interest rates and prices — fluctuations that ultimately hit profitability.
## Functions of the Treasury Department
The treasury department is typically responsible for five areas:
| # | Function | What it covers |
|---|---|---|
| 1 | Cash Management | Efficient cash collection and managing cash payments — both internally and to third parties. |
| 2 | Currency Management | Managing foreign-currency risk exposure. To minimise risk, forward contracts can be used to buy or sell currency forward. |
| 3 | Fund Management | Planning and sourcing short, medium and long-term cash needs; investing surplus funds temporarily by mapping the gap between fund inflows and outflows; participating in capital-structure decisions; forecasting future interest and forex rates. |
| 4 | Banking | Maintaining good banker relationships; negotiating interest rates, forex rates etc.; acting as the initial point of contact. Short-term finance may come via bank loans or sale of commercial paper in the money market. |
| 5 | Corporate Finance | Involvement in acquisitions and divestments within the group; often responsible for investor relations. |
## Quick recall
Think "C-C-F-B-C": Cash, Currency, Fund, Banking, Corporate finance.