Topic 10 Flashcards
What is the a bentchmark
A standard which something is compared e.g intrest rate banks go off what the Bank of England sets
What to consider for a benchmark
Business size
risk appite
Earning
Investment
Forigne exchange transcation risk bentchmarch helps with performance
• The potential for favorable variance is:
ー
Get a better rate from a different bank
Negotiate a better rate from the specified bank
- Use currency borrowing/deposits (money markets) as an alternative hedge and achieve a better outcome
- Manage the exposure by internal techniques (e.g. matching/multilateral netting)
• This benchmark conforms to the usual benchmark criteria in that it is:
- Set out beforehand and not retrospectively
- Consistent with the cost centre objectives
- Achievable
- Would be appropriate for a value added cost centre treasury
Relationship banking
For high salary, income help request loans offered by the bank
Long-term relationship
Understanding
Good offers on other products
No prices on products
Transaction banking
No manager
Cheaper
No preferred bank
Can see deals from all banks
Higher Charges because the bank needs to make a profit
Advantages of relationship bank
Mutual understanding support in downtown quick decisions quick manages tailored for the company specific needs and competitive pricing
Advantages of traditional banking
They don’t get funds for capital market
Have their own treasury so they don’t need advice
They don’t want premium
Issues supplier facing
Hi liquidity higher prices for customers
Finance in domestic business with political targets
Sovereign risk
Mismatch between deposit loans banks have more loans and deposit can create funding gap
Centralisation
Decisions only made by top level managers
More layers are needed to pass down decisions after in a larger organisation
Decentralisation
Made by managers are different levels often closer to whether action happens
Since authority is spread out a few layers of managers are needed usually on a smaller scale
Advantages of centralisation
Easier to overall monitor group on exposure on interest and for exchange
Greater buying power with bank
Interest charges can be reduced because they track surplus credit balance
Hi
Cheaper can be raised
Monitor more easily well experienced
Disadvantages of centralisation
high set ups cost
Demotivation of subsidise
Conflict with culture
Cash management better left to subsidise
Not clear way of procedures, more confused
Slower decision-making
Loss of communication
Fraud
Advantages of decentralisation
Faster decision-making because it’s more local
Empowering employees feel more motivate
Flexibility to adapt to the market changes
Customer focus better line of communication
Disadvantages of a decentralisation
Lack of consistency
Higher costs
Control issues
More conflict
Types of decimation treasury
Advisory
Agency session making
In house business decisions
Financial basis of treasury
Cost centre
Cost saving
Profit centre
Operational risk
It’s stops the from being able to run day to day e.g system shut down
Types of operational risk
Internal and external fraud
Work place safety
Client s products business practice
Damage to physical assets
Disputing
