5 • 1

CHAPTER

5

INTERNATIONAL TREASURY

MANAGEMENT*

Michael H. Moffett

Thunderbird—The American Graduate School of International

Management

James L. Mills

Thunderbird—The American Graduate School of International

Management

CONTENTS

5.1 Introduction 1
5.2 Treasury Management 2
(a) Traditional Treasury 2
(b) Treasury Implementation 3
(i) Planning 3
(ii) Processing and Control 4
(iii) Investment and Financing 4
(c) Modern Treasury 5
(d) Treasury Organization 7
(e) Treasury Drivers 9
5.3 International Treasury Management 10
(a) Stage 1 10
(b) Stage 2 11
(c) Stage 3 11
5.4 International Cash Management 12
(a) International Cash
Management Goals 12

(b) Mechanics of International

Cash Management 12

(c) Techniques for Effective

Deployment of Funds 14

(d) Barriers to Effective Inter-

national Cash Management 15

5.5 Foreign Exchange Management 15

(a) Risk Management Guidelines 16

(b) Front-Office/Back-Office

Division 17

(c) Position Monitoring and

Performance Measurement 17

5.6 Summary: The Emerging Value-

Added Role of Treasury 18

SOURCES AND SUGGESTED

REFERENCES 18

5.1 INTRODUCTION. The financial management of the nonfinancial firm is tradi-
tionally divided between treasury activities and controller activities. Simplistically,
this is a distinction between cash flow(treasury) and financial reporting(controller).
Controller activities such as end-of-month closings, internal reporting and forecast-
ing, and external financial reporting have become increasingly automated. Continu-
ing advances in the field of information technology, combined with the increasing
focus by management on the future rather than the historical details of the account-
ing past, have led to a larger role for treasury within financial management.

*Additional research assistance was provided by Timothy Magnusson.