A project implemented by: A project funded by the European Union.
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Transcript of A project implemented by: A project funded by the European Union.
A project implemented by:
A project funded by the European Union
A project implemented by:
A project funded by the European Union
1. Introduction
1.1 Introduction of participants
1.2 Workshop objective
2. Definitions
2.1 Cash management
2.2 Cash-flow forecast
2.3 Liquidity management
A project implemented by:
A project funded by the European Union
3. Risk management
3.1 Risk management framework
4. Risk/reserve management
4.1 Logical framework of the reserve requirements
4.2 The level of the reserves
4.3 Reserve curves
A project implemented by:
A project funded by the European Union
A project implemented by:
A project funded by the European Union
Workshop Objective:
Learn about liquidity management
(cash forcasting and management)
in theory and practice!
A project implemented by:
A project funded by the European Union
2.1 Cash management is a daily task aiming to ensure that sufficient liquidity is available for solving daily liquidity needs.
2.2 Cash-flow forecast or cash flow management is a key aspect of the financial management of a business, planning its future cash requirements to avoid a crisis of liquidity.
2. 3 Liquidity management is used as a general term, which includes both cash management and cash-flow forecast, i.e. all the activities aiming to ensure the availability of sufficient liquidity.
A project implemented by:
A project funded by the European Union
Ensuring cash is available to meet commitments
Overriding objective – other objectives must be subject to it
Economising on cash within government Saving costs
Managing effectively the government’s aggregate short term cash-flow Cash deficits and surpluses Reducing risk
A project implemented by:
A project funded by the European Union
What is the difference between the short term plan and long term plans?
What is the difference between the budget plan and cash-flow plan?
What is the difference in the cash-flow plan of a financial insitution and the Treasury?
A project implemented by:
A project funded by the European Union
How can we get realistic cash-flow plans from the Bis?
Which institutions to concentrate on ?
How often should you ask for data ?
A project implemented by:
A project funded by the European Union
Item/period 1 2 3 4….29 30 31 Febr.
Marc April
May …. Dec.
Major items
- - Total Outstanding items
- - Total outstanding items
Grand total
A project implemented by:
A project funded by the European Union
Cash-flow concept
Requirements to the updating
Roll-over plan
Responsibilites on preparation and control
Responsibilites on analysis
A project implemented by:
A project funded by the European Union
DATA CONSISTENCY AND ACCURACY
The higher the quality of the information
• The lower the costs
• The smaller the risk
Do we want to have absolutely correct data each minute
for cash forecast/ cash management purposes ?
A project implemented by:
A project funded by the European Union
Short term
Ensure liqudity
Hedge risk and mitigate risk
Long term
Mitigate risks
Avoid cyclical peaks
A project implemented by:
A project funded by the European Union
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the risks.
Basel principles
Market risk
Operational risk
Liquidity risk (or funding risk)
A project implemented by:
A project funded by the European Union
Tasks concerning the development of a risk management framework
Identification, assessment and prioritization of risks
identification of risk categories
risk analysis related responsibilities
definition of triggers (when action is to be done)
A project implemented by:
A project funded by the European Union
Identification of tools available for risk handlingPrecondition: risk identification, preliminary risk prioritization
Tools are to be differentiated according to their purpose of usage and impact, as
applied for the handling of short- term, or long-term risks
having their impact short- or longer term.
A project implemented by:
A project funded by the European Union
Risk monitoring and risk control –Responsibilities are dedicated concerning: risk watching
preparation of recommendations on risk handling
approval of recommendations
recommendation implementation
implementation impact monitoring and reporting.
A project implemented by:
A project funded by the European Union
RESERVES
As protection tools
As indicators for risk management purposes (Basel)
A project implemented by:
A project funded by the European Union
The volume of the necessary reserves depends mainly on:
the volume of the assets to be protected the volatility of the markets and market behaviour and specialitiesthe reliability of the forecasts the time necessary from the recognition to the decision making and for the implementation of actionstools available for the implementation of actionstime needed from the activation of the corrective actions to exercise their impact.
A project implemented by:
A project funded by the European Union
Practice of the OECD countries
Albanian current reserves
Budget related contingencies and reserves
Stand-by facility for liquidity management purposes kept at BoA
A project implemented by:
A project funded by the European Union
Recommended initial reserves
salaries (paid by the Treasury for the Central and Local Government employees)
social aid and contribution, unemployment benefits utility fees.
Minimum and maximum level
Minimum 2 weeks
Maximum 4 weeks
A project implemented by:
A project funded by the European Union
A project implemented by:
A project funded by the European Union
A project implemented by:
A project funded by the European Union
PRACTISE I
A project implemented by:
A project funded by the European Union
PRACTISE II
A project implemented by:
A project funded by the European Union
International practice
Recommended for Albania
Gap analysis workshop exercise
Q&A
A project implemented by:
A project funded by the European Union
Item/period 0-30 days
31-60 61-90
91-180
180-365
366-2 years
2-5 years
5-7 years
7-10 years
10-years
+ Income
-Expenditures
GAP
CUMULATIVGAP
A project implemented by:
A project funded by the European Union
Item/period 0-30 31-60
61-90 91-180 180-365
+Income
-Expenditures
Gap
CUMULATIVE Gap
Min. reserve requirements (RR)
Max. RR
Gap - min.RR
Gap –max. RR
A project implemented by:
A project funded by the European Union
Item/period 0-30 31-60
61-90 91-180 180-365
+Income 10
-Expenditures
Gap
CUMULATIVE Gap
Min. reserve requirements (RR)
Max. RR
Gap - min.RR
Gap –max. RR
A project implemented by:
A project funded by the European Union
Item/period 0-30 31-60
61-90 91-180 180-365
+Income 10
-Expenditures
Gap
CUMULATIVE Gap
Min. reserve requirements (RR)
Max. RR
Gap - min.RR
Gap –max. RR
A project implemented by:
A project funded by the European Union
Item/period 0-30 31-60
61-90 91-180 180-365
+Income 10
-Expenditures
Gap
CUMULATIVE Gap
Min. reserve requirements (RR)
Max. RR
Gap - min.RR
Gap –max. RR
A project implemented by:
A project funded by the European Union
Draw the curve
Indicate the tools to be applied
Questions & Answers
Conclusion
A project implemented by:
A project funded by the European Union
Thank You!