The Role Of Treasury Management In Currency Risk Management

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Date
2006
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam
Abstract
The increased volatility of the international foreign exchange market generates increased financial risk especially to commercial banks. Exchange rate change is one of the financial risks where the increased volatility is reflected to the greatest extent. Therefore, if financial institutions are to measure, price and control currency risk, they must establish an appropriate function responsible for currency risk management. The study has established that it has been a practice for banks to place the role of risk management under the stewards of treasury function. This study was designed to analyse the role of treasury management in the currency risk management. The study used both primary and secondary data with a comparative case study orientation. Published financial statements and other desk materials were collected principally from selected banks. Interviews were also made with responsible treasury managers. There are various ways (economic, translation and transaction), that the bank can utilize in analysing and setting the exchange rate risk management. In this study, transaction and translation exposure were the chosen methods of analysis. This study has established that, commercial banks in Tanzania have treasury function in their structures which is responsible for foreign currency trading and risk management. It is recommended in the study, Banks directors and senior management must take an active interest in treasury activities at all times. Banks should also maintain a sound treasury front and back offices capable of managing financial instruments volatility challenges. Management must ensure that there are adequate segregation of duties between treasury front and back offices. This is very essential for prudential risk management; and finally treasury team should always participate in the development of treasury policies, programs and strategies necessary for currency risk management.
Description
Available in print form,East Africana Collection ,Dr.Wilbert Chagula Library,Class mark ( THS EAF HG3881.T34M.37)
Keywords
Banks and banking, Financial institutions, Foreign exchange problems, Commercial banks in Tanzania
Citation
Marwa.M ,(2006) The Role Of Treasury Management In Currency Risk Management,Master Dissertation,University of Dar es Salaam,Dar es Salaam.