1. A project implemented by: A project funded by the European Union

2. 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

3. 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

4. A project implemented by: A project funded by the European Union

5. 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!

6. 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.

7. 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

8. 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?

9. 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 ?

10. A project implemented by: A project funded by the European Union Item/period1234….293031 Febr. Marc April May….Dec. Major items - - Total Outstanding items - - Total outstanding items Grand total

11. 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

12. 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 ?

13. 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

14. 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)

15. 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)

16. A project implemented by: A project funded by the European Union  Identification of tools available for risk handling  Precondition: 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.

17. 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.

18. A project implemented by: A project funded by the European Union RESERVES  As protection tools  As indicators for risk management purposes (Basel)

19. 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 specialities  the reliability of the forecasts  the time necessary from the recognition to the decision making and for the implementation of actions  tools available for the implementation of actions  time needed from the activation of the corrective actions to exercise their impact.

20. 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

21. 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

22. A project implemented by: A project funded by the European Union

23. A project implemented by: A project funded by the European Union

24. A project implemented by: A project funded by the European Union PRACTISE I

25. A project implemented by: A project funded by the European Union PRACTISE II

26. A project implemented by: A project funded by the European Union  International practice  Recommended for Albania  Gap analysis workshop exercise  Q&A

27. 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 CUMULATIV GAP

28. A project implemented by: A project funded by the European Union Item/period0-30 31-60 61-9091-180180-365 +Income -Expenditures Gap CUMULATIVE Gap Min. reserve requirements (RR) Max. RR Gap - min.RR Gap –max. RR

29. A project implemented by: A project funded by the European Union Item/period0-30 31-60 61-9091-180180-365 +Income 10 -Expenditures Gap CUMULATIVE Gap Min. reserve requirements (RR) Max. RR Gap - min.RR Gap –max. RR

30. A project implemented by: A project funded by the European Union Item/period0-30 31-60 61-9091-180180-365 +Income 10 -Expenditures Gap CUMULATIVE Gap Min. reserve requirements (RR) Max. RR Gap - min.RR Gap –max. RR

31. A project implemented by: A project funded by the European Union Item/period0-30 31-60 61-9091-180180-365 +Income 10 -Expenditures Gap CUMULATIVE Gap Min. reserve requirements (RR) Max. RR Gap - min.RR Gap –max. RR

32. A project implemented by: A project funded by the European Union  Draw the curve  Indicate the tools to be applied  Questions & Answers  Conclusion

33. A project implemented by: A project funded by the European Union Thank You!