Effective company capital management: strategies, risks, and key tools.
Managing a company's capital.
Managing the capital of a company of any size is a service offered by many financial organizations that specialize in working with securities. An investor with temporarily available funds who wishes to use them efficiently turns to one of these companies and enters into a fiduciary management agreement for the capital of the company they represent. The management company undertakes not only to preserve but also to increase the investor's invested funds through active market operations.
Why is this service so popular? The fact is that working with securities requires a lot of effort and time, as well as special skills and knowledge. As a rule, it is inconvenient for an investor to operate on the stock market independently, yet the available capital must be used; otherwise the company will incur losses. The management company is directly dependent on the effectiveness of the transactions it carries out, because the greater the investor's profit, the higher the percentage received by the manager. Professional and meticulously calculated management of a company's capital can contribute to its further development and greater resilience in difficult times for business.
One of the widely used ways to employ a company's capital is to organize depository (custody) activities. Depository activity is a service that is safe for the deponent (investor) for safeguarding their securities and/or accounting for and transferring ownership rights to existing securities.
Organizing depository activities involves developing the terms of its operation. The depository's terms of activity are a document approved by both parties, in which the conditions of a particular depository's activities are rigidly fixed. These terms set out the procedures for clients and depository employees, templates (samples) of documentation, and specify the deadlines for executing the operations performed. The depository's service tariffs are also indicated.
The actions of the depository (manager) are fully accountable to the investor, and therefore at any time the deponent may give instructions regarding securities that are stipulated in the depository agreement. The management company undertakes to responsibly safeguard the investor's securities, ensure comprehensive protection of rights to those securities, and maintain records of the securities' rights assigned to the investor.