This lesson examines the governance framework that ensures treasury operations are controlled, transparent, and aligned with the organisation’s strategy and risk appetite .

1.1 The Purpose of Treasury Governance

Treasury governance is the system of policies, procedures, and controls by which treasury activities are directed and managed. Strong governance is essential for ensuring treasury operates within defined risk parameters and complies with regulatory requirements. It ensures accountability, transparency, and oversight, preventing unauthorized activities and protecting the organisation from financial and reputational risk .

1.2 The Role of the Board and Senior Management

Treasury governance requires active involvement from the board and senior management. The board is responsible for:

  • Approving treasury policies and risk limits.

  • Setting the overall risk appetite that treasury must operate within.

  • Monitoring treasury performance and compliance through regular reporting.

  • Ensuring adequate resources are allocated to the treasury function .

1.3 Treasury Organizational Structures

Treasury can be organised in several ways, with different governance implications:

  • Centralised Treasury: Group treasury controls all activities, providing a consolidated view of cash and risk but potentially reducing local autonomy.

  • Decentralised Treasury: Each entity manages its own treasury, offering speed and local responsiveness but risking a fragmented view.

  • Hybrid Treasury: Combines central oversight with local execution, balancing control with flexibility .

1.4 The Separation of Duties

A fundamental governance control is the segregation of duties between the front office, middle office, and back office:

  • Front Office: Executes transactions and interacts with financial markets.

  • Middle Office: Monitors risk, ensures compliance with limits, and provides independent oversight.

  • Back Office: Handles settlement, confirmation, and accounting.
    This separation ensures that no single individual can both initiate and settle a transaction, reducing the risk of fraud or error .

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