This lesson examines the policies and controls that provide the overriding structure under which a treasury department operates. According to the AFP, treasury policies help companies document and communicate to employees and contractors the expected standards for treasury processes .

4.1 The Purpose of Treasury Policy

A treasury policy document provides the overriding structure under which a treasury department operates . It is a formal document that sets out the objectives, authority, and controls for all treasury activities, ensuring that treasury’s actions are aligned with the organisation’s overall risk appetite and strategic goals . The policy also provides a clear framework for decision-making and a defence against fraud.

4.2 Key Treasury Policies

The AFP identifies ten treasury policies every company should consider :

  1. Cash management policy: Provides guidance on managing cash inflows and outflows and planning and monitoring liquid resources .

  2. Bank account management policy: Important for delegating authority on opening, closing and managing accounts .

  3. Payments policy: Ensures consistency in the management of all payments processes .

  4. Fraud policy: Provides guidance on how to prevent, detect, report and investigate suspected fraud .

  5. Short-term investment policy: Provides guidance for investing working capital on a short-term and medium-term basis .

  6. Long-term funding and financing policy: Pertains to the execution of long-term funding strategies .

  7. Financial risk management policy: Provides guidance on managing various types of risk, including foreign exchange (FX) risk, interest rate risk, financial counterparty credit risk and liquidity risk .

  8. Credit and collections policy: Addresses extending credit to customers and collecting customer payments .

  9. Regulatory compliance policy: Ensures compliance with regulatory requirements .

  10. Treasury systems policy: Regarding treasury management system (TMS) and any other treasury-specific technology solutions .

4.3 The Deal Execution Process

The process for undertaking treasury deals includes analysis, decision making, execution, approval, settlement and accounting implications of a deal . A typical treasury transaction process has the following steps: identification of the position, pre-dealing authorisation, dealing (front office), confirmation, settlement (often dual authorised), and accounting (back office) .

PreviousNext