Chapter 18 Flashcards
Formal approval process for new Treasury policy
Four-levels:
- Tsy. (Sr. Staff)
- Other FAs (e.g. acc’ting, legal)
- IA and/or compliance group
- Board of directors (or appropriate board committee)
For policies with less impact: approval needed only @ designated executive level.
Handling exceptions to collection/concentration policies and procedures
should be allowed but there should be some documented segregation of duties involved
Segregation of duties
concept of having 2+ individuals involved in a process/task,
- reduced internal risks (fraud, collusion/defalcation, human error)
defalcation risk
general risk of intentional employee fraud
External theft risk
- external risk
Legal and regulatory/compliance risk
- external risk
Investment safety and reporting breaches to investment limits
Investment safety: usually viewed from “preservation of principal” perspective
- must also consider related factors (e.g. credit quality, price volatility)
- Not liquidity– (this is usually a separate objective from safety)
Breaches of limits in a portfolio: report ASAP and indicate how remediated
outsourcing policy:
5 key areas to address
“DR VIP”
- Delegation of authority
- Reporting req’s
- Vendor and ops risk mgmt
- Info security/confidentiality req’s
- Performance measurement
regulatory compliance policies
cover activities needed to comply with regulatory req’s
- Stmt. of policy and required compliance
- Sub-contractor and vendor compliance req’s
- Compliance monitoring
- Audit req’s
- Exception mtmg.
- Disciplinary processes
Diversification approaches include: list 4
- Allocate % by asset class or btwn. a variety of investment mtmg. firms
- Hold certain % of foreign securities to minimize impact of ccy. mvmts.
- Limit investments (i.e. max % of a certain firm’s stock relative to total portfolio)
- Limit investments from specific issuers and/or instruments (concentration risk)
nvestment policy reviews should be conducted by
a specific person/unit, outside the policy-related FA
(not auditors)
