Ch.17 Treasury Policies and Procedures

Question 1

What are the four primary reasons that treasury policies and procedures are required?

Answer 1

• Organizational Needs, ensures processes are performed in a consistant manner
• Risk Management, control process to mitigate risk in a controlled environment
• Roles and Responsibilities, Defines the job and process
• Compliance, internal audit

Question 2

What are some key control issues to consider when developing treasury policy guidelines and objectives?

Answer 2

• Structure of Controls
• Delegation of authority and governance
• Segregation of Duties
• Roles and responsibilities
• Records Retention Policies
• Moving from Controls to Policies and Procedures

Question 3

What are the basic elements of a policy?

Answer 3

• Objectives, stated at the begining of a policy
• Scope, what will be covered
• Basic Guidelines, how they should be performed
• Performance Measurement and reporting, Metrics for objectives
• Required Controls and Compliance, Oversight
• Exception Management, who can approve exceptions
• Review Cycle, work flow
• Policy attachments, exhibits and appendices

Question 4

Once a treasury policy has been developed, what are the typical steps in a formal approval process for that policy?

Answer 4

• Treasury Department Review
• Review by other functional area managers
• Review by internal audit and/or compliance group
• Final Approval

Question 5

When should an existing policy be reviewed and updated?

Answer 5

• As companies grow
• Specified time frame
• ## During reorganizations

Question 6

Why should a company have a formal investment policy?

Answer 6

• It establishes a clear understanding of the firms investment philosophy and objectives.
• Protects staff from blame and unforeseen problems.

Question 7

What issues should be considered when writing treasury procedures?

Answer 7

• Expected length of time that it expects or is willing to hold an investment.
• Duration, as related to interest rate risk

Question 8

What is an investment horizon, and why should it be included in a firm’s short-term investment policy?

Answer 8

• Length of time that it expects to or is willing to hold an investment. In order to give guidance for risk exposure

Question 9

What are the three typical objectives that must be considered in an investment policy?

Answer 9

• Safety
• Liquidity
• Risk/Return Trade-off

Question 10

What are some typical approaches to diversification that must be considered in an investment policy?

Answer 10

• Allocation
• Foreign investments to hedge USD rates
• Limiting investments by issuer and instruments

Question 11

What are some common benchmarks used in the measurement of performance in an investment policy?

Answer 11

• Yields on the US Treasury securities
• Market indices
• Money Markets

Question 12

What are the key elements that should be included in a payments policy?

Answer 12

• Delegation of authority
• Permitted payment methods
• limits
• approval requirements
• Documentation
• Risk Management

Question 13

What elements should be included in an outsourcing policy?

Answer 13

• Delegation of authority
• Reporting requirements
• vendor risk management
• Information security and confidentiality
• Performance measurement

Question 14

What elements should be included in a regulatory compliance policy?

Answer 14

• Statement of policy and required compliance
• subcontractor and vendor compliance requirements
• audit
• exception management
• Disciplinary process

Question 15

Why are records retention policy guidelines important?

Answer 15

• fees and fines can be assessed if not followed.

- audit