Ch 18

How can the behavior of treasury staff be regulated?

-Assigning specific duties, -Documenting duties to designated parties, and -adding penalties in the event of violations.

A board approved investment policy should include which of the following?

-Maximum weighted average duration for the portfolio -Guidelines for investing in foreign securities

What should the policy specify regarding compliance testing?

-who is responsible for compliance testing, -the scope of the testing, and -to whom the results should be reported.

What contributes greatly to the success of the development process?

Active involvement and support of senior management

What are policies and procedures commonly used for in organizations?

As training tools to document best practices and expectations

What is a best practice for compliance measurement in organizations?

Assigning compliance measurement to a specific person or unit outside the policy-related functional area

Who needs to formally approve most treasury policies?

Board of directors (or appropriate board committee) or equivalent

What will determine the balance of detail between the policy statement and procedures?

Company culture

Why should treasury policies and procedures be updated?

Control requirements change over time in response to new developments and technology

Give an example of a limit that can be breached in an investment policy.

Counterparty limits if a counterparty is downgraded by a credit rating agency.

The structure of the specific treasury policy and procedures documents will need to reflect which of the following?

Department practice

What should the treasury policies development process include?

Desired controls for each function

What is the key objective of the consultation phase of policy development?

Develop a workflow of existing practices and identify where risk points occur

Which of the following is correct for the specific guidelines related to handling exceptions to collection and concentration policies and procedures?

Exceptions should be allowed with approval and there should be a process for tracking them

What determines the final approval authority for treasury policies?

Existing delegations of board authority

Why is a cash flow forecast important?

It is an essential tool for liquidity planning and risk management.

What is the primary aim for an organization when adopting an outsourcing policy?

Manage risk and maintain control

Subcontractor and vendor compliance requirements are key issues for which type of organizational policy to ensure they are effective?

Regulatory compliance policies

What should be clearly stated at the beginning of the policy document?

The objectives for the policy - everything else falls later in the document

Why do most treasury policies need formal approval?

They typically involve delegation of board authority and prerogatives

How can an organization inform employees, agents, contractors, and vendors of expected behavior related to treasury activities?

Through the formalization of policies and procedures

Why should staff from various functional areas be included in the policy development process?

To create a policy that is acceptable to all areas involved

What is the purpose of a cash flow forecasting policy?

To ensure that a current, consistent, and accurate cash flow forecast is available.

An organization's treasury team is working on updating a variety of key policies across the department, since they haven't been reviewed in more than five years. In developing a new cash flow forecasting policy, which of the following points should be included?

Variance analysis methodology

Which of the following is true of the policy and procedure development process for the treasury organization?

When building support for developing a policy, it is important to have team representation from all affected areas

What should a policy statement identify regarding exceptions?

Who can approve exceptions, how they will be tracked, and how breaches will be managed.

What do treasury policies and procedures provide?

framework for the design of workflows and controls that support operational, financial, and treasury management objectives.

What is segregation of duties?

having more than one individual involved in a process to complete a task, Ex wire or ACH - draft & approve reduces the risks of fraud and human error.

To conform to best practices, reviews of adherence to the investment policy should be conducted by which of the following designated groups

internal and external auditors

Bank account and financial services authority policies are essential for providing:

the appropriate delegation of authority regarding opening, closing, and managing accounts

Key issues to be addressed in an outsourcing policy include:

· Delegation of authority · Vendor and operational risk management · Information security and confidentiality requirements · Performance measurement, including compliance with relevant existing company policies · Termination of outsourcing contract

Key items to be addressed in these policies include:

· Delegation of authority allowing treasury to manage financial service provider relationships · Delegation of authority to open and close bank accounts, and to add or remove services · Oversight and governance of banking relationships · Duties and tasks involved in managing relationships · Qualifying types of financial institutions, including counterparty credit assessment · Signature authority, including updates as required · Financial institution evaluation, e.g., credit rating and/or market capitalization · Documentation requirements

A cash flow forecasting policy should include:

· Goals of the cash flow forecast · Forecast frequency (e.g., daily, weekly, monthly) · Format · Schedule for updating the forecast · Acceptable forecasting methods · Variance analysis · Directions for forecasting cash flows in foreign currencies

An investment policy should include:

· Scope of investment policy (e.g., short-term cash, defined as for periods up to one year) · Investment objectives · Approved instruments · Approved counterparties (e.g., a list of named approved counterparties or a generic definition such as "any issuer with a minimum [short- or long-term, depending on investment term] rating from one or more credit rating agencies") · Portfolio management rules, such as diversification requirements and investment horizons · A reference to the bank account management policy (both from a counterparty credit quality perspective and to achieve adequate diversification) · Performance management · Use of external providers, including asset managers and custody providers

Regulatory compliance policies cover activities needed to comply with regulatory requirements that exist in a growing number of countries (ie money laundering, trade, and corruption). Corporations should implement policies to ensure compliance with labor laws, environmental regulations, antitrust laws, securities laws, and many others. Key policy elements include:

· Statement of policy and required compliance · Subcontractor and vendor compliance requirements · Compliance monitoring activities · Audit requirements