Treasury Policies & Governance Will Define How Treasury Activities are Carried Out

Based on the mandates, Treasurers will need to formulate a set of Corporate Treasury policies for the organization on:

• Bank Relationships Management (Counterparty Limits, Cash Bank, Wallet Sharing)
• Financial Risks Management (FX, Interest Rates, Commodity Risks)
• Cash and Liquidity Management (Cashpool, In-House Bank, Internal Dealing)
• Debt and Credit Ratings (Debt Ratios, Credit Ratings, Public Relationships)
• Proprietary Trading (Profit Targets, Loss Limits, Trading Products)
• Operational and Settlements Standard Operating Procedures

Depending on the organization and its setup, the list of policies can be more than above. 

Treasury policies should: 

• Reflect the Corporate Treasury’s mandate
• Show the reporting and responsibility structure
• Explain the Treasury’s definition on different Treasury risks
• Outline the risk management methodologies and risk monitoring processes (i.e FX exposures, Cash-flow reports, Counterparty limits, Debt monitoring)
• Specify clearly the different risk management limits (i.e FX limits, Interest Rate coverage, Debt ratios, Trading limits, Cash end of day balances, Settlement cut-offs)
• Include standard operating procedures guidelines on different risk management processes

Corporate Treasurers need to have a robust framework on risks monitoring and setup to ensure timely reporting and alert escalation.

Depending on the level of sophistication and organizational needs, normally such tasks fall under the Treasury Risk Controllers/Analysts desks. We tend to call them the middle office, their roles are to identify, measure and monitor the different Treasury risks metrics on a regular basis.

The middle office will also ensure that the Treasury dealers, traders or managers act within their mandates and assigned trading limits. Usually, such monitoring reports are distributed to the Treasury team along with the senior management. 

So far, we have painted a high level overview on the roles, setups, policies and mandates in the industry.

Let us now zoom in on the specific areas of responsibilities of the corporate treasurer, discussing the expectations and common issues faced by corporate treasurers.