In a medium to large organization, we normally would have a treasurer who reports to the Head of Finance or CFO

Hence, for uniformity and consistency purposes, it is important to establish a simple statement of policy on Treasury function.

The policy should basically encompass the following areas:

• Banking
• Petty Cash
• Wire Transfer
• Borrowings
• Treasury Risk Management
  

Append below is a sample for Treasury function:

Banking

The treasury function oversees the following banking activities:

• Approval of banking institutions for Company accounts;
• Establishment and closure of bank accounts at approved banks;
• Establishment of new banking services at approved banks; and
• Designation of authorized signatories for withdrawals from bank accounts.
  

All bank accounts are to be established by the Company’s Corporate office, through the ….. 
All accounts established and maintained by the Company shall be clearly identified in the Company’s books and records and shall be in the name of the Company entity to which such funds belong. 
Any deviations need to be approved by….

No payment shall be made to accounts or designated payees in a country other than those in which the payee resides, maintains a principal place of business or rendered the services for which payment is due, without prior approval by the ……..

All requests for the establishment of a bank account must include:

• the type of bank account;
• the purpose of the account;
• authorized signatories on the account; and
• the legal name of the bank.  All of this information should be submitted to the Corporate Treasury Manager 
  

The Corporate Treasury Manager maintains and updates, on a regular basis, all relevant data relative to the Company’s banking institutions.

If an employee who is an authorized signer, or who has the ability to make withdrawals to any Company bank account, leaves the Company for any reason, immediately notify the Corporate Treasury Manager for updating of bank records.

Petty Cash

It is appropriate and necessary for locations to maintain a petty cash drawer.  The amount of the petty cash fund can be determined at the discretion of the location Controller, but should not exceed $X.  The following procedures for petty cash drawers must be adhered to:

• Any and all petty cash accounts must be included in the location’s general ledger;
• Any and all disbursements from the petty cash drawer must be documented with receipts, regardless of amount;
• Any and all petty cash accounts must be reconciled on a monthly basis.
• All reconciliations should be prepared by someone other than the location Controller and approved by the location Controller.  The location Controller’s review should be clearly depicted on the reconciliation.

Wire Transfer or Telegraphic Transfer

Policy

A wire transfer is an online transmission of funds from the central Company bank account to a vendor, supplier or employee bank account.  The Company’s Corporate Treasury Manager is authorized to issue wire transfers in lieu of manual checks in the following situations:

• Employee-authorized payroll automatic deposit;
• Payment to foreign individuals or vendors in countries with inadequate postal and/or bank systems; and/or
• Payments that require immediate availability of funds.
• Wire transfers are always made in US dollars and may only be used for amounts greater than $X.  In addition, it should be noted that wire transfers cost the Company up to $X per wire transfer.  Therefore, they should only be used when absolutely necessary.
  

Borrowings

All external borrowings, regardless of size and type, require approval by the Company’s Corporate office as well as approval by the Board of Directors. 

The CFO and the Company’s Board of Directors must approve any and all guarantees of borrowings of subsidiaries or affiliates.  Third party guarantees are typically not provided.
All arrangements involving foreign currency exchange, investments, swaps, etc. must be approved in advance by the Company CFO. 

It is the Company’s policy to discourage loans to employees, except for …….

Treasury Risk Management

This policy governs the management of interest rate and foreign exchange risk for the Company.  As a global company conducting business in foreign countries, the Company is exposed to foreign exchange risk.  Movements in currency values may have significant adverse effects on revenues, expenses, earnings and competitiveness.  Therefore, it is imperative that foreign exchange exposures be forecasted accurately, monitored closely and managed effectively.  The same exposures exist for the Company relative to changes in interest rates, for floating rate debt instruments. 

It is the Company’s policy that all hedging activities are to be entered into, documented and accounted for.

Objective

The objective of interest rate and foreign exchange risk management is to protect the economic value of the Company from the possible negative effects of interest rate and foreign currency fluctuations.

In practice, because economic exposure is difficult to quantify, this focus on economic exposure means that risk management will be directed toward minimizing the potential adverse effects of interest and currency fluctuations on the Company’s reported, consolidated USD earnings. 

To ensure compliance with this objective, the Company maintains a treasury risk management committee (RMC) that consists of the following Corporate individuals:

• CFO (chairman)
• Treasury Manager
• Controller

The RMC is charged with the responsibility of identifying and managing the Company’s interest rate and foreign currency risk within the parameters set forth in this policy.  Exceptions to this policy must be pre-approved by the ….

Hedging

The RMC has ultimate responsibility for managing the interest rate and currency exposure of the Company;
The CFO is responsible for the development and implementation of specific hedging strategies consistent with this policy, and guidelines and controls established by the RMC;
The CFO is responsible for identifying and quantifying the Company’s interest rate and foreign currency exposures;
The risk management program need not contain a detailed list of each transaction/hedge to be implemented but must include detailed qualitative and quantitative descriptions of all hedging strategies to be employed by the Company to manage its exposure to interest rate and currency risk.
While the broad objective of the Company’s interest rate and currency risk management is to minimize economic exposure to potential adverse interest rate and currency fluctuations, it is not the policy of the Company to hedge 100 percent of all identified exposures.  Rather, the following broad guidelines should be employed:

• Offsetting exposures need not be hedged;
• Exposures arising from the translation of non-functional-currency balance sheets need not be hedged;
• For forecast or anticipated exposures, hedge coverage may fall below 100 percent, depending upon the type of hedge instrument used and the reliability of the forecast;
• Exposures involving highly regulated currencies, or where the cost of hedging is high, will be managed on a case-by-case basis; and
• All hedging strategies will be approved by the Company’s Board of Directors or other committee as designated by the Board of Directors.
• All hedge transactions must be documented and approved by the RMC.
  

To ensure efficient hedging, the Company’s CFO is responsible for the execution of all hedges and is also responsible for ensuring compliance with the requirements of SFAS No. 133 with respect to documentation, reporting and measurement of hedge effectiveness.

The following hedge instruments may be used to manage the Company’s interest rate and foreign exchange exposures:

• Forward contracts;
• Swaps;
• Options; and
• Other vehicles as approved by the RMC

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Related Entries

• Foreign Exchange Management: Operation/Management Policy And Procedures
• The Imprest System of Keeping Petty Cash
• Foreign Exchange Management: Forecasting and Quantifying FX Currency Risk
• FX Management: A Practical Basic Understanding
• Foreign Exchange Management : Managing A Transaction Exposure Risk