A 101 Guide
Introduction
Section 1: Treasury policy fundamentals
Section 2: Assessing risks and determining risk appetite
Section 3: Drafting the policy and finessing its content
Section 4: Implementing the treasury policy
Section 5: Example treasury policy chapter
Key takeaways
- Treasury policy frames the treasury mandate, defining how the treasury
- function operates and interacts with other parts of the organisation.
- It can be leveraged as an internal marketing document, educating stakeholders, which will improve the quality of treasury processes and collaboration across the organisation.
- Arguably, the drafting of a treasury policy is the easy part. The upfront effort creating agreement on the organisation’s risk appetite (i.e. understanding which treasury risks have to be managed, and within what boundaries) is a necessary, more difficult first step.
- Investment in codifying the organisation’s risk appetite in the treasury policy will have a positive pay-off when organising the treasury function. The risk appetite and treasury policy frame treasury processes and reporting, and therefore the level of investment (i.e. effort and budget for projects and operations) in people, technology, and processes, as well as the relevance of collaboration across core business operations and finance departments.
Introduction from the Author
Treasury policy is the executive mandate to the treasurer, as custodian of financial risk. Clearly stating the aims of treasury – and covering core components such as hedging strategy – it should deliver more predictable outcomes and buy-in from other stakeholders. This in-depth yet accessible guide explains how to get it right.
When engaging with new clients, the first document I will ask for is the treasury policy because this gives me an understanding of what treasury is expected to achieve and what it cares about.
Unfortunately, it is often an effort for treasury to even locate this document. Also when presented, it frequently comes with an apologetic note about being outdated, with revisions long overdue. Sometimes I receive treasury policies that are clearly copied from another organisation, as a ‘find/replace’ action had not found all references to the source organisation, with document properties sometimes still including the names of individuals at the source organisation.
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