Generally, there is one main reason why an organization needs to create a stand-alone treasury department = cash management complexity. At a certain point during an organization's revenue growth, it's cash management functionality outgrows the Controller's group. The catalyst for this increase in cash management complexity may be due to organic growth, merger(s) and/or acquisition(s). It is at this point that it become more secure & efficient for organizations to develop a new, stand-alone treasury department.
List below are five topics that should be taken into considering when developing a new treasury department:
Treasury Department Scope of Operations
Multinational Operations (US & UK) --> Cash Forecasting --> FX Risk Management --> USD / GBP Hedging
This is a simple example that should be replicated for every function that will be incorporated in the new treasury department. Once the new treasury department's scope of operations are determined, then an organization can review the department personnel, hierarchy, technology, policies, procedures and internal controls.
Treasury Personnel & Hierarchy
In some instances, organizations postpone the development of a treasury department (respective to the organization's annual revenue and cash management complexity.) If a relatively large organization is creating a new treasury department then bank websites and spreadsheet may not be secure and efficient enough to facility treasury operations. In these situations, organizations may want to consider the selection and implementation of a treasury workstation (treasury management system).
Treasury Policies & Procedures
Let's discuss the general definitions of treasury policies and procedures. Treasury policies are the rules by which the treasury department will operate. Treasury procedures are the step-by-step instructions as to how each treasury process will be conducted. The treasury procedures will operate within the rules dictated by the treasury policies.
The development of treasury policies should be a team effort. The CFO (via Board of Director directives) can lead in the development and approval the overall policies for the treasury department. Specific treasury policy feedback should be requested from various subject matter experts such as Legal, Internal Audit, Accounting, IT, Treasury Consultants, etc...
The development of treasury procedures is a more specific task. In order to create a secure and efficient treasury process one must have a detailed understanding of internal control, business requirements, treasury best practices and treasury department capacity. Generally, treasury department procedures will be draft by the corporate treasurer and submitted to both the CFO and Internal Audit for review / approval. Once approved, treasury procedures should be reviewed annually to ensure that they are 1.) meeting business requirements, and 2.) utilizing current treasury best practices.
Treasury Internal Controls
Relevant TreaSolution Services:
Treasury Best Practices Review
Treasury Benchmarking Reports
Treasury Department Development
Treasury Workstation Selection (RFP)
Treasury Workstation Implementation
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