A Fresh Look at Treasury

Getting a fresh look at your treasury can give you a new perspective on the risks you are running and the things that you need to tighten up on. Why wait for the regulator? Here's one client's experience.

Background:

This bank's treasury had grown organically, balancing risk and reward with more focus on the income statement. But as the market became more volatile, the bank recognized the potential risks that needed further investigation. The bank sought a fresh perspective to help the board understand more about how its strategy affected treasury risks.

The Risk:

The bank recognised that intrusive regulatory environment was already signaling that increased capital and liquidity requirements would be used to restrain firms, particularly where controls and governance were perceived to be weak.

The Proposal

The bank's Chief Executive, Finance Director, and Treasurer held an initial meeting to discuss the three-stage consulting proposal:

A comprehensive review of all the risks in treasury.

A management report identifying over 50 items requiring attention with each risk being graded on a scale of 1 to 5 in terms of its urgency.

A board presentation and high-level report, explaining how the bank's strategy had influenced risk-taking and providing an agenda to clarify the risks that had been identified.

The Outcome:

The bank's management agreed to the proposed plan of action, which addressed identified risks over a 12-month period. The bank's treasury now clearly demonstrates that robust action has mitigated or eliminated vulnerabilities, and the balance sheet has been altered to reduce exposures that were creating risks beyond the board's risk appetite.

By conducting a comprehensive review, this bank proactively addressed treasury risks and developed a plan of action to mitigate potential vulnerabilities.