Tag Archive for: rules

Real and fake risk control – Treasurers and recruiters benefit and suffer

| 25-09-2018 | by  Pieter de Kiewit |

As owner of a small company I have been listening to people complaining about regulatory and compliance affairs for a long time. 2018 will be the year these affairs have a substantial impact on my business and now I can understand the complaints. Both treasurers, recruiters and, I expect, many others in our society, struggle finding the balance in correcting what goes wrong and the hassle of too many rules. Some simple examples: 

  • ING is punished hard for money laundering and I suspect just so. The rules are in place but not applied. My assumption is that target setting beats following the rules;
  • Some large corporates nowadays hire recruitment outsourcing parties that do the procurement of my services. One of them required me to inform them about the payrolling of my staff because: “in Bangladesh there is child labour and we want to prevent you make the same mistake”;
  • One of my clients is a subsidiary of an international conglomerate and decided to implement the services of a new cash management bank. The project has been on hold because the HQ of the conglomerate and the bank cannot agree upon the know your customer (KYC) regulations, much to frustration of all involved;
  • GDPR is implemented, also to control the power of large internet firms. Of course these regulations also apply to my business but did any of you read my new privacy statement or actually read cookie statements? Bureaucracy rules!

I think 99% of us know what is the right thing in 99% of the cases. This is what our parents taught us. That does not mean we will do the right thing. In the current situation, regulators want to solve issues by creating new rules. I am happy that applying the rules with consequences, as with ING, is being done increasingly. I think the structural solution does not lie in more rules.

Hopefully we can all start a dialogue about what is right and act upon it. Customers and clients, family members, colleagues, countries, teachers and students. Not blindly following the rules, but following them because we understand and agree. I am aware that this sounds might sound soft and is not possible in all situations. With many of our clients we cooperate successfully based upon a few bullet points in an email. That’s the way I like it.

Will you share your thoughts?

Pieter de Kiewit

 

 

Pieter de Kiewit
Owner Treasurer Search

 

 

 

Best read articles of all time – Corporate Governance – It is all about the rules

| 20-06-2018 | treasuryXL |

Corporate governance is the rules and processes by which a company is controlled and directed. It is a balancing mechanism between different stakeholders – directors, shareholders, management, government, external financiers etc. The treasury function performs highly skilled and complex tasks to ensure continued and harmonious execution of all cash related functions. At the same time, there is much interaction with both internal and external stakeholders. The corporate governance within the treasury function should always be performed in accordance with predetermined and approved metrics as laid out in Treasury statutes. This means undertaking operations that are consistent with the governance within the corporation.

Corporate governance helps to define the strategies of a company, and highlight how these strategies will be implemented throughout the policies, procedures and working processes. Normally, Treasury statutes are drawn up by treasury and management – detailing the accepted methodology to perform the approved tasks – whilst responsibility and approval is granted by the directors. Once agreed upon, the statutes have to be observed by staff carrying out their duties and responsibilities.

As the treasury function is highly complex – both in financial products as well as regulatory frameworks – both directors and management need to fully comprehend the functionality as well as the implications of different financial products and services. The onus lies on the treasury department to ensure that other stakeholders not only have enough knowledge about the products, but also awareness and understanding of the relevant risks. This is vital to ensure that the right decisions are made at the highest strategic level.

Directors and management need to understand:

  • Financial risks undertaken whilst running the business on a day-to-day basis
    Operational controls to protect the business from fraud
    Risks inherent in approved financial instruments
    Strategies used to identify and mitigate financial risk
    How risk is measured and reported
    Potential exposure as a result of the agreed policy
    Acceptance that not all risks can be qualified and quantified
    The influence of external factors – market risk, counterparty risk, interest rate risk etc.

Proactive role of the Treasury

  • Accurate valuation of financial products used – if you cannot value it, you should not be using it
    Quick recording of all transactions
    Ensuring with controllers that all financial products are correctly input for accounting purposes
    Implementation and management of agreed Treasury policies
    Determining if bank covenants are being maintained
    Ensure compliance with all external regulatory frameworks
    Collaborating with auditors – both internal and external

Policy is influenced by strategy and objectives. The role of Treasury is to help to fulfil those objectives. Treasury has a dual function – it both mitigates risk as well as being the source of risk. Treasury enters into financial transactions on behalf of the business in order to mitigate risks; however, something like an unauthorised trade could subject the business to financial loss.

It is essential that directors and management understand both the risks that treasury manage, together with the potential risks that those transactions can create.