Radial overhaul of treasury policy urged

A POOR understanding of treasury operations by directors and poor reporting procedures by company treasurers can lead to unacceptable…

A POOR understanding of treasury operations by directors and poor reporting procedures by company treasurers can lead to unacceptable risk taking, according to Mr Michael Delaney, a director of corporate finance consultants, FTI Finance.

Radical changes in treasury policy, controls and reporting are needed to ensure that company boards are kept in touch "and that directors can properly exercise their duties to prevent unacceptable risk taking which can hit the bottom line, sometimes with disastrous results," he told the Irish Association of Corporate Treasurers annual conference in Dublin.

He said company officers responsible for the treasury function had a duty to educate their board directors and institute formal reporting procedures.

International studies show that only 40 per cent of board directors and other executive management receive regular information on treasury operations and just 40 per cent apply fraud controls to their core treasury activities, according to Mr Delaney.

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Treasury policy must be set in the context of broader financial "and corporate objectives, he said. For example, regarding debt, treasury policy must state the minimum of fixed rate debt, an acceptable cost of funds and what derivatives may be used for.

Compounding the problems was that only half of the top 200 companies in Ireland had an internal audit department, he said. While even those with an internal audit needed to boost their real treasury experience.