For any typical small & midsize company , you will find one single person taking care of entire banking activities . He may take assistance from his junior for entering online transactions or dealing with banks for routine transactions . This banking head normally reports directly to the account head or to MD. However, with the change of time , it is very important that treasury functions should work in a professional way with clear roles and responsibility . With this post you will get understanding regarding How do you structure a treasury department?
How do you structure a treasury department & number of employees :
One can decide the number of employees within the treasury department based on the size of the company, however the broad division and structure will remain the same. Companies can bifurcate responsibilities based on the risk matrix.
Organisation Structure of Treasury Department:
Below flowchart will give clear understanding regarding structure of treasury function .
What should be the roles and responsibilities of treasury functions ?
We have provided sample roles and responsibilities related to treasury function which cover foreign currency risk involving trade exposures (Imports and Exports) and long term and short term borrowings. This can further extend to other treasury functions too .
Board of Directors:
Board of Directors (BOD) provide a broad framework and guidelines for setting up a Risk Management Committee and assess risk at macro level . BOD will review treasury report as per agreed timelines
Chief Financial Officer:
CFO set benchmark value in terms of exchange rate/ short and long term borrowings . Set Risk limit and duration . Maximum Annual cost of fund for the company’s liabilities .
Treasury Head:
- Specify dealing limits for dealers.
- Setting / deciding on limits for counter parties.
- Approve every deal or hedging contract.
- Ensure that the limits set are not breached.
- Ensure that RBI guidelines and FEMA regulations are adopted.
- Ensure proper and adequate training to treasury staff.
- Earmark and specify the functions of front office, mid office and back office.
- Formulate and finalize the guidelines, hedging strategy.
- Decide upon the appropriate hedging instruments
FRONT OFFICE :
- Undertaking deals in the market (buy/sell currencies, enter into hedging transactions, maintain positions, observe stop loss and exposure limits).
- Ensure proper reporting of deals done to the Mid office.
- Interact with the market participants to get updated information on the FX market.
- Online review of FX portals and update the senior management for updates.
MID OFFICE :
- Track RBI / FEMA guidelines
- Assume responsibility for strategic decision on hedging medium and long term forex exposures and valuation of derivatives
- Submission of Treasury MIS to top management and market research
- Responsible for implementations of risk management policy, compliance with risk limits.
BACK OFFICE
- Confirmations of deals done.
- Accounting for the deals done.
- Cash flow management
- Reporting and MIS.
- Settlement on the due date.
- Compliance with the risk and exposure limits
It is very important to have strong documentation for each transaction with a proper audit trail.
Hope you got clear ideas about How do you structure a treasury department? Do give your valuable feedback in the comment section .
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