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Operational Risk Management

The basic purpose of the corporate treasury department is to ensure that there is sufficient cash available for the company to operate, and that interest rate and foreign exchange risks are effectively managed. It cannot do this if it stops operating due to environmental disasters such as flooding or due to organised disruptions from terrorists, or from loss of utilities and services or equipment failure, which can disrupt the operations of the corporate treasury department from a few seconds or minutes to many days or weeks. Few, if any, corporate treasury departments can afford to be out of action for that long. Full business continuity is essential.

A detailed Business Continuity Plan is required for all corporate treasury departments. This should be developed by a dedicated Crisis Management Team made of the key departments involved including the IT department that should be responsible for developing the strategy, policies and procedures for disaster receovery. Continuity plans need to be developed with and approved by senior management and should specify how the corporate treasury department data is backed up and stored off site, the backup for hardware failures, alternative power source(s) and many other details to ensure that the corporate treasury department does not stop working and supporting the group when there is an 'unforseen event'. Moreover, the disaster-recovery plans, procedures and systems need to be rigorously tested at least once a year.

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