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5 actions for next week: cybersecurity, covenants, guarantees, hedges, forecasts

(This is the second CTMfile’s Friday series in which experienced cash and treasury management professionals from around the world give their take on “Actions for next week.”)

Here is Paul’s list of jobs for next week: 

  1. Arrange team training on cyber security: Regularly stories are being published about the growth in attempted fraud. The best way to counter this is to have a well-trained team whose members are constantly aware of the risks. Both the CFO and I will sleep better at night with the knowledge that we have arranged for this training.
  2. Set up a regular routine for covenant testing: Covenant testing is not the favourite task of any Treasurer, so it is important to set up a routine with the Controller for doing this. We want to move away from scrambling to get the numbers done just in time to a routine of being able to test the covenants at any given time. This is not limited to reporting deadlines at quarter-end but at the end of each month, so that, if necessary, corrective measures can be taken in time before the next reporting deadline.
  3. Reduce the number of bank guarantees and L/Cs: How often have we in the group at the request of a subsidiary, asked the banks to issue bank guarantees? Some of these have been in the books for years, even if the expiry date has long passed. These instruments are expensive and bite into our credit lines which could be kept available for other purposes. We should make clear that bank guarantees should only be issued if no other alternative exists, i.e. parent company guarantees or letters of comfort.
  4. Review existing FX hedge ratios: FX market volatility has increased in the last months. We therefore need to ensure that current hedge ratios are not static, but can be adjusted in line with market developments. This is not a one-off matter, but should be done at least once a month in co-operation with the CFO and may even require an update in existing policies.
  5. Review the quality of cash forecasting: We always emphasize the importance of cash forecasting in the group with the operating units, but do not provide feedback on the quality as often as we should. It is difficult to expect these operating units to be diligent about their input if we do not provide timely feedback. We therefore should set up a system which calculates deviations from previous forecasts and thereby increases the communication on cash forecasting within the group. We should as a next step consider providing incentives for good forecasting.

This item appears in the following sections:
Minimizing Fraud Procedures
Cash Flow Forecasting
Global Cash & Liquidity Management

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