FIN651 Risk Financing and Treasury Management

Answers:

What is the issue discussed in the case?

The discussed issue is that a hedge transaction is done as part of a hedging program reported in the ERP system in the last month. It comes up for ripeness, but the bank had no such proceedings of hypothetical transactions. The payment is made for a previous hedge resolution from side to side an electronic system that confirms that the bank asks for the price. Books into the control and the treasury system showed various figures. Therefore the treasure claimed that there is a lot of cost and objectives related to achieving steadiness, plus visibility of the financials was not met.

Who is the central responsible unit for this problem, and why?

The control team member is responsible for these hedge transaction problems, as they do not have the required expertise to make decisions regarding banks, accounts, and liquidity management. The control team did the past entries based on the issues done by Treasury; therefore, as the control team does not do a proper review, there is rising to matters in the business firm. Due to a lack of experience and knowledge of the control team, they cannot do perfect transitioning of the bank accounts.

What do you suggest to avoid such problems in the future?

In the future, the reconciliation process will avoid this type of issue. It is the process to compare the transactions and activities to support the financial documentation. It is involved in resolving the problems and discrepancies to be discovered (Kousky & Kunreuther, 2018). In order to perform bank reconciliation, there is the matching of the cash balances on the balance sheet towards corresponding amounts in the bank statements (Polak et al., 2020). There is also determining differences amid the two to make changes to bookkeeping records, resolution of the differences, and recognize the fraud transactions done for the business.

In order to do bank reconciliation, the treasury team is required to match deposits in business proceedings with the bank announcement. There is a comparison of the quantity for each place to be verified on the deduction side of the bank attribute of the cash book with the credit side of the bank. The bank statements are adjusted to correct the balance. In order to do the transactions, there is required to add the deposits in the transit, subtract exceptional checks, and subtract the mistakes in the bank (Lung, 2020). The cash account is adjusted in the business account to add the interests and remove the monthly basis charges. Finally, there is a comparison of the balances based on bank and bank book, and if both the amounts are the same, the adjusted parts are the same. After receiving the statement from the bank, there is reconciling of the bank account, and it is to be done at the end of each month (Von Solms, 2021). It is also possible to be done every week to get better financial results. The business is ensured that recorded transactions are up to the end of the bank statement.

References

Kousky, C., & Kunreuther, H. (2018). Risk management roles of the public and private sector. Risk Management and Insurance Review, 21(1), 181-204.

Lung, F. (2020). Rapid Literature Review: Disaster Risk Financing and Public Finance. Maintains COVID-19 Series.

Polak, P., Nelischer, C., Guo, H., & Robertson, D. C. (2020). “Intelligent” finance and treasury management: what we can expect. AI & SOCIETY, 35(3), 715-726.

Von Solms, J. (2021). Integrating Regulatory Technology (RegTech) into the digital transformation of a bank Treasury. Journal of Banking Regulation, 22(2), 152-168.

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