CTP Treasury Operations and Controls 5 — Questions and Answers
Question 1: Which type of treasury fraud scheme involves an employee creating fictitious vendors to divert company payments?
- Check kiting
- Accounts payable fraud via ghost vendors (Correct answer)
- Ponzi scheme
- Regulatory arbitrage
Correct answer: Accounts payable fraud via ghost vendors
Ghost vendor fraud involves creating fictitious suppliers in payment systems to redirect company funds to a fraudster's accounts.
Question 2: What is the purpose of a 'treasury center of excellence' (COE) model?
- To centralize all company purchasing decisions
- To concentrate treasury expertise, standardize processes, and improve efficiency across the organization (Correct answer)
- To eliminate regional finance teams entirely
- To manage only pension fund investments
Correct answer: To concentrate treasury expertise, standardize processes, and improve efficiency across the organization
A treasury COE centralizes specialized knowledge and best practices to drive consistency and efficiency across treasury functions.
Question 3: When implementing a payment factory, the PRIMARY operational benefit is:
- Higher investment returns on idle cash
- Centralized processing of payments across multiple entities, reducing costs and improving control (Correct answer)
- Elimination of foreign currency exposures
- Faster equity capital raising
Correct answer: Centralized processing of payments across multiple entities, reducing costs and improving control
A payment factory centralizes all outgoing payments from multiple subsidiaries, standardizing processes and reducing bank fees.
Question 4: A company experiences a system outage in its TMS during a critical payment window. Which element of a treasury business continuity plan addresses this scenario?
- Succession planning for the CFO
- Manual backup procedures and alternate payment channels (Correct answer)
- Quarterly dividend policy
- Annual budget reforecasting
Correct answer: Manual backup procedures and alternate payment channels
Business continuity plans include manual backup procedures and alternate payment channels to ensure operations during system outages.
Question 5: What does 'value dating' refer to in international treasury operations?
- The date a derivative contract is valued for mark-to-market purposes
- The date funds are actually credited or debited and become available for use (Correct answer)
- The date an invoice is approved for payment
- The date a foreign subsidiary is acquired
Correct answer: The date funds are actually credited or debited and become available for use
Value date is the date on which funds are credited or debited and actually available, which may differ from the transaction date.
Question 6: Which approach BEST describes 'target balancing' in a notional pooling structure?
- Setting a minimum required balance in each account and sweeping excess to a master account (Correct answer)
- Physically transferring funds to maintain zero balances across all accounts
- Investing all cash in treasury bills automatically
- Requiring each subsidiary to maintain its own credit facility
Correct answer: Setting a minimum required balance in each account and sweeping excess to a master account
Target balancing sweeps only the amount above a predetermined target balance, maintaining a minimum operational reserve in each account.
Question 7: In treasury operations, a 'settlement risk' mitigation strategy for FX transactions is BEST achieved through:
- Extending all payment terms to net-90
- Using CLS (Continuous Linked Settlement) to synchronize payment and receipt in FX transactions (Correct answer)
- Avoiding all cross-border transactions
- Hedging with equity derivatives
Correct answer: Using CLS (Continuous Linked Settlement) to synchronize payment and receipt in FX transactions
CLS eliminates Herstatt risk by simultaneously settling both legs of FX transactions, ensuring payment-versus-payment finality.
CTP Treasury Operations and Controls 5
Which type of treasury fraud scheme involves an employee creating fictitious vendors to divert company payments?