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Treasury Policy

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Section 1 - Purpose and Context

(1) The purpose of this document is to define the Western Sydney University policy for the management of financial risks associated with treasury operations of the University.

(2) This policy sets out the strategies for managing financial risks that the University is to employ, as well as the procedures for executing, monitoring, reporting and reassessing these strategies.

(3) For the purpose of this policy financial risks include liquidity and funding risk, foreign exchange risk, interest rate risk, investment risk and counterparty credit risk associated with the operations of the University.

(4) This policy is to be read in conjunction with the following University policies:

  1. Cash Management Policy
  2. Foreign Exchange Risk Policy
  3. Interest Rate Risk Policy
  4. Investment Policy
  5. Credit Risk Policy
  6. Risk Management Policy
  7. Delegations of Authority Policy.

(5) For the avoidance of doubt the functional currency for the University and its subsidiaries is Australian Dollars (AUD).

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Section 2 - Definitions

(6) For the purpose of this policy the following definitions apply:

  1. Liquidity Risk - the risk that the University, through an unforeseen event or miscalculation, will have insufficient liquidity available at the right time to meet its obligations in an ordinary manner.
  2. Working Capital - is a financial metric (Working Capital = Current Assets less Current Liabilities) which represents operating liquidity available to a business.
  3. Foreign Exchange Risk - the risk that an AUD loss relative to a certain point in time is created where:
    1. purchases denominated in a foreign currency become more expensive in AUD from the time the exposure is created to the time of settlement;
    2. receipts denominated in a foreign currency reduce in AUD value from the time the exposure is created to the time of settlement.
  4. Interest Rate Risk - the risk of loss in earnings or economic value as a consequence of movements in interest rates, i.e. the risk that the future cash flows or fair value of a financial instrument will fluctuate because of changes in market interest rates.
  5. Investment Risk - the risk that invested funds are adversely affected in any of the following ways:
    1. Capital/credit risk of an investment - where the capital which has been invested may be lost.
    2. Liquidity risk of an investment - where investments may not be readily saleable on the open markets and may therefore not be readily convertible into cash, or liquidating an investment may result in significant costs.
    3. Market risk - is the risk that the value of an investment will decrease due to the change in value of the market risk factors, such as equity price, interest rates or commodity prices.
  6. Credit Risk - the risk of financial loss from a transaction arising from the default by one of University's counterparties, occurring either during the term of the transaction or at settlement.
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Section 3 - Policy Statement

Part A - Identifying Risk

(7) The identification of the financial risks as well as the strategies for managing these risks is highlighted within each of the following policies attached to this policy:

  1. Cash Management Policy
  2. Foreign Exchange Risk Policy
  3. Interest Rate Risk Policy
  4. Investment Policy
  5. Credit Risk Policy

Part B - Risk Management Objectives

(8) The objectives of managing the financial risks within this policy are set out within each of the risk management policies (listed above). The objectives include:

  1. Applying good corporate governance in the control of financial risks.
  2. Reducing the exposures to financial risks consistent with the individual risk management policies.
  3. Ensuring that robust processes are put in place in order to identify all material (as defined by the Board of Trustees) financial risk exposures in a timely manner.
  4. Ensuring that a whole of University approach is taken in managing financial risk exposures such that all natural offsets are taken into account prior to use of financial instruments for purpose of hedging.
  5. Providing all business units with a clear and easily understood description of requirements through the individual financial risk management policies in order to achieve a common approach for the University.
  6. Ensuring that prudent risk management strategies are undertaken to manage financial risks and adherence to appropriate approval processes.
  7. Ensuring that the purpose of financial risk management should not be to seek speculative gains in line with favourable market movements.

Part C - Accountabilities

(9) The Board of Trustees are ultimately accountable for the effective operation of the risk management strategies for controlling the financial risks within this Treasury Policy.

(10) The Board of Trustees is responsible for approving the risk management strategies within this policy and delegates responsibility for management and execution of this policy as it sees appropriate.

(11) At the date of this policy the delegated responsibilities relating to the management of the financial risks in this policy are as follows:

Table - Delegated Responsibilities

Responsible Staff/Committee Responsibilities
Board of Trustees Approval of the Treasury Policy including all strategies, limits and other parameters contained within this policy.
Finance and Investment Committee Critical review of all major investments, including financial risk implications, for recommendation to the Board.
Vice-President, Finance and Resources Manage the financial risks of the University, including the effective execution of financial risk management strategies, in accordance with this policy and ensure the policy is adhered to on an ongoing basis. Provide regular reporting of financial risk management to the Board, demonstrating compliance to the requirements of this policy. Reassess the effectiveness of the strategies within this policy on a regular basis.

Part D - Delegated Authorities for Financial Instruments

(12) The Board of Trustees is responsible for approving all dealers and authorisers responsible for administering the execution of deals and approving these deals (respectively) in financial instruments for the purpose of hedging financial risks. At the date of this policy the authorities are as follows:

Table - Authorities for Financial Instruments

Authorised Entitlement Entitled Actions Authorised Staff
Dealer Set up new deals, including all deal details, in the online trading system (currently CBA CommBiz) Accounts Payable Officer
Authoriser Approve deals prior to set up in the online trading system (unless set up under the same username) Vice-President, Finance and Resources Vice-Chancellor and President

(13) University staff are only allowed to deal in authorised financial instruments up to the approved limits prescribed within this policy.

(14) The authoriser of a deal must be different to the person executing the deal. This control is to be established within the online trading system.

(15) The Vice-President, Finance and Resources is responsible for ensuring the online trading platform is appropriately set up, including:

  1. unique usernames
  2. unique passwords
  3. proper user access set up (in line with the delegated authorities above)
  4. system driven segregated duties between authorising and dealing for each transaction.

Part E - Monitoring Policy Compliance

(16) The Vice-President, Finance and Resources is responsible for monitoring compliance to this policy.

(17) The Vice-President, Finance and Resources will provide an assurance statement within the monthly University Executive report and the quarterly Finance and Investment Committee report.

Part F - Management Reporting

(18) The execution of new deals and the performance of existing deals are to be reported to the University Executive on a monthly basis as part of the monthly reporting pack and to the Finance and Investment Committee on a quarterly basis. The following responsibilities apply:

  1. A member of staff nominated by the Vice-President, Finance and Resources is responsible for creating this report. A copy of the report is also to be sent to the Vice-President, Finance and Resources.
  2. A second member of staff nominated by the Vice-President, Finance and Resources is responsible for reviewing the content of this report for reasonableness and consolidating it into the monthly reporting pack to the University Executive.
  3. The Vice-President, Finance and Resources is responsible for ensuring this report is complete and accurate and suggesting amendments where required.

Part G - Reassessment of Results and Policy Implications

(19) The Vice-President, Finance and Resources is responsible for reassessing the effectiveness of the strategies within this policy on a semi annual basis.

(20) The Vice-President, Finance and Resources is to provide a statement within the reports to the University Executive and the Finance and Investment Committee on a quarterly basis that addresses the effectiveness of the strategies of this policy and any recommended policy revisions.

Part H - Approved Derivative Financial Instruments

(21) The Board of Trustees is responsible for approving the direct use of derivative financial instruments for the purpose of managing financial risks. The derivative financial instruments approved for this version of the policy are as follows:

Table - Approval to Use Derivative Financial Instruments

Approved Instrument Complexity Risk Hedged Contract Limit
Forward Exchange Contract Single level transaction Foreign exchange risk See limits in Clause 26
Interest Rate Swap Single level transaction Interest rate risk See limits in Clause 26

(22) The use of derivative financial instruments is restricted to authorised dealers only, as specified in this policy.

(23) Approved derivative financial instruments must only be taken out with approved counterparties, as specified in this policy.

(24) All approved derivative financial instruments must only be used to hedge against a known and highly probable exposure.

(25) The execution of any deal involving the use of an approved derivative financial instrument requires approval from the Vice-President, Finance and Resources.

Part I - Approved limits

(26) The Board of Trustees is responsible for approving limits for University staff in dealing in approved derivative financial instruments for an individual transaction and for any one period of 24 hours. The limits approved for the current version of this policy are as follows:

Table - Transaction Limits

Staff Title FEC Transaction Authorisation Limit IRS Transaction Authorisation Limit Daily Authorisation Limit
Vice Chancellor and President No limit No limit No limit (IRS only)
Vice-President, Finance and Resources AUD 5,000,000 AUD 10,000,000 AUD 10,000,000

(27) The Vice-Chancellor and President has the authority to approve the use of interest rate swaps only (i.e. does not have the authority to approve other derivative financial instruments) and only if the following conditions are met:

  1. The Vice-President, Finance and Resources has provided a specific recommendation for approval of the swap.
  2. The University does not have the ability to pass through interest rate changes on the underlying exposure.
  3. There is an underlying exposure to interest rates.
  4. The swap notional value does not exceed the notional value of the underlying exposure.

(28) The Board of Trustees is responsible for reviewing these limits on an annual basis in line with the risk appetite of the University and in light of reporting against the management of financial risks.

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Section 4 - Procedures

Part J - Risk Management Procedures

(29) The procedures by which the University will manage its exposure to financial risk are detailed within the financial risk management policies which are within Associated Information. The policies include:

  1. Cash Management Policy
  2. Foreign Exchange Risk Policy
  3. Interest Rate Risk Policy
  4. Investment Policy
  5. Credit Risk Policy
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Section 5 - Guidelines

(30) Refer to Section 3 for guidelines.