ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals
Which of the following is the most appropriate governance control to reduce the risk of rogue trading in a multinational's treasury function?
Segregating dealing, confirmation and settlement duties, with independent reporting of positions to the board, best reduces rogue trading risk. It prevents one person from initiating and concealing unauthorised trades, and it provides timely independent oversight, unlike year-end audit or the removal of limits.
- AAllowing the chief dealer to confirm and settle their own trades to speed up processing
- BSegregating dealing, confirmation and settlement duties, with independent reporting of positions to the boardCorrect
- CRemoving all position limits so dealers can respond quickly to market moves
- DRelying on the external auditor to detect unauthorised trades at year end
Explanation
Segregation of front, middle and back office duties, together with independent reporting and limits, is the key control against unauthorised trading. Letting dealers confirm their own trades or removing limits increases the risk. Year-end audit is too late as a primary control.
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