Treasury Controls That Protect Your Balance Sheet
- Fulu Mudau
- Nov 25
- 4 min read
Treasury controls form the backbone of financial stability. They ensure that cash, investments, funding structures, and risk exposures are managed responsibly and in line with organisational strategy. In the South African environment, where volatility in interest rates, currency movements, and operating conditions is common, strong treasury controls protect the balance sheet from unnecessary pressure.
Treasury controls do more than prevent errors. They help the organisation act confidently, maintain liquidity discipline, and demonstrate governance maturity to auditors, lenders, and oversight bodies.
Why Treasury Controls Matter
Treasury activity affects every part of the financial ecosystem. Weak controls can lead to liquidity shortfalls, errors in cash management, misaligned investments, and missed funding opportunities.
Three reasons highlight their importance:
Liquidity Stability
Controls ensure that cash remains available for operational needs, debt commitments, and strategic priorities.
Risk Protection
Market, credit, and operational risks increase when treasury decisions are inconsistent or overstretched. Controls provide limits, rules, and oversight.
Governance and Compliance
Boards, auditors, and lenders expect reliable processes that demonstrate responsible financial management.
Strong treasury controls protect both the income statement and the balance sheet.
Core Principles of Treasury Control
A well structured treasury environment is built on several key principles:
1. Independence
Segregation of duties prevents errors and reduces fraud risk.
2. Transparency
Clear reporting and documentation allow leadership to understand exposures.
3. Consistency
Decisions must follow predetermined policies and procedures.
4. Alignment with Strategy
Treasury actions must support corporate goals, liquidity needs, and funding timelines.
5. Risk Awareness
Controls are only effective if teams understand the risks they manage.
These principles guide every control in the treasury landscape.
Policy Frameworks That Anchor the Balance Sheet
Treasury policy is the foundation of all controls. It defines what is allowed and what is prohibited.
A complete policy framework includes:
Treasury Policy
Liquidity thresholds
Approved counterparties
Investment instruments
Funding limits
Governance requirements
Risk Management Policy
Exposure identification
Stress testing rules
Reporting frequency
Market and credit risk limits
Delegation of Authority
Approval levels
Escalation requirements
Oversight structures
Investment and Funding Guidelines
Maturity management
Liquidity segmentation rules
Capital preservation parameters
Without these frameworks, the balance sheet becomes vulnerable to inconsistent decisions.
Critical Control Areas in Corporate Treasury
There are specific areas where controls have the most impact.
Cash Management Controls
Daily cash visibility
Bank reconciliation
Payment approval workflows
Access control and user rights
Liquidity Controls
Minimum liquidity thresholds
Segmentation of cash
Short term and long term forecasting
Scenario testing
Investment Controls
Instrument approval lists
Credit quality limits
Concentration limits
Maturity alignment
Funding Controls
Covenant tracking
Refinancing timelines
Interest rate risk management
Facility utilisation monitoring
Risk Controls
Market exposure identification
Hedging policy alignment
Counterparty risk monitoring
These controls ensure the balance sheet remains resilient across changing market conditions.
Key Risks South African Organisations Must Manage
Operating in South Africa presents unique financial risks.
Interest Rate Risk
Fluctuating rates affect borrowing costs and investment returns.
Liquidity Risk
Tight creditor or debtor cycles can strain working capital.
Credit and Counterparty Risk
Counterparty failures have become more visible in recent years.
Currency Risk
Businesses with imports, exports, or offshore exposure must manage volatility.
Operational Risk
Weak processes create errors, unauthorised activities, or reporting gaps.
Compliance Risk
Non adherence to policy or governance standards leads to audit findings.
Treasury controls reduce these risks by creating discipline and transparency.
Practical Treasury Controls for Daily Operations
Several practical controls can be implemented immediately.
1. Daily Cash Positioning
A daily view of liquidity prevents surprises and supports short term decisions.
2. Payment Separation and Dual Approval
Segregation of duties reduces operational risk and protects against fraud.
3. Rolling Cash Forecasts
Forecasts highlight future liquidity pressure and guide investment and funding choices.
4. Liquidity Segmentation
Cash is categorised into operational, reserve, and strategic tiers.
5. Counterparty Limits
Exposure to any single bank or issuer is monitored and restricted.
6. Investment Maturity Management
Matching investment maturities with liquidity needs prevents forced withdrawals.
7. Reconciliation and Audit Trails
Accurate data reduces reporting risk and strengthens governance.
These controls create a structured treasury environment that protects cash and strengthens decision making.
Examples in a South African Context
Example 1: Manufacturing Company with Poor Liquidity Controls
A manufacturer fails to segment liquidity. Excess cash is placed in long dated deposits. Unexpected equipment failures require immediate funding. The business turns to short term borrowing at higher rates. Segmentation and forecasting would have protected the balance sheet.
Example 2: Public Entity Under Audit Pressure
A government linked entity lacks clear investment controls. Decisions vary across departments. After implementing a treasury policy and reporting framework, audit findings reduce and treasury management becomes consistent.
Example 3: Corporate with Market Exposure
A corporate holding large foreign currency balances encounters volatility. After implementing FX risk controls and exposure reporting, decision making becomes more predictable and aligned with policy.
These examples show the practical value of structured treasury governance.
When External Advisory Strengthens Treasury Controls
Independent advisory firms add value when organisations:
Lack internal treasury resources
Need policy development
Require governance frameworks
Prepare for lender engagement
Need objective risk assessments
Seek training to build internal capability
Advisors ensure treasury controls align with strategy, liquidity needs, and regulatory expectations.
Key Takeaways
Treasury controls protect liquidity and stabilise the balance sheet.
Governance frameworks guide consistent, risk aware decisions.
Liquidity segmentation and forecasting strengthen financial resilience.
South African organisations benefit from controls due to market volatility.
Independent advisory can build capability and strengthen governance.
FAQs
What are treasury controls in a corporate environment?
Treasury controls are policies, processes, and oversight mechanisms that manage cash, liquidity, funding, and financial risk.
Why are treasury controls important for balance sheet protection?
They ensure responsible liquidity management, prevent errors, reduce risk, and support governance and compliance.
What risks do treasury controls address?
They address liquidity, credit, operational, market, and compliance risks.
How does liquidity segmentation strengthen treasury control?
Segmentation prevents mismatches by assigning cash to operational, reserve, and strategic tiers based on liquidity needs.
What treasury controls should South African companies implement first?
Daily cash visibility, dual payment approval, cash forecasting, counterparty limits, and investment governance.
Can independent advisory improve treasury controls?
Yes. External advisory helps design policies, implement controls, conduct assessments, and build internal capability.
Comments