Association of Corporate Treasurers (ACT) Qualifications Treasury Fundamentals and the Treasury Function Syllabus

Name three key controls used to mitigate treasury operational risk.

Segregation of duties, dual authorisation/four-eyes on payments, dealing limits and mandates, independent confirmation and reconciliation, and a secure standing-settlement-instruction (SSI) database. (Any three.)

What is the 'four-eyes principle' in treasury controls?

A control requiring at least two people to authorise an action (e.g. a payment or deal release) so that no single individual can complete a sensitive transaction alone.

What is a Treasury Management System (TMS)?

Specialist software that supports treasury operations — capturing deals, managing cash and liquidity, monitoring risk and limits, generating payments, valuing positions, and producing reporting and accounting entries.

List three core functional benefits of using a TMS.

Automation and straight-through processing (fewer errors), real-time cash and risk visibility, and stronger controls/audit trail with embedded limit-checking and reporting. (Also: accounting integration, scalability.)

What does 'straight-through processing' (STP) mean in treasury technology?

Processing a transaction end-to-end automatically — from deal capture through confirmation, settlement and accounting — without manual re-keying, reducing errors, cost and operational risk.

What is SWIFT and how does corporate treasury use it?

SWIFT is the secure global financial messaging network. Corporates use it (e.g. via SWIFT for Corporates / standardised message types like MT/MX/ISO 20022) to send payment instructions and receive statements across multiple banks through one channel.

Name three common types of fraud that threaten corporate treasury.

CEO/business-email-compromise (impersonation) fraud, invoice/mandate (supplier bank-detail change) fraud, and internal/unauthorised dealing or embezzlement. (Also payment diversion and phishing.)

What is 'CEO fraud' / business email compromise (BEC)?

A social-engineering attack where a fraudster impersonates a senior executive (or trusted party) to trick treasury/finance staff into making an urgent, unauthorised payment to the fraudster's account.

Give three controls that strengthen cyber resilience and fraud prevention in treasury payments.

Callback verification of new/changed bank details on a known number, dual authorisation, restricted user access/segregation, multi-factor authentication, and staff awareness training. (Any three.)

What is the difference between internal and external audit of treasury?

Internal audit is an in-house (or outsourced) function reviewing the effectiveness of treasury controls/risk management for the board/audit committee. External audit is independent statutory auditors giving an opinion on whether the financial statements (including treasury balances/disclosures) are true and fair.

What does internal audit primarily test in a treasury function?

That controls operate effectively and policy is complied with — segregation of duties, authorisation limits, reconciliations, confirmation processes, system access, and accuracy of reporting — to assure the audit committee on the control environment.

List four macroeconomic drivers that are directly relevant to treasury decisions.

GDP growth/economic cycle, inflation, interest rates (monetary policy), and exchange rates. (Also: unemployment, fiscal/government policy, balance of payments, commodity prices.)

How does higher expected inflation typically affect nominal interest rates?

It tends to raise them — lenders demand a higher nominal rate to preserve real return. This is captured by the Fisher relationship: $(1+i)=(1+r)(1+\pi)$, approximately $i \approx r + \pi$.

State the Fisher equation linking nominal rate, real rate and inflation.

$$1+i = (1+r)(1+\pi) \quad\Rightarrow\quad i \approx r + \pi$$ where $i$ = nominal rate, $r$ = real rate, $\pi$ = expected inflation.

What is the yield curve?

A graph of the yield (interest rate) on debt of equal credit quality plotted against time to maturity, showing the term structure of interest rates.

Describe a 'normal' (upward-sloping) yield curve and what it implies.

Longer-maturity yields are higher than short-maturity yields, reflecting a term/liquidity premium and expectations of stable or rising rates and economic growth.

What is an inverted yield curve and why is it significant?

A downward-sloping curve where short-term yields exceed long-term yields. It often signals expectations of falling future interest rates and is regarded as a potential predictor of economic slowdown or recession.

Name the three classic theories explaining the shape of the yield curve.

(1) Expectations theory (long rates reflect expected future short rates), (2) Liquidity preference theory (a premium is required for longer maturities), and (3) Market segmentation/preferred habitat theory (supply and demand differ across maturity segments).

Distinguish money markets from capital markets.

Money markets trade short-term instruments (maturity up to ~1 year) such as T-bills, commercial paper and CDs for liquidity. Capital markets trade long-term instruments — bonds and equities — for raising longer-term funding.

Distinguish primary markets from secondary markets.

Primary markets are where securities are first issued and the issuer raises new funds (e.g. an IPO or bond issue). Secondary markets are where existing securities are subsequently traded between investors, providing liquidity (no new funds to the issuer).

Name four key participant types in the financial markets.

Borrowers/issuers (corporates, governments), investors/lenders (funds, pension funds, individuals), intermediaries (banks, brokers, dealers), and regulators/infrastructure (exchanges, clearing houses, central banks). (Any four.)

What is the role of a financial intermediary?

To channel funds between surplus units (savers) and deficit units (borrowers), providing maturity transformation, risk pooling/diversification, aggregation, and liquidity — e.g. banks taking deposits and making loans.

In the UK, which two bodies are the main financial system regulators and what does each cover?

The Prudential Regulation Authority (PRA, part of the Bank of England) supervises the safety and soundness of banks/insurers; the Financial Conduct Authority (FCA) regulates conduct, markets and consumer protection.

What are the three statutory objectives of the UK FCA?

(1) Protect consumers, (2) protect and enhance the integrity of the UK financial system, and (3) promote effective competition in the interests of consumers.

Why is regulation of the financial system necessary?

To protect consumers/investors, maintain financial stability and confidence, ensure market integrity (prevent fraud/abuse), reduce systemic risk, and correct information asymmetries and market failures.

What does professional ethics require of a treasury professional beyond legal compliance?

Acting with integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour — doing what is right and in stakeholders' interests even where the law is silent (the ACT's ethical code principles).

What is a conflict of interest, and how should a treasury professional handle one?

A situation where personal interests could improperly influence professional judgement or duty. It should be identified, disclosed, and managed/avoided (e.g. recuse oneself) to protect objectivity and stakeholder trust.

What does the 'agency problem' refer to in corporate governance?

The conflict arising when managers (agents) may act in their own interests rather than those of shareholders (principals). Governance mechanisms — boards, incentives, monitoring, disclosure — aim to align these interests.

State three core principles of good corporate governance.

Accountability, transparency/disclosure, fairness (to all stakeholders), and responsibility/integrity — supported by an effective, balanced board with independent oversight. (Any three.)

What is sustainable finance / ESG and how does it relate to treasury?

Sustainable finance integrates Environmental, Social and Governance factors into financial decisions. In treasury it shows up as green/sustainability-linked bonds and loans, ESG-screened investments, and ESG-linked pricing, plus managing climate-related financial risk and disclosure.

Distinguish a 'green bond' from a 'sustainability-linked bond'.

A green bond's proceeds are ring-fenced to fund specific environmental projects (use-of-proceeds). A sustainability-linked bond (SLB) has general-purpose proceeds but its coupon is tied to the issuer meeting predefined sustainability KPIs/targets (penalty/step-up if missed).

What is money laundering and what are its three classic stages?

The process of disguising the illegal origin of criminal proceeds so they appear legitimate. Stages: (1) Placement (introducing cash into the system), (2) Layering (moving/disguising via complex transactions), and (3) Integration (returning 'clean' funds to the criminal).

What are 'KYC' and 'CDD', and why do they matter to treasury?

Know Your Customer (KYC) and Customer Due Diligence (CDD) are processes of verifying counterparties'/customers' identity and assessing their risk to prevent financial crime. Treasury must satisfy banks' KYC and apply due diligence to counterparties to comply with AML law and avoid facilitating money laundering.