Draft Long Term Plan 2012-2022 - Hurunui District Council

Hurunui Community Long Term Plan 2012 - 2022Risk ManagementTo avoid undue concentration of exposures, financial instrumentsshould be used with as wide a range of approved counterpartiesas possible. Maturities should be well spread. The approvalprocess must take into account the liquidity of the market theinstrument is traded in and repriced from.Operational Risk• Operational risk is the risk of loss as a result of humanerror (or fraud), system failures and inadequateprocedures and controls.• Operational risk is very relevant when dealing withfinancial instruments given that:• Financial instruments may not be fully understood• Too much reliance is often placed on the specialisedskills of one or two peopleAgreementsFinancial instruments can only be entered into with banksthat have in place an executed ISDA Master Agreementwith Council.Council’s internal/appointed legal counsel must sign off onall documentation for new loan borrowings, re-financingsand investment structures.Financial Covenants and Other ObligationsCouncil must not enter into any transactions where it wouldcause a breach of financial covenants under existing contractualarrangements.Council must comply with all obligations and reportingrequirements under existing funding facilities and legislativerequirements.• Most treasury instruments are executed over thephone• Operational risk is minimised through the adoptionof all requirements outlined in the full Treasury RiskManagement Policy, which include:Legal Risk• Dealing Authorities and Limits• Segregation of Duties• Reporting procedures, including records,confirmations and reconciliations• Organisational ControlsLegal and regulatory risks relate to the unenforceability of atransaction due to an organisation not having the legal capacityor power to enter into the transaction usually because ofprohibitions contained in legislation. While legal risks are morerelevant for banks, Hurunui may be exposed to such risks.Hurunui will seek to minimise this risk by adopting policyregarding:• The use of standing dealing and settlement instructions(including bank accounts, authorised persons, standarddeal confirmations, contacts for disputed transactions)to be sent to counterparties.• The matching of third party confirmations andthe immediate follow-up of anomalies.• The use of expert advice.261