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A Compliance Officer and a Treasury Management Officer Walk Into a Bar…..

Updated: Aug 2, 2022

🚨 TRUTH ALERT🚨 Compliance and Treasury Management rarely sing from the same same song sheet. If you’ve ever worked in either of these departments, you know that statement is painfully true. How often have you, as a Treasury Management professional, had business banking relationships questioned or exited because Compliance deemed it necessary? How often have you as a Compliance professional delivered the news to Treasury Management that a relationship needs to be questioned or exited? Likely more than once and often a painful experience for both parties. So how can both parties get on the same page and avoid these situations? Allow me to explain.

Understanding Risk Appetite

Risk appetite is the level of risk an organization is willing to accept while pursuing its objectives. Every financial institution (FI) should have a defined risk appetite. Think of this as an imaginary “risk line” drawn in the sand by executive management and the board of directors. It’s the role of Compliance as well as other risk management functions to notify key parties when that imaginary “risk line” is being approached or crossed.

If risk appetite statements are not well communicated and parties don’t understand where the “risk line” has been drawn, bankers will unwittingly cross that line. Effective communication of an institution’s risk appetite to each line of business function is critical in avoiding the onboarding of relationships or offering of services that are not in line with institution risk appetite goals. When Compliance and Treasury Management get on the same page regarding the “risk line” the uncomfortable moments of questioning business banking relationships cease to exist.

Understanding Policies and Procedure Mandates

Policies and procedures exist to ensure regulatory requirements and institution objectives are achieved. Despite their importance, many FIs fail at effectively communicating not only the importance of both but any updates to existing policies and procedures. This means each line of business should review existing policies and procedures on a set cadence that are relevant to their department objectives to ensure they stay abreast of any updates or changes that may be mission critical.

As a best practice, updates to Compliance policies and procedures should be directly communicated with the Treasury Management department (and other impacted parties) of a FI. Consistent and meaningful communication between both parties creates powerful synergies that enable each department to successfully achieve their goals.

Breaking Down Silos

Let’s face it, Compliance often has the reputation of being the unwelcomed kid to the party. Maybe it’s because they are viewed as the “tattletale” kid or the “stick in the mud” that sucks the fun out of trying something new or risky. While this view of Compliance may be true in a sense (you know I’m right guys!), the right “couples therapy” between Treasury Management and Compliance can go a long way.

What exactly does “couples therapy” mean between these two parties? It means having a working understanding of when collaboration on new projects, ideas or customers is necessary between the departments. It means a healthy understanding of the “why” behind each department's objectives and reasoning behind related policies and procedures. It means an open phone-line (does that make me sound old?) to bounce thoughts, ideas and concerns off each other on a real-time basis.

Final Thoughts

It’s time for Compliance and Treasury Management to begin building a working relationship that is beneficial to both parties and the overall strategic goals of the FI. Why not have a fellow companion that you can commiserate with on how misunderstood you are at your FI? And while you don’t actually have to go to a bar to do it, it certainly doesn’t hurt.

Learn more about how you can create meaningful relationships and growth opportunities at your institution by joining us on our upcoming webinar on: TREASURY MANAGEMENT BEST PRACTICES: LEVERAGING NON-TRADITIONAL PROGRAMS TO INCREASE NON-INTEREST INCOME AND DEPOSITS, April 25, 2022, 3:00 PM CT. Register using this link.