Topic 10

Question 1

What is the a bentchmark

Answer 1

A standard which something is compared e.g intrest rate banks go off what the Bank of England sets

Question 2

What to consider for a benchmark

Answer 2

Business size
risk appite
Earning
Investment

Question 3

Forigne exchange transcation risk bentchmarch helps with performance

Answer 3

• The potential for favorable variance is:
ー
Get a better rate from a different bank
Negotiate a better rate from the specified bank
- Use currency borrowing/deposits (money markets) as an alternative hedge and achieve a better outcome
- Manage the exposure by internal techniques (e.g. matching/multilateral netting)
• This benchmark conforms to the usual benchmark criteria in that it is:
- Set out beforehand and not retrospectively
- Consistent with the cost centre objectives
- Achievable
- Would be appropriate for a value added cost centre treasury