CPFO Treasury and Investment Management (TIM) Practice Exam 2025 - Free CPFO TIM Practice Questions and Study Guide

A well-structured investment policy is crucial for guiding the investment decisions of an organization. Among the choices presented, outlining specific investment targets is essential. This characteristic provides clarity and direction, ensuring that all stakeholders understand the financial goals, objectives, and benchmarks that the organization aims to achieve.

Having specific targets allows for measurable performance evaluation, enabling the investment team to assess whether investment strategies and decisions align with the overarching objectives set forth in the policy. It helps in maintaining focus and discipline, serving as a benchmark against which investments can be compared. Furthermore, clearly defined targets assist in risk management by ensuring that investments are aligned with the organization’s risk tolerance and investment time horizon, which mitigates the chances of making impulsive decisions based on market fluctuations.

The other choices lack the attributes needed for a well-structured investment policy. While it is important for policies to adapt to changing circumstances, frequent changes can undermine their effectiveness. A vague policy does not provide the necessary structure to make informed investment decisions, and minimal compliance oversight could lead to inconsistencies and risks not being adequately managed.