1) There are three main types of FX risk that require management: transaction risk, translation risk, and economic risk.
2) Translation risk is often overlooked despite its potential impact on accounting metrics and lending covenants.
3) Treasurers have a variety of internal and external tools to manage FX risk, including hedging strategies, but also need to establish clear risk measurement to ensure hedging is effective.
A brief overview of financial risk management strategies which will be covered in a 2 day workshop on Emerging Markets Investment & Risk Management Strategies on Sept 15-16 2011 in Singapore.
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
A comprehensive presentation on the financial risks involved in businesses in general & specifically in banks.
What is Risk?
Generally - Danger, Hazard, Adverse impact, Fear of loss.
Financially-Loss of earnings/capital
May result in incapability of financial institution to meet business goals
Basically there are 4 main risks:
1. Credit Risk
2. Market Risk
3. Liquidity Risk
4. Operational Risk
MODULE 4:
Market Risk (includes asset liability management)
Yield Curve Risk Factor-Domestic and global contexts-handling multiple risk factor-principal component analysis- value at Risk (VAR) – implementation of a VAR system- Additional Risk in fixed income markets-Stress testing- Bank testing.
Gaining Greater Control Over Commodity Planning & Procurement for ManufacturersEka Software Solutions
Consumer Product (CP) and Industrial Manufacturing companies face significant challenges with commodity sourcing and procurement.
Unprecedented volatility in raw material prices is putting extraordinary pressure on forecasts and earnings for companies in the CP, food and beverage, and manufacturing industries.
In this webinar, industry expert Thad Malit, Deloitte, and Eka discuss how to:
- Eliminate the monthly “Spreadsheet Olympics"
- Manage budgets, forecasts, and coverage in real-time
- Run scenario analysis to optimize decision making
Download webinar recording: http://info.ekaplus.com/commodity-planning-procurement-webinar
A brief overview of financial risk management strategies which will be covered in a 2 day workshop on Emerging Markets Investment & Risk Management Strategies on Sept 15-16 2011 in Singapore.
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
A comprehensive presentation on the financial risks involved in businesses in general & specifically in banks.
What is Risk?
Generally - Danger, Hazard, Adverse impact, Fear of loss.
Financially-Loss of earnings/capital
May result in incapability of financial institution to meet business goals
Basically there are 4 main risks:
1. Credit Risk
2. Market Risk
3. Liquidity Risk
4. Operational Risk
MODULE 4:
Market Risk (includes asset liability management)
Yield Curve Risk Factor-Domestic and global contexts-handling multiple risk factor-principal component analysis- value at Risk (VAR) – implementation of a VAR system- Additional Risk in fixed income markets-Stress testing- Bank testing.
Gaining Greater Control Over Commodity Planning & Procurement for ManufacturersEka Software Solutions
Consumer Product (CP) and Industrial Manufacturing companies face significant challenges with commodity sourcing and procurement.
Unprecedented volatility in raw material prices is putting extraordinary pressure on forecasts and earnings for companies in the CP, food and beverage, and manufacturing industries.
In this webinar, industry expert Thad Malit, Deloitte, and Eka discuss how to:
- Eliminate the monthly “Spreadsheet Olympics"
- Manage budgets, forecasts, and coverage in real-time
- Run scenario analysis to optimize decision making
Download webinar recording: http://info.ekaplus.com/commodity-planning-procurement-webinar
Suitability is the process by which wealth managers establish whether the investment proposition they put forward is right for clients. The FCA has put suitability at the top of its agenda to ensure that clients get what they expect and wealth managers are better placed to manage these expectations.
Effective Risk Management Strategies for Factoring Success.pptxM1NXT
Factoring, which involves the purchase of accounts receivable to provide businesses with quick access to working capital, is a powerful financial tool that can fuel growth and stability. However, it comes with its own set of risks and challenges.
Visit: https://m1nxt.blogspot.com/2023/12/effective-risk-management-strategies.html
Risk as a Service – The Next Thing in Affordable Corporate Risk Management?CTRM Center
In the past, the use of ‘sophisticated’ risk tools and metrics was considered the bailiwick of the very largest entities that could afford to develop and run with such an approach. Often they saw advanced risk analytics as offering them a strategic and/or competitive advantage in the market. Others in the commodities space simply could not afford to perform sophisticated risk analytics and anyway, they often didn’t have the skills onboard to perform, or even understand, them appropriately.
Some firms resorted to using more simplistic reporting of positions, or other metrics, to monitor ‘risk’ and/or used somewhat simplistic limits for various forms of market and/or credit risk. Often, the calculation of exposures, or at-risk capital, value or earnings, or PFE, took a great deal of time to compute and if something went wrong, like a missing price for example, the calculation might simply crash before completion. This meant that often, risk exposures were only accurate well after the fact and were never available to inform the business when needed.
Next Generation Integrated Treasury and Trading for Energy and Commodity Comp...CTRM Center
Energy producers, traders and consumers today face a challenging trading environment with more regulatory oversight, lower prices, increasing costs and almost constant volatility. As a result forward thinking energy companies are already adopting a more closely integrated treasury and trading approach, a potentially overlooked opportunity by many. Typically, trading and treasury are separate areas of business with limited or no integration between them. The traders work to sell commodities at the best price or to profit from trading, while the treasury function with its concern over available cash, navigating future investments and doing so in the right currency and at the right location, has a range of responsibilities, including FX and IR hedging, broader credit management, debt and capital management and more. Usually, the treasury department gets a fixed time view of trading positions to work with and can miss opportunities to protect profits or control costs as a result as these exposures change rapidly. Even large oil and gas majors have experienced the situation where trading has a good month but FX rates moved against them to give an entirely different result. Despite believing that they were hedged, FX markets went against the company leaving it with significantly eroded traded profits.
Building out a Robust and Efficient Risk Management - Alan CheungLászló Árvai
Credit Derivatives are off-balance sheet financial statements that permit one party to transfer the risk of a reference asset, which it typically owns, to another one party (the guarantor) without actually selling the assets.
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how can I sell pi coins after successfully completing KYC
gtnews Risk Management Buyer's Guide feature
1. a buyer’s guide to Risk ManageMent systeMs
Economic
Uncertainty Brings
FX Risk Into Focus
Managing foreign exchange (FX) risk is a key responsibility for corporate
treasurers. There are different types of FX risk that require attention, as well as
a variety of regulatory and compliance issues to address. Ben Poole examines
these challenges and the variety of tools and techniques available for treasurers
to mitigate and manage FX risk.
T
he importance of FX risk management is Translation risk receives less focus, according to but then it is correspondingly more difficult to
accentuated over periods of uncertainty, Kevin Lester, director of risk management and hedge balance sheet items in a cost-effective
which is a reason for its rise in prominence treasury services at Validus Risk Management, manner,” Murarka notes.
of the past few years. But what constitutes and gtnews contributing editor: “Translation
FX risk? For the purposes of this feature, FX risk is risk is an area that is often overlooked, at least Economic risk is also an area which deserves
made up of the following elements: in terms of the implementation of FX hedging more attention, as it represents the long-
• ransactionrisk: The risk of value changes when
T strategies, largely due to the fact that it does term risk that currency volatility poses to the
a transaction executed in foreign currency is not directly impact cash flow, and as a result value of the company, and “is arguably the
measured in the functional currency. hedging translation risk can lead to cash flow most important category of FX risk,” says
• Translationrisk: When a company has mismatches between hedging instruments and Lester. As the impact of economic risk goes
subsidiaries with assets or liabilities underlying exposures.” far beyond the reporting of FX gains and
denominated in a functional currency other losses, and can relate to more fundamental
than the reporting currency of the holding Despite its low profile, translation risk can have strategic issues such as competitiveness and
company. Most multinational companies important repercussions, particularly in terms geographic expansion, the more abstract nature
(MNCs) are heavily exposed to translation risk. of lending covenants, which are measured of economic risk can pose a challenge for
• Economicrisk: The future impact on cash using accounting metrics that are impacted corporate treasurers. However, the significance
flows and earnings of a company as a result of by currency volatility. As such, it is often the of economic risk to commercial strategy can
long-term changes in FX rates. case that the issue of translation risk deserves also mean it is an area in which the treasurers
greater focus than it currently receives in many can add considerable value to the business.
Typically, the management of transaction risk companies, particularly in situations where a
has been the main focus of corporate treasurers. high degree of leverage is employed and there is Tools for Treasurers
Transaction risk tends to be comparatively easy significant risk of breaching lending covenants. When it comes to the tools available to treasurers
to identify and manage using traditional hedging to help manage FX risk, these can be divided into
instruments, and often generates a high degree Vikram Murarka, founder of Kshitij Consultancy two main categories:
of management focus due to its visibility in terms Services, agrees, but sounds a note of caution. 1. Internal risk mitigation tools.
of creating profit and loss (PL) volatility. “Translation risk can be given more attention, 2. External hedging tools.
12
2. a buyer’s guide to Risk ManageMent systeMs
Every company has a unique set of circumstances
and different market views
Internal risk mitigation tools involve minimising “Such products seem to be slowly re-emerging hedging programmes will often be judged on
the exposure or impact of FX risk on the as FX volatility has begun to decrease, and this the basis of whether or not the hedge made
company by adjusting internal business trend will likely continue as long as volatility money, thereby ignoring the original hedging
processes. These tools include intercompany remains contained,” says Lester. “This could objectives, as well as the performance of
netting programmes, risk-sharing pricing or be a dangerous trend, and treasurers should the overall portfolio (including the underlying
supply contracts, and developing natural hedging ensure that hedging products are robust exposure). Such an approach will often lead
opportunities (either through capital structure enough to manage risks effectively in highly to hedging activities that actually increase
adjustments or commercial adjustments). volatile markets.” FX risk, rather than decrease it, as the focus
According to Lester, companies are becoming becomes the hedging PL, rather than the
more focused on maximising the use of internal Looking at strategies treasurers are currently achievement of risk management objectives
risk mitigation techniques (and this trend will employing in this area, André de Klerk, which are aligned with overall corporate
likely continue over the next 12 months), as it financial risk manager at Moneycorp, suggests strategy.” In this case, it is essential to have
allows them to: corporates are using of a blend of financial quantifiable risk KPIs that are regularly
• Minimise hedging costs. products with different weightings over monitored, and used to recalibrate hedging
• Maximise credit availability (through a different periods. “Most of the companies we activity as necessary to meet the company’s
reduction in FX credit line usage). advise use a combination of spot, forwards and risk management objectives.
• Reduce the complexity of hedging FX options to achieve an appropriate result for
implementation (e.g. hedge accounting a particular requirement,” says de Klerk. “Every Kshitij’s Murarka adds: “We think that
requirements). company has a unique set of circumstances treasurers need to re-look at their preference
• Eliminate risk substitution (i.e. exchanging FX and different market views - using the right for the ‘natural hedge’. They can increase
risk for counterparty risk or liquidity risk). products at the right time is important.” the profitability of their companies - without
changing the risk profile - by asymmetrically
External hedging tools (FX forwards, options, FX Hedging Strategies hedging both payables and receivables.
structured products, etc) remain essential tools With these tools in place, treasurers need A natural hedge is a lazy hedge, producing
for managing residual FX risk (after internal tools to ensure that they have efficient hedging lazy results.”
have been fully exploited). “The popularity of strategies in place. The main areas that
structured products, particularly those involving treasurers need to pay attention to include: Mark Warms, general manager, Europe, Middle
complex derivatives or leverage, has certainly • Establishing clear hedging objectives. East and Africa (EMEA) at FXall, suggests that
waned since the onset of the financial crisis,” • Establishing quantifiable and visible risk key the main area for treasurers to pay attention
explains Lester. A key reason for this is that many performance indicators (KPIs). to in their hedging strategies is assessing
of these structured products contained ‘short • Ensuring hedging performance is regularly which trading methods they are using for a
volatility’ components, in the sense that they benchmarked against KPIs. specific situation. “Electronic trading provides
involved writing options to subsidise the cost of treasurers with a choice of execution strategies
hedging. As such, they were disproportionately “The setting of risk KPIs and hedging and it is important that choice is based on a
impacted when volatility spiked as a result of the performance measurement is an area which thoughtful process that is appropriate for the
financial crisis, and many hedging programmes could often be improved,” comments Lester. “In specific trading situation,” Warms explains.
did not perform well as a result. the absence of such benchmarking activities,
13
3. a buyer’s guide to Risk ManageMent systeMs
Treasurers have often required complete end-to- analysis, making it very difficult for a third
end workflow solutions that encompass all aspects party system to meet the diverse needs of the
of trading and reporting to meet global compliance corporate treasury market,” he adds.
standards and thus manage their risks. “Execution
quality analytics tools are becoming increasingly Murarka agrees that the spreadsheet model is here
important for treasurers, providing them with to stay, but that technology providers can look at
a comprehensive trade performance overview, that as a starting point for the more complicated
as well as metrics to measure the effectiveness solutions they develop. “The most important
of their trading strategy, while at the same time technology that treasurers need is a software that
enabling regulatory compliance. End-to-end can track and collate all their FX exposures on the
integration of treasury management and hedge one side and all their hedges on the other side.
accounting systems with trading and settlement The software should look and feel like Excel, but
tools is a best practice for both risk management should work internally as a supercharged database
and operational effectiveness,” notes Warms. management system,” he says.
The Role of Technology Regulatory Environment
FX risk management technology can be divided Looking to the future of FX risk management,
into five main categories: regulation is a key ‘unknown’ that corporates will
have to pay particular attention to, according to
1. Market data. Moneycorp’s de Klerk: “The greater regulation of
2. Dealing systems. OTC [over-the-counter] derivatives is certainly a
3. Transaction/position management. concern for corporate treasurers. The biggest fear
4. Risk analytics. is that it will make hedging more expensive.”
5. Risk reporting/accounting technology.
New rules outlined under the Dodd-Frank Act in
According to Lester, there is significant overlap the US and the European Markets Infrastructure
among providers within these categories. Legislation in Europe, are placing new
“Most of the major TMS [treasury management requirements on OTC derivatives to be secured
systems] vendors do incorporate FX risk with cash collateral. Although corporate users
management functionality within their core of hedging instruments thus far secured an
systems, which facilitates everything from exemption from both regulations, they will still be
operational process management, such as required to report their hedging activities, monitor
deal capturing and basic reporting, through positions and provide detailed information to
to more analytical functionality, such as risk prove that their hedges are constructed to cover
measurement and sensitivity analysis.” commercial risk as allowed by the rules.
There are also specialised technology Over the past few years, the credit crisis
providers who focus on specific aspects of illustrated some of the limitations of current hedge
the risk management process, such as hedge accounting regulations, and accounting bodies are
accounting, deal life cycle management, working on replacement standards. Unfortunately,
exposure visibility and risk management accounting rules have been one of the things that
dashboard development. “The current trend is caused treasurers to avoid hedging. “When these
moving away from ‘all-in-one’ providers, where accounting regulations were first introduced, they
a single system is used for all aspects of FX risk became so important that they superseded the
management from operational to strategic, and business rationale for hedging. I am glad to see a
towards an integrated solution where best-of seismic shift after the financial crisis and rightly
breed providers are selected for their specific so,” says de Klerk. Economic and financial drivers
core competencies,” suggests Lester. are now far more important in determining a
hedging policy than the accounting implications.
When it comes to the more analytical or strategic
elements of FX risk management, the preferred Conclusion
tool for many corporate treasurers is still the FX presents a highly visible risk that treasurers
traditional spreadsheet (ideally populated need to manage as part of their daily
with data extracted directly from their TMS responsibilities. These challenges come in a
or accounting system to minimise data entry variety of forms, and with the OTC regulations
requirements and errors). Lester suggests that looming, it is a risk that will remain of critical
this is likely to remain the case, despite the importance in the future. There are tools and
advancements made by systems providers, due techniques available for treasurers to mitigate
to the need for flexibility when performing FX risk and manage FX risk, and it is important for
analysis. “Different corporate treasuries have every treasury department to give a thorough
very different approaches and requirements evaluation of what their needs are in this area,
when it comes to risk measurement and and to select the appropriate tools for the job.
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