Development of Risk Management Policy involves interaction with senior management of the Company, including heads of finance and functional departments, operating staff of treasury and a comprehensive review of current risk profile of the Company. The scope of Policy covers
- A clear articulation of objectives of FX risk management and treasury’s role in achieving these objectives
- Risk identification, risk measurement, risk monitoring and hedge strategy for each risk category
- Setting target value and risk limits
- Defining permitted hedge instruments
- Reviewing treasury organization to establish clear roles and responsibilities to ensure effective controls are in place; this often requires review and (sometimes) design of linkages with other business departments
- Developing customized MIS and reporting, including templates for data collection from different business nodes, analytic tools for monitoring MTM and risk, management reporting, and operations decision support
- Suggesting model delegation of powers
- Guidance on accounting and documentation as part of operating guidelines.
- Upgrading skills of treasury staff to ensure effective implementation of the policy
Do any of these ring a bell?
- We would like to protect our earnings guidance from FX volatility
- Maintain USD-price competitiveness in a global export market
- Our existing policy of 70% cover has resulted in FX losses
- How to avoid over-hedging in a volatile market?
- Board is upset over opportunity losses
- We have suffered accounting losses on account of derivatives
- There is no treasury operating manual
- How to hedge FX loans, while maintaining cost advantage?
- Business growth and acquisitions warrant a review of our treasury operations
- 100% export target achieved in USD terms, but export manager is facing flak as performance in Rupee terms falls short of budgeted figure
- There is resistance from international business division for our transfer pricing formula
We work with clients to address these and other strategic concerns. The basic solution is to develop and implement a best practices risk management framework.