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By Anne Friberg
Whether by necessity or by risk-management choice, collateral management will become critical in the current regulatory environment. Third-party service providers like Citi are stepping up to help.
In a post-Dodd-Frank world third-party service providers are lining up to take on the collateral -management burden from those who don’t want to dedicate in-house resources to this process. A look at a new entry: Citi.
September 08, 2010 -
By Joseph Neu
A recent academic paper explores what happens to finance without a risk-free rate.
Investigating further the idea that corporate debt is coming closer to sovereign debt, we stumbled upon a recent paper by NYU Finance Professor Aswath Damodaran, “Into the Abyss: What if nothing is risk free?”
September 08, 2010 -
By Bryan Richardson
Companies grapple with identifying and incorporating emerging risk into their planning.
The notion of enterprise risk management is still a concept that many corporate leaders struggle to get their head around. Particularly the seemingly mundane tasks of what it encompasses, who owns it, what it routinely does and how much it costs. All are issues that must be understood and embraced, preferably in the boardroom and C-Suites first, in order for an ERM program to have any hope of getting off the ground.
September 08, 2010 -
US banks don’t fare well in world’s safest bank survey. Low ranking another argument for shoring up ISDA program.
The world rankings of the safest banks are out and few US banks made the top 50. This is by no means a huge surprise but given the emphasis on ISDAs in wake of the financial crisis, it’s good to know where a bank stands and, perhaps, how much more starch a collateral support agreement (CSA) should have.
August 30, 2010 -
S&P’s latest risk pricing tool looks to put a new spin on collected data.
Recently S&P launched a reconfigured analytical tool on its Global Credit Portal to help investors in corporate bonds determine if they are being adequately compensated for the risk of the bond—i.e., does it yield enough. Using a “Risk-to-Price” scoring methodology, the tool allows users to rank securities on a risk basis (both market and credit risk) relative to one another and bucketing them into one of four quadrants. Bonds falling in Quartile 1 are projected to offer the best risk-adjusted yield and those in Quartile 4, the worst.
August 25, 2010 -
By Anne Friberg and Joseph Neu
FX Managers set top priorities for September meeting agendas
The FX Managers set top priorities for September meeting agendas, including ISDAs and derivative processing. Here’s discussion of these topics as well as some other key agenda items...
August 04, 2010 -
August 02, 2010 -
Business media outlets have repeatedly pointed out that corporate America is stockpiling cash in response to the ongoing concern over the economy and to Washington’s anti business posturing. In further support of this fact, the AFP recently released its fifth
August 02, 2010 -
August 02, 2010 -
By Bryan Richardson
At IBM, enterprise risk management begins at the top and goes to the performance appraisal as well.
Despite a good decade of hype, enterprise risk management (ERM) is perhaps one of the newest disciplines inside of corporate America. In fact, it is so new that most non-financial companies have no program, much less an effective one. And those that do have a program continue to labor at getting their arms around what it should look like, how it should work and how to educate the broader company on the concept.
July 07, 2010 -
Comparing results from The NeuGroup's Corporate ERM Group meetings in the spring of 2010 versus 2009, we see how corporate ERM programs have made tangible progress toward two key goals.
July 06, 2010 -
Equities got a quick boost from a stronger yuan, but US MNC treasurers would rather it be fully convertible than appreciating.
News of China’s new yuan flexibility regime has been played up in the financial press as reason for equities to rise. While MNC treasurers with significant earnings in China will enjoy the bounce, they probably know there is no reason to get too excited about the yuan yet.
June 21, 2010 -
Treasurers updating bank counterparty matrices should review the latest BIS report.
It’s time for corporate treasurers to rev up their counterparty and credit risk analysis. The Bank for International Settlements (BIS) has just released its quarterly review detailing German and French bank exposures to troubled countries such as Greece, Spain, Ireland, and Portugal and it’s not pretty.
June 14, 2010 -
By Bryan Richardson
Multiple risk impacts in succession can end a firm, so ERM programs should flag them.
Some companies aren’t minding their risks properly. In a recent survey of The NeuGroup’s Corporate ERM Group, half of the respondents indicated they have not done any studies on risk correlation and nearly two-thirds indicated they do not include risk correlation as part of their risk assessment process or their risk training. Yet, according to one member of the group, “risk correlation is what ERM is all about. Multiple events are what bring companies down.”
June 10, 2010 -
By Joseph Neu
Despite bailouts and fears of a European Lehman weighing on the euro—and even speculation of euro exits or outright collapse—there has been no rush to hedge.
While there are certainly corporates out there that are sitting on optimal euro-dollar hedges—or even scrambling now to cover positions—our general sense is that many treasuries have been fairly sanguine about responses to the euro’s recent demise. Perhaps the best explanation is that they have been so focused on issues in the US, that they were unprepared to imagine the extent of the euro’s fall until it was too late.
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A roundup of topics International Treasurer is investigating.
Last week’s meeting of The NeuGroup’s Corporate ERM peer group highlighted a host of developments in the world of nonfinancial enterprise risk management. And, in a sign that corporate ERM, while still a young field, is one that’s maturing quickly, one of the top considerations was how to benchmark a company’s success in managing its risks.
May 20, 2010 -
By Ted Howard
Banks and corporates enlist every monster under their beds to frighten regulators out of clamping down.
If the global financial crisis was the US’s gift to the world then Basel III is a returned favor. That’s the view of bankers and other experts of the Bank for International Settlement’s Basel III proposals. And US regulators aren’t pushing back.
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By Anne Friberg
Delta hedging allows treasury to lock in the spot rate, increasing control over the execution.
Many factors affect the premium of an FX option trade. The primary moving parts are the implied volatility and the spot rate. Option users can consider taking one of those out of play by “freezing” the spot reference rate for the trade by way of delta hedging. That involves setting the spot with one bank and then bidding out the option to several banks—with the spot rate as a given.
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A roundup of issues International Treasurer is investigating.
The Senate finally took up debate of financial reform legislation today. Republican senators’ obstruction of the bill fell prey to the Democrats’ charge that their rivals were in the pocket of Wall Street, a position that was ever-more politically tenuous in the wake of Congress’s Goldman Sachs inquisition on Tuesday.
April 29, 2010 -
By Anne Friberg
Selling options earns premiums and gives a chance for better execution rates than leaving overnight hedge orders.
Next time your FX policy is up for review, consider this: are you allowed to execute your hedges over a period of time (rather than immediately); can you act on a currency view; and are you permitted to sell options? For most companies, the answer is probably yes, yes, and no, and that’s the end of it. For some, selling options is only permitted when combined with buying options, e.g., when putting a collar in place.
April 12, 2010