Navigating volatility and uncertainty

Risk management is an area that many companies ignore due to the complexities and technicalities involved in some hedging strategies and instruments. Our Hedging & Risk Management practice is designed to ease this understanding and help companies manage their risk exposures in a way that is cost-efficient and effective, so they can gain greater visibility into the future and minimize the possibility of being blindsided by unforeseen events.

R isks are inherent in every enterprise. Risk management, however, is not. Many organizations treat risk management as a back-office function and spend little time identifying and controlling their risk exposures. We believe this is a poor business practice – one with potentially disastrous consequences. Risk management, in our view, needs to be incorporated into the operating model and strategy from day 1. It is a dynamic process that needs continual development as the organization evolves and grows in complexities. Here is how we help.

“The absence of evidence is not evidence of absence.”

– Martin Rees

Risk Discovery

The first step to any risk management process is to uncover the sources of risk inherent in the business. We help organizations perform a full decomposition of their risk exposures be it counterparty, credit, settlement, market, or operational risks.

Commodity Price Hedging

Businesses in manufacturing or agriculture industries need stable input prices to forecast cash flows and maintain margins. As such, volatility to raw material prices is undesirable and can pose significant challenges to cost management. We help companies:

  • assess commodity price exposures and evaluating hedging opportunities using futures and forward contracts
  • determine potential payoffs and credit risk based on different price scenarios and market conditions
  • monitor current positions and implement dynamic hedging strategies as exposures change

Foreign Exchange Hedging

Foreign exchange risks is one of the biggest risks facing organizations with international operations. This makes hedging an area that cannot be ignored. We help companies:

  • hedge currency risks using forwards and options to mitigate translation risks and stabilize prices of raw materials and amount of foreign debt repayments
  • mark-to-market current derivative positions and their payoffs
  • design structured options with special features to fit a particular situation or capitalize on a potential market outcome

Operational Risk Management

  • Run probabilistic models to forecast optimal inventory levels, working capital needs, and cash flow requirements to service liabilities so as to manage liquidity and solvency risks