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Top Four Emerging Trends in Financial Risk Management

Sponsor: Chatham Financial

In the aftermath of the financial crisis, treasury professionals continue to face rising expectations. Senior management, boards of directors, investors and internal stakeholders demand more from treasury departments than ever before. Specifically, boards have increased their scrutiny of risk management, which has motivated treasury departments to contemplate best practices around quantifying financial risk, maintaining compliance in an evolving regulatory environment and other key areas. The most proactive treasury groups initiate these conversations with boards and seek to answer questions before boards have the chance to ask them.

In recent months, four key trends have emerged within the financial risk management space and treasury, in particular: (1) identifying the impact of new regulatory requirements and compliance therewith; (2) enhancing FX exposure management and impact analysis; (3) developing commodity risk management programs; (4) leading the evolution of treasury into a strategic nerve center for businesses.

Regulations & Treasury: The Brave New World is Upon Us

The regulations now going into effect began to take shape in 2008 after the onset of the financial crisis, which many blamed on misuse and abuse of derivatives. New regulation under Dodd-Frank creates new regulatory requirements for corporate treasurers who utilize derivatives. Reporting requirements for inter-affiliate trades, clearing exemptions and ISDA Protocol questions hound treasurers as they seek to understand whether current programs can remain intact. Beyond Dodd-Frank, Basel III will have a significant impact on derivative pricing for nearly all corporate users of derivatives programs. Forward thinking treasurers already are performing a cost-benefit analysis of their existing programs and identifying changes that may lead to greater efficiency.  Finally, hedge accounting standards, particularly under IFRS, are changing globally. These changes will have real and lasting impacts on companies looking to hedge FX risk and may require further program changes over time.

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