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IFRS and Weather Risks: Now is the Time
by Jean-Louis Bertrand, Professor of Finance, ESSCA
Member of the “Climate and Financial Innovations” working group, Paris-Europlace and weather risk management consultant at Metnext
Wall Street has put a lot of pressure on corporates to meet the numbers and forced treasurers to tackle sales and earnings volatility through the use of rigorous hedging programmes. Most companies have dedicated resources to implement and manage IFRS compliant programmes to cover foreign exchange, interest rate and sometimes commodity exposures. To date, weather risks have not been on the radar screen, yet many studies confirm they can have financial consequences on the business and profits that can be far in excess of what currencies or interest rates can generate.
Treasurers have foreign exchange, interest rates or commodity risks under control, but is this the case for their most significant risk?