What comprises best practice risk management in today’s corporate treasury? And how are the industry and its suppliers rising to new challenges for policy, process and technology?
This article analyses a range of risk classes that are generally managed in today’s corporate treasury operations, and examines how a demanding set of evolving challenges is being met in practice.
There are two essential requirements for effective treasury risk management: having a documented treasury policy that clearly defines which risks are to be managed, and how they are to be managed; and having access to technology of sufficient power and flexibility to apply and monitor the policy in daily operations.
The management of different kinds of market risk has been the primary concern for corporate treasuries ever since treasury departments were first organised as a distinct section of the finance operation of the largest multinational corporations. And since the financial crisis first struck in 2008, more and more companies have determined that a necessary part of protecting working capital, profits, earnings and financial asset values involves investing in deeper and more powerful resources to manage the market risks relating to liquidity, foreign exchange and interest rate risk exposures.