– Financial Risk Management

The objective of financial risk management is to protect assets and cash flows from risk.

The treasury function strives to accurately assess financial risks by identifying financial exposures, including currency, interest rate, credit, commodity and other business risks.

And then try to manage the market based on those risks. He must develop effective hedging strategies after gaining real-time insight into a variety of risk positions that result in less exposure.

You can differentiate risks related to changes in stock prices, interest rates and exchange rates.

Financial and market risks

Here, the objective is to control and monitor the financial and market risks to which a company is exposed. Treasury should identify explicit and implicit financial risks, credit risks and operational exposures as well as modal risk mitigation strategies.

Market risks result from the danger of negative market developments (changes in parameters in the money and capital markets), which in turn affect a company’s financial assets.

The treasury system creates and maintains all the market data needed to price financial instruments – both real data and fictitious data to run scenarios.

Some instruments exposed to market risks are; Bonds, Loans, Money Market Transactions, Forward Rate Contracts; swaps; futures contracts; Bond options; Futures Options

Foreign exchange risks

Currency risk and currency risk arise when the transaction is denominated in a currency other than the reference currency or when the foreign subsidiary maintains financial statements in a currency other than the reporting currency.
Some instruments exposed to currency risk are outstanding forward exchange transactions and currency options.

Commodity Price Risk

Commodity price risk refers to the uncertainties of future market values ​​and the size of future revenues, caused by fluctuating commodity prices.

Commodity risk management involves identifying, quantifying and mitigating exposure to commodity prices and currency risk.

Robust analytics are used to understand risk positions in real time, reducing price risks from basic trading operations with appropriate hedging.

Interest rate risk

Risk that arises for bondholders from the fluctuation of interest rates.

It has an impact on bonds, interest rate guarantees, interest rate swaps and interest rate swaps between currencies.

Regulatory conformity

There is always an inherent risk that the organization may not be able to comply with all applicable laws and regulations, which can result in fines and penalties.