Your Business With James Caan 2017 - 20
Are you exposed to
In today's volatile markets,
risk management is no
longer an option, it's a
necessity for your company
uge swings in �inancial markets
can have a major impact on
companies, so you need to be
aware of the risks to your business.
The FX and interest rate markets move
continuously - they are driven by traders,
speculators, hedge-fund managers and
banks, all looking to make a profit.
Of the $5.3 trillion that is traded on the
FX market each day, it is estimated that only
3% is done so for commercial reasons.
This leaves smaller companies with no choice
but to enter the FX markets for commercial use,
leaving them open to huge movements caused
by traders looking to make a profit.
Spot trades can leave a client at risk of, for
example, a 30% drop in GBP/USD in six months,
as happened in 2008 when the markets crashed.
Benchmark Standard advises on specific
structures (spot, forward, options) to mitigate
risk to the open market, the price they are
entered into (and giving margin to banks or
brokers), but also, beyond that, the impact on
FRS 102, the balance sheet, financial covenants
or the company value.
The same applies to interest rates, as many
banks sell "fixed rate loans" to avoid regulation,
yet the risks and breakage costs are the same as
a derivative called an "interest rate swap".
All of this is why risk management is now a
necessity, rather than an option. As sales teams get
" W E F INISHED THE YEAR £1M IN PROF IT "
"When I met the company, they were £250K over budget after six months. My task was to
end the year 'no worse off '. We structured the purchases to stop the losses, identified the
challenges and the negatives, and made decisions to protect the business. We allowed
for an upturn in the market and protected the downside, and once we'd decided on a
course of action we ended the year with a forecast of £1m in profit."