Managing Risk in a New Environment
by Helen Sanders, Editor
There are few treasury-related articles nowadays that do not stress the importance of liquidity and risk for corporate treasurers. Things have changed, however, since the gritty days of 2008-9, and while treasurers face new challenges, not least in Europe, they have become more savvy, better prepared and more able to prioritise the risk management issues that matter most. In this article, we look at trends and priorities in risk management from two perspectives. We are therefore pleased to welcome Justin Brimfield, EVP, Corporate Development, at treasury and risk management solution vendor Reval, and secondly, Marco Tierno, Head of Group Treasury and Short Term Planning at international airline, Alitalia, winner of the 2011 TMI Award for Treasury Team of the Year.
A new era for managing risk
Justin Brimfield, Reval first summarises the quite different situations in which treasurers found themselves during the global financial crisis,
“The global financial crisis of 2008-9 was a wake-up call for organisations globally. Treasurers typically found themselves in one of two camps. The first, smaller group comprised those that had already identified some risk tolerance levels, had established policies in place, and in some cases had systems to capture, analyse and address risk exposures. These companies had only to refine the completeness and timeliness of risk management information.
The vast majority of companies, however, found that they had not sufficiently prioritised risk management in the past, and therefore did not have either their risk tolerances defined or appropriate policies or procedures in place. In some cases, board risk committees either did not exist, or were not engaged with the business. These companies found that they lacked the information they needed to understand their exposures or the skills and tools to analyse the impact.”
Since then, the situation has changed considerably, as he continues,
“Since then, we have witnessed a mindshift amongst organisations globally. Risk management is no longer a minority activity remote from the business, but everyone from board level throughout the organisation now shares a strong sense of risk awareness. Corporations are still at different stages of sophistication and readiness but are working towards setting up the appropriate roles, policies, and systems.”
Consequently, there is now a greater awareness of the value of risk management solutions, either as part of a treasury management system (TMS) or a specialist tool integrated into the overall treasury infrastructure. Justin Brimfield, Reval discusses,
“Although risk management tools such as Reval® have been available since 2000, initially to manage compliance issues, these have evolved to focus on capturing, analysing and mitigating risks, and monitoring the performance of these strategies. The most notable requirement for any corporation is visibility: it is impossible to manage what you cannot see. Consequently, we see a significant focus on capturing timely, accurate and complete risk exposures.”