Financial risk manifests itself in many forms across most organisations, including:
- Foreign currency risk exposures – transactional, translation and economic
- The interest rate reset profile of the debt portfolio
- Cash liquidity or investment risk
- Commodity sales or commodity input price risk
- Counterparty credit exposures to the structuring of the company’s overall capital structure.
The challenge for the Chief Financial Officer and Treasurer is to ensure that all these financial exposures are identified and measured, appropriate risk management strategies are in place that are aligned with corporate risk appetite, and risk management activity and outcomes are effectively communicated.
How PwC can help you
We can assist you to enhance your overall management of financial risk, including:
- Aligning the management of financial risks with corporate objectives to enhance shareholder value. This encompasses integrating probable outcomes for risk and value drivers through structured risk quantification and corporate modelling, efficient capital allocation, and aligning various measures of corporate performance (EVA, MVA) within an economic capital framework.
- Enhancing the effectiveness of treasury and commodity trading and risk management process and systems, including treasury process re-engineering, transactional banking reviews and banking tenders, treasury and commodity trading system reviews and implementation, and assessing the role and appropriate model for corporate treasury.
- Implementing the appropriate quantitative financial risk measures and analytical management tools, including capital and credit risk measurement methodologies, Earnings at Risk (EaR) and Value at Risk (VaR), financial instrument pricing models, corporate financial modeling and real option modelling.
- Assessing the control and governance framework around treasury and commodity trading operations, including assurance focused reviews, treasury risk framework diagnostics, financial instrument pricing and assessing preparedness for adoption of IFRS.
Our Australian Financial Risk specialists also have deep industry experience that encompasses financial services, the resource sector (mining, oil and gas), agribusiness and global corporate treasuries.
