November 28, 2014
I am a believer in “Treasuryanity”, what I mean is that I believe that organisations should invest in efforts to identify their full portfolio of financial risks. Often I see companies happy to ignore what isn’t easy or obvious to identify such as broader FX, commodity or funding exposures.
Mostly I see unwillingness and a lack of understanding from the wider business as to why risk identification and management is important.
In some companies the matter has been considered at a senior level and the question has been one of value. Is this exercise worth the time and energy?
Without all the facts, treasury activities are flawed. Companies won’t know if they are over or under-hedged due to unknown exposures. Is the investigatory effort worth the energy? The easy answer I see applied is: are these exposures material and what has occurred in the past?
Clearly you can’t value what you don’t know and the past is not always a good indicator of the future, especially as companies enter new markets and expand into new products.
Should we accept business flaws? It’s not as if we can remove all non-core risk entirely, and do shareholders want companies to?
As I see it, Treasurians have much the same problem as many religions; getting people to believe before it’s too late.
Comment from blogger: I mean no offence to any religion, but merely wish to draw a comparison