Top Threats: Liquidity, Market Risks

Treasury and finance personnel at U.S. corporations consider liquidity and market risk to be the most significant of the threats they face, although fewer companies have exposure to those risks than to interest-rate and credit risks, according to a survey of 226 companies by the Association for Financial Professionals (AFP).

Sixty-four percent of the executives surveyed say their companies are exposed to liquidity risk and 53% say it's a significant threat; 52% say they have exposure to market risk and 64% cite it as a significant risk.

Brian Kalish, financial practice lead at AFP, says the weight the respondents placed on liquidity risk isn't surprising after the events of the last two years. "People found out very quickly that if you don't have liquidity, you're not going to last very long," he says.

On the other hand, while 82% of the respondents said their companies were exposed to interest-rate risk, only 31% consider it significant, and while 72% say they have exposure to credit risk, just 38% say it is significant.

The survey also shows that the extent of hedging varies according to the type of risk. Just 45% of the companies hedge their interest-rate and credit risks, but 57% hedge their liquidity risk and 61% hedge their market risk.

"I was a little bit surprised by the fact that people don't hedge some exposures they know about because of the accounting implications," Kalish says. "If the rules change and make it even more onerous for people to hedge, they're going to step away from it."

For a look at how more aggressive liquidity management is fueling demand for information, see Hungry for a World of Digital Data.

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