From the September/October 2012 issue of Treasury & Risk magazine

Bronze AHA Winner in Financial Risk Management

Building a Tool to Show How Risks Are Interrelated: Ford Motor

Ford’s treasury de-compartmentalized its risks by developing a cash-flow-at-risk (CFaR) tool to show how exposures as different as commodity price fluctuation and foreign exchange volatility could be interrelated and that hedging them separately could undo natural hedges.
 

“We knew that there is a diversification benefit among our commodity and currency exposures,” says Dennis Tosh, director of global trading and automotive risk management. “But we didn’t have a robust process or system that could measure it and give us a more realistic view of our net exposures. Now we do.”

To get to that vision, “we needed a comprehensive and integrated system,” Tosh says. After evaluating several solutions, Ford concluded the best source was Reval, software already used by Ford for hedge accounting compliance and hedge valuation.

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