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Taming Financial Risks in a Volatile World

Alexander Hamilton Award winners in Financial Risk Management discuss how they manage and mitigate FX, interest rate, and commodity exposures.

The more complex the global business environment becomes, the more challenging it is to effectively manage financial risks. Whether companies are facing down exposures brought on by sales to (or purchases from) foreign markets, whether they’re trying to mitigate the effects on their earnings of swings in commodity prices, or whether they’re battening down the hatches in preparation for anticipated interest rate volatility—whatever the financial risk, complexity in the modern business landscape increases the difficulty for the corporate treasury and risk management teams.

But companies that dedicate sufficient resources to financial risk management are seeing big returns. Among the success stories are the three winners of the 2015 Alexander Hamilton Awards in Financial Risk Management.

At Health Care Service Corporation (HCSC), an initiative designed to improve information around corporate investments dramatically improved portfolio management. The company developed a framework that models both risks and returns of individual securities across factors such as interest rates, credit spreads, and foreign exchange (FX). Then the project team plugged several different investment-portfolio options into the framework to see what would happen. The outputs from this process gave HCSC management the confidence to increase the interest rate and credit risks the company was carrying, in exchange for higher expected returns on its investment portfolio.

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Meg Waters

Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.

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