Managing Counterparty Risk
This past month we wrapped up our third webinar on counterparty risk management, finishing the three part series we began last October. Our goal of the webinar series, hosted by ourselves and Strategic Treasurer, was to raise awareness of the challenges treasurers face in managing counterparty risk and, as a thought leader in the industry, lead the discussion on structuring a framework for addressing these challenges. We have met with many treasurers over the past year who seem to agree with the goals of counterparty risk management, but struggle with its effective implementation. In the end, the challenge is both broad and deep, overlaying credit judgments with exposure aggregation.
As an investment manager, our core competence of quantifying and mitigating credit exposures with the goal of constant risk aversion is also central to the practical challenges of counterparty risk management. Given that certain counterparty exposures are more imbedded than others, such as credit lines, vendors and the like, the challenge gets trickier given the illiquid nature of these sectors where overlapping risk may be present. To counterbalance the entrenched nature of certain exposures in an organization, we wanted to introduce the concept of “Separately Managed Accounts in Counterparty Risk Management” in this month’s research. We believe exploring the additional risk management characteristics of separate accounts as they pertain to counterparty risk management is a timely subject, especially as money fund reform looms.
Best Regards,
Ben Campbell
President & CEO
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