Counterparty Risk

2 min read

Risk management is core to every treasury operation whether the organization is a biotech in phase III trials or a global Fortune 500 company. Large or small, an organization’s goals should be centered on selecting and monitoring exposures that are appropriate for its risk tolerances. Granted, staying consistently true to those tolerances is significantly more complicated for larger enterprises due to the reality that counterparty exposures are sprinkled throughout the organization, ranging from direct to indirect and embedded to pliable.

While all this complicates risk management for large organizations, the goals for organizations both large and small remain simple: to manage risk at a constant level and avoid risk volatility as underlying credit exposures vacillate. This goal has been core to our credit exposure management over the many credit cycles of the last 20 years. Throughout these cycles, our credit exposures have actively expanded and contracted in keeping with the goal of Constant Risk Aversion for our clients. This migration in exposures was most visible in 2007 and early 2008 when, in our view, many credits and sectors fell out of acceptable risk tolerances for the objectives of many of our clients. This discipline also may be applied to counterparty risk management. Counterparty exposures, which come in many different shapes and sizes, can be captured, analyzed and managed all with the goal of proactively managing an organization’s overall counterparty risk. To look at this challenge in more detail, this month’s research outlines the landscape faced by many corporations in their efforts to effectively manage counterparty risk.

To further assist treasury professionals in their efforts to manage counterparty risk, Capital Advisors Group, in partnership with Strategic Treasurer, is hosting a three-part Counterparty Risk Management webinar series that kicks off on October 17. Details and registration information for this informative webinar series will be distributed later this week.

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Best Regards,

Ben Campbell
President & CEO

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