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NEW YORK, August 5, 2019 / PRNewswire / – Corporate treasurers plan to use more sophisticated risk management techniques to better balance liquidity and earnings risks and minimize currency losses according to the Bloomberg survey results announced today.
More than 100 company treasurers, financial badysts and risk managers responded to the survey, which revealed that risk-free cash flow (CFaR) and at-risk earnings (EaR) were now recognized as the last solution in the industry. risk management. The results show that 34% of respondents already use CFaR or Value at Risk (VAR), 29% plan to use it, and only 8% have never heard of it. The survey also found that 64% of respondents said they needed to improve or plan to improve the current coverage policy of their company..
However, when asked what obstacles stood in the way of adopting a CFaR-based hedging policy, 66% of those surveyed mentioned the difficulties in explaining the policy to CF & A. Internal and to the board of directors. Technology is another hurdle: 41% of respondents said their company was reluctant to change its current technology. The discussion also focused on the importance of Key Performance Indicators (KPIs).
"In terms of cash flow and profit volatility, companies are moving away from the obsolete percentage hedge model to a risk management approach because they are unable to link their old strategies to the KPIs required by the board of directors, "said the board. Mark Lewis, Business Cash Product Manager at Bloomberg.
Explaining the policy internally and updating the technology were not the only challenges cited when implementing CFaR & EaR. Respondents were also concerned that such a policy would be too complex (29%), too expensive to implement and implement (26%), or that it would not provide sufficient benefit (13%).
"We have worked closely with our customers to address the very real challenges of explaining CFaR / EaR to their boards of directors and updating their legacy technology systems." Bloomberg makes available to its customers tools that can be used to test back the change of CFaR / EaR.It is easier to explain how this technique is proven over time.In addition, our tools can be used end-to-end. or integrated into an existing workflow, making implementation transparent, "said Lewis.
The survey was conducted during Bloomberg's recent online webinar titled "The Benefits of CFaR and RAA for Business Risk Management", to explain how risky cash flow (CFaR ) and at-risk income (ROE) can better explain the volatility risk of earnings and cash flow in their financial statements.
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