Market risks

The correct identification and estimate of the main market risks (exchange and rate risks for example) is always the result of a complex and multi-faceted cognitive process.


This could be an analysis limited to specific situations or a 360-degree exploration during which I will look at the details of your business, covering aspects such as target markets, products and services, characteristics of your customers and type of contracts, typology of suppliers, capital structure and funding sources. This approach will allow us to identify the main sources of risk and quantify their potential impact.


Access to internal information and active collaboration from your financial and commercial departments will enable us to more clearly visualize the impact on the economic-financial parameters relevant to your company. which could for example include that on EBITDA, on financial covenants and possibly produce specific Value-at-Risk (VaR) measures.


Our risk assessments often inform the structure of broader treasury policies — see more under Governance and Policies

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"Just because you never died before, doesn’t make you immortal"

Nassim Taleb, "Let's Not Be Turkeys"

(William Godwin)

Governance e Policies

The business expands and the management of market risks becomes progressively more complex. And you rightly demand a robust governance structure, which establishes clear rules to monitor the management of these risks (exchange rate, interest rates, etc.)


You would like to be able to sit in front of your Board and demonstrate how the set of rules and processes (transfer pricing, hedging policy, delegation and control system) is the best guarantee of sound, prudent and professional management of market risks.


With my help, and your commitment, you can arrive prepared for that discussion

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"Common sense often makes a good rule"

(William O. Douglas)

Treasury documentation

I will be able to assist you in negotiating a Treasury documentation, be it an ISDA, a CSA or other Master Agreements. While my support does not extend to legal advice or financial recommendations, it is designed to help you fully understand the commercial terms offered by your regular product providers and to enable you to appreciate the implications of these terms under various scenarios.


Negotiating these terms, particularly in complex documents such as an ISDA, can be challenging, especially for those with limited experience: these documents have evolved over decades, incorporating lessons from the past, and their technical aspects often go beyond the skills of a company treasurer. Inadequate terms can lead to serious consequences in times of market tension or unfavorable economic cycle, potentially exacerbating financial stress.


With my vast experience I will guide you through these negotiations, enabling you to obtain fair terms with your counterparties.

Where there is an opportunity to consider Deal Contingent Hedging transactions, I will be happy to support you in negotiating the relevant contractual arrangements.

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"Not preparing properly means, in many cases, preparing very well to do the wrong thing"
Sam Harris (Neuroscientist)

Active Management - "Execution"

Once you are ready to implement the chosen hedging strategy, I can be at your side to maximize its effectiveness and contain costs during the "execution" phase.


I can support you at various stages (and this link will give you the complete list). Your Treasury team will likely already have experience executing derivatives transactions, but the supervision and guidance of a market professional can be crucial to ensuring the best success.

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“Don't be afraid to ask questions. Don't be afraid to ask for help when you need it. I do that every day. Asking for help isn't a sign of weakness, it's a sign of strength because it shows you have the courage to admit when you don't know something, and that then allows you to learn something new"

Former US President Barack Obama - 2009

Attestation of Absence of Over-Hedging

"Over-Hedging" situations can lead to the involuntary generation of speculative positions with the potential for even significant P&L losses.

Banks and brokers are increasingly wary of offering products that could lead to over-hedging, especially when their customers are not sophisticated enough to understand the implications.

These institutions, however, often do not have complete information on their clients' exposures and on derivative contracts that they may have already concluded with other counterparties.


This is where my role becomes crucial. I can provide you with expert analysis on your market risk exposures and existing derivative contracts with all your counterparties. At the end of this review, I will offer a professional attestation that will establish whether or not a derivative can attract any over-hedging, for your perusal including sharing with your ordinary financial partners.

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The reversal of the burden of proof in financial services, in Italy and other European countries, means that service providers, in order to avoid liability for damages, must be able to demonstrate that they have acted with due diligence in ensuring the suitability of the products sold

Market Intelligence

Your time is precious and must be allocated efficiently. Let me take care of preparing periodic updates on the market (or markets) of your interest. Through access to macroeconomic and trading reports from leading investment banks, I can prepare a selection of interesting readings exactly when you need them.


The production of synthetic country profiles for "frontier markets" can also complete the intelligence service, which can be useful when your business is ready to expand geographically, and it will be very useful to receive detailed information on the characteristics of the market, its rules, payment systems and much more.

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The best thing about working in financial markets? There will never be a day, not just the same, but not even similar to one previously experienced

Deal Contingent Hedging

In some extraordinary finance operations, such as M&A or Project Finance, market risks can play a significant role due to the fluctuations that can occur between reaching an agreement and completing the transaction.


Think for example of a cross-border acquisition, in which the purchase price is often agreed in foreign currency: the fluctuations in FX exchange rates in the classic 6-12 months normally necessary for its completion could significantly increase the cost of acquisition, well beyond what was initially planned.


Deal Contingent Hedging trades, on foreign exchanges or interest rates, can, in certain circumstances, represent a valid answer to this risk management question. Their complexity, however, is such that adequate understanding requires long experience in the field: it is in these cases that you may want to turn to those who, like me, have a long history of negotiation and structuring of DCH in order to have support that helps you correctly understand the characteristics of the products that will be offered to you by your financial partners.

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“It's what we already know that often stops us from learning.”

Claude Bernard

Training

One of my goals is to make your organization self-sufficient in market risk management, so that you no longer need me in the future.


If you have not yet reached this stage, your Treasury team will gradually acquire the skills necessary for a healthy and effective risk management.


I can accelerate this process through targeted "on-the-job" training for your Treasury team members. This training, tailored to your specific needs, will cover areas such as product knowledge, treasury documentation and governance: the hallmark elements of my skills.


It's not just theory; we will focus on practical and relevant topics for your organization, and we will do so in a way that does not interfere too much with the normal course of work.


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