|
Links to Text
Introduction
Financial Risk for Financial Institutions
Corporate Treasury
Accounting for Derivatives
Employee Stock Option Valuation
Benchmarking Credit Risk
Financial Risk Due Diligence
Introduction
PricewaterhouseCoopers' Financial Risk Management (FRM) professionals develop enterprise-wide risk management solutions for all key financial risks, including foreign exchange, interest rate, credit, regulatory, commodity, energy risks and related operational controls. We calibrate and build measurement methodologies, performance measurement systems, and the related management processes to link risk to return and shareholder value.
Financial Risk for Financial Institutions
Does your firm know the full extent of its exposure to financial risks and the likely impact of market volatility on those risks? How does your organisation choose which financial risks it wishes to be exposed to? Does your risk management reporting system clearly capture all your key risks and is there an understanding of risk exposures at all levels of your organisation?
Recent events have proven that a company's financial risk exposure can place the entire organisation in jeopardy. Other companies have managed those risks in such a way as to generate competitive advantage.
We can help your organisation to develop a risk management framework to link your organisation's business strategy and operations to your risk management functions.
We can also recommend appropriate risk management structures as well as approaches for measuring, quantifying, understanding and reporting market, credit, liquidity and operational risk. We also advise companies on how to establish best practice controls to manage those risks.
 |
Corporate Treasury
Corporate Treasurers need to ensure that they are focused on key financial risks and that they are managing them in a cost-efficient manner. Are your company's Corporate Treasury policies appropriate for the financial risks faced by the company? Are the financial risks measured, reported and managed in an appropriate manner? Does the Corporate Treasury function have appropriate performance measurement benchmarks?
These issues, if not addressed, may result in the company incurring losses or having inapproriate exposure to finanical risks due to inadequate controls over market risk (e.g., interest rate risk, foreign exchange risk, etc.) and credit risk.
The effective management of those risks in a corporate environment requires specialised skills. We have extensive experience in helping organisations position the Corporate Treasury function to identify and manage those risks in a way that effectively supports the business.
Accounting for Derivatives
Is your company reporting under US Generally Accepted Accounting Practice or International Accounting Standards? Is your management prepared for the implementation of the new derivative accounting standards, FAS 133 and IAS 39? Does management know under what conditions derivative and financial contracts will qualify as a hedge for accounting purposes and what changes will have to be made to existing hedging practices in order to qualify for hedge accounting? Has management assessed the potential impact of FAS 133 and IAS 39 on reported earnings?
If these issues are not addressed, existing hedging strategies may no longer qualify for hedge accounting, resulting in an unexpected impact on earnings. We can help you to review your existing hedging strategies and advise you on whether they would qualify for hedge accounting under the new accounting statements. We can also advise you on the systems and documentation requirements necessary for the implementation of hedge accounting under FAS 133 and IAS 39.
|
Employee Stock Option Valuation
Has your company issued stock options to employees and suppliers and does your company report under US Generally Accepted Accounting Practice (GAAP)? If yes, do you know that the fair value of these options is required to be reported under US GAAP? Does the company wish to consider the valuation impact of issuing options under different scenarios such as exercise price, vesting or maturity periods so that they can improve their tax and financial planning?
We can help you to perform a fair value calculation of the stock options issued to employees and suppliers. We can also advise you on the valuation and accounting impact of alternative stock option structures to minimise any unexpected impact on earnings.
Benchmarking Credit Risk
There have been a number of notable corporate failures in Asia during recent years - does your company have the capability to detect, manage and minimise exposures to deteriorating credit risks? Do you know what your firm's total credit exposure is to related credit risks? Are you aware of some the credit risk issues arising from derivatives?
We can advise companies on the best practice methodologies for measuring, quantifying and aggregating credit risk. We can also help companies to establish appropriate credit risk management policies and structures.
Financial Risk Due Diligence
Is your company acquiring a financial institution or corporation with treasury operations? If so, are you aware of the financial risk (such as foreign exchange, interest rate, commodity price and credit risk) of the target? Are you aware of all the on- and off-balance sheet exposures of the target and their possible financial impact? Are there any "hidden" derivative losses or any volatile derivative contracts in the target? Will your company have to spend significant amounts to improve the financial risk management controls and processes post-acquisition?
These issues, if not addressed prior to the acquisition (i.e., during the due diligence process), could expose your company to hidden costs. We can help you to perform an overall assessment of the financial risk exposure of the target. We can advise you on the adequacy of the existing financial risk management function of the target and make recommendations to you on improvements, if neccessary. We can also perform an independent valuation of any derivative contracts and advise you on their potential future impact. | 
