Credit rating philosophy and framework
Financial institutions must pull out all the stops to meet the more stringent requirements for risk management.
Having a solid credit ratings and portfolio management framework is crucially important. But how consciously are they tackling the task? Do they really know how appropriate and consistent the rating models are on which they base and control risks?
And do financial institutions know what is going on behind the figures on their dashboards?
An interest swap is a practical way of covering interest rate risks. Provided that a number of rules are observed, it is permissible to use hedge accounting in such cases.
In this article, senior consultant Mark van den Berg explains the advantages of hedge accounting with the help of an example from the business community.
Renewable energy sector
The renewable energy sector depends on natural resources such as the sun and the wind.
Due to the unpredictable nature of these resources, it is often difficult for the renewable energy sector to insure against the risk of not reaching the minimum production levels.
Applying Alternative Risk Transfer (ART) by means of Insurance-linked Securities (ILS) is a way to bring this risk to the capital markets.
By the end of 2007, the ILS market in the US reached a peak of US$15bn. In Europe, the ILS market is still in its infancy and offers abundant opportunities for innovative corporate finance boutiques and insurance companies.
More than a necessary evil
Because of regulations such as Basel II and Solvency II, risk management is high on the agenda of all financial institutions and many companies. Since the credit crisis began, everyone knows exactly why. The crisis will be with us for a while yet, and the regulatory burden will only intensify over the coming period. All the more reason to support this crucial process with an intelligent risk management system (RMS).
The Impact of Corporate Risk Management on Shareholder Value
This part looks at how risk management is an instrument that can be used to lower the WACC and create shareholder value.