FINANCIAL RISK MANAGEMENT

The Board of Directors is responsible for defining the company’s risk strategy, which is a corporate management tool of central importance. IFBC helps companies develop and establish a risk strategy adapted to their operational business activities and appetite risk.

Dealing properly with the complex issues arising from currency management can have a significant impact on a company’s success. For many companies, the main challenge in FX management is the unpredictability of exchange rates. There is not one best practice for dealing with FX risks. Based on our long-standing experience, we help our customers identify, analyse, manage and monitor FX risks.

Formulating the FX risk policy

The FX risk policy establishes the principles of dealing with FX risks and defines the processes, responsibilities and limits of FX risk management. Our specialists can assist with evaluating your existing FX risk policy and formulate a new one, if necessary. The FX risk policy may be either self-standing or part of a risk and/or finance policy.

Formulating and implementing hedge strategies

For successful FX management, it is essential to understand how FX risks affect your company. We help our customers analyse the effects of various types of FX risks (transaction and translation risk, economic risk) on the income statement and balance sheet.

Knowing your company’s risk-bearing capacity and the various types of FX risks provides an important basis for subsequent hedge decisions. When choosing a hedge strategy for future and existing contractually fixed transactions, it is important to consider the effects of exchange rate fluctuations on performance indicators such as the margin and EBIT. For the translation of balance sheet items in foreign currencies, we focus our analysis on how exchange rate fluctuations affect the consolidated equity and equity ratio.

Forecasting as a basis for currency management

Budget and forecasting processes form an integral part of FX management. They are combined in the form of rolling or partially rolling forecasts adapted to the business model. In planning, the focus is placed on the key value drivers. For optimal efficiency and flexibility, as many planning elements as possible are standardised and automated. Using scenarios, future developments can be simulated transparently as a basis for the company’s FX management.

Hedge Accounting (IFRS 9) reporting on accrual basis

With Hedge Accounting, the underlying transaction and the related hedging transaction can be accounted for on an accrual basis. The complex rules of IAS 39 previously prevented many companies from performing hedges that are economically correct. We help our customers introduce IFRS 9, which substantially simplifies Hedge Accounting.

With years of experience behind us, we assist our customers with identifying, analysing, managing and monitoring interest risks. Our services include, in particular:

Formulating the interest risk policy

The interest risk policy establishes the principles of dealing with interest risks and defines the processes, responsibilities and limits of interest risk management. Our specialists can assist with evaluating your existing interest risk policy and formulate a new one, if necessary. The interest risk policy may be either self-standing or part of an overall risk and/or finance policy.

Designing financing concepts

A customised financing concept should be aligned with the company’s planned strategic development and meet the needs of daily business operations. When designing financing concepts, we bear the key factors in mind: cost of capital, flexibility, stability and security. This ensures that your finances and capital structure, in particular, will be optimally aligned with your company’s specific situation and that operating and financial leverage will be properly coordinated.

Operationalisation and hedging of interest risk

To obtain valuable information for corporate management, the process of formulating the strategy and budgeting must be closely linked with operationalisation of the interest risk using target values.
Moreover, the ways in which the different types of interest risks exercise an influence should be centrally analysed in detail. We assess the possible effects of market changes on equity and financial performance, while systematically distinguishing between the “Accounting View” and “Market View”. On that basis, we derive recommendations for the use of hedge instruments for interest risk management.

A tailor-made liquidity concept is one of the cornerstones of corporate finance management. We develop control instruments for liquidity risk management for our customers and assist them in the following subject areas, in particular:

Formulating the liquidity risk policy

The liquidity policy establishes the principles of dealing with liquidity risks and defines the processes, responsibilities and limits of liquidity risk management. Our specialists can assist with evaluating your existing liquidity policy and formulate a new one, if necessary. The liquidity policy may be either self-standing or part of an overall risk and/or finance policy.

Create room for manoeuvre through liquidity planning and management

We help our customers measure the liquid assets that they need to cover their liquidity requirements in the course of ordinary business and to maintain strategic flexibility. Rolling liquidity planning makes it possible to determine how long the existing liquid assets will cover the operational liquidity requirements. This will give you the necessary basis for taking early measures to prevent liquidity squeezes or excess liquidity.

Setting the transfer prices for intragroup transfers of liquidity

Liquidity risk management is usually handled by a central organisational unit that is responsible for setting the transfer prices for intragroup fund transfers, among other things. We assist our customers with modelling intragroup transfer prices. The intragroup transfer price policy should reflect the liquidity risks, income and expenses and be linked to market prices.

YOUR CONTACT PERSON

Dr. Thomas Vettiger, Managing Partner

thomas.vettiger@ifbc.ch

Christian Hirzel Partner

Christian Hirzel, Partner

christian.hirzel@ifbc.ch

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