FX and Treasury Risk Management Policy


IFA helps build a firewall against risks arising from reckless and impulsive decisions. A comprehensive risk management policy ensures that risk management considerations are embedded in the business decision making fabric of the firm.

A well-articulated Risk Management Policy is the cornerstone of a robust risk management framework that is standardized, systematic and consistent. It is a holistic and enterprise-wide approach to managing risk. 

Having a Risk Management Policy instils a sense of confidence among creditors, investors, auditors and regulators about the firm’s attitude towards risk and in its ability to manage the same. It involves determining the ability and willingness of the firm to take risks and quantifying the same. The minimum hedge ratio, choice of instruments for hedging exposures are all determined based on the firm’s ability and willingness to take risk. It is a systematic approach towards identifying, measuring, monitoring and mitigating risks. Once the sensitivity to various risk factors is determined, the focus is on reducing those sensitivities. The objective is to ensure that the core operating profits of the firm are not eroded by adverse movement in any of the risk factors. Lowering the sensitivities to risk factors reduces the cost of capital, thereby enhancing the value of the firm.

Features of Services

IFA documents a comprehensive risk management policy which standardizes the overall risk management framework but at the same time leaves adequate room for the treasury to be nimble, agile and dynamic to benefit from the market opportunities. The salient features of this service are as follows:

  • Primary objective is to ensure that the core operating profits are preserved.
  • It involves Identification of Risk factors
  • Quantification of impact of various risk factors i.e. FX, Interest rates, Commodities, Liquidity and ALM (Determining Sensitivities)
  • Establishing correlations among risk factors and conducting Worst-case Scenario analysis
  • Ascertaining the risk appetite and Risk tolerance
  • Working out the optimal hedge ratio to ensure that risk is contained within tolerance limits
  • Determining the hedging instruments permissible for hedging
  • Determining the roles across junior, mid and senior management levels in managing and monitoring risks
  • Ensuring that Risk management gets embedded into the DNA of the firm and appreciate the contribution of risk management in enhancing firm value.



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