The cornerstone of any Risk Management Consulting Project is properly identifying the risks our clients face.
Direct Risks
The exposures a company faces are sometimes clear. Companies that produce or sell goods in foreign countries likely have foreign exchange risks. Companies that purchase commodities and raw materials to conduct their businesses, produce goods, or bring finished goods to market, likely have some level of commodity risk. Even if these risks are apparent and direct, many companies do not asses, measure, or monitor them. Knowing the risks a company faces is critical, as well as the Value at Risk (VaR) and potential impact market moves may have on cash flows or asset valuations.
Indirect Risks
Some companies are exposed to risks that they may not be aware of, or find difficult to quantify. Indirect risks can include exposures in the value chain of production — both upstream and downstream for foreign exchange, rates, or commodity prices. At the same time, competitors may be at an advantage or disadvantage depending on their commodity and foreign exchange exposures. It is critical for a company to know where competitor risks lie, and where there may be opportunities strategically. After all, if a competitor has a foreign exchange risk it does not hedge, this could affect their pricing ability if the market moves. Such pricing ability could threaten a client company’s position.
For questions about consulting projects, please email us at consulting@prestigeeconomics.com.