Chatham Financial discusses how to mitigate key person risk and boost resiliency in a NeuGroup session
SummaryThe question of how to mitigate so-called key person risk as treasury teams grapple with high turnover and difficulty filling open positions surfaced among members at a fall meeting of NeuGroup for Mid-Cap Treasurers.
In another Chatham case study, the treasurer and the FX risk director of a fast-growing company with a significant international footprint resigned in the same week. Management tapped Chatham to “keep the lights on in the risk management program” while it found the “right replacements” and strategically thought through treasury’s resiliency. Then the pandemic hit, accelerating strategic changes aimed at ramping up the staff’s capabilities.NeuGroup
- The broader context of the conversation was a session where Chatham advisors reviewed the key components of risk management—strategy, operating model and technology—and discussed case studies of companies rethinking those areas to build resilience in corporate finance in the wake of the pandemic.
- Among the questions Chatham suggested corporates ask in addressing operating model resiliency is, “Do I have key person risk?” The answer for some members is clearly yes.
Relentless turnover. One Chatham client saw a string of key FX personnel depart, leaving no playbook for FX balance sheet exposure gathering or hedge execution, and a system relying on multiple platforms through the hedging life cycle. The company used the experience to take a proactive stance and rethink its treasury program and avoid a Band-Aid approach in the future.
- By using Chatham to fill in temporarily the gaps left behind, it gained a fresh set of eyes to review the program workflows and trading thresholds.
- It established steady FX daily trading and reporting coverage, documenting key activities and recommending process improvements. Documentation of processes and controls reduced the time to onboard new team members.
- The company established a long-term staffing plan by aligning activities with expertise and employees’ capacity, conducting interviews to vet treasury candidates and support existing staff.
Our expertise for corporates
Chatham provides the knowledge and expertise needed to manage the financial risk associated with interest rate, commodity, and foreign exchange volatility. We develop and implement hedging strategies for hundreds of public companies annually, based on deep and productive banking relationships, giving us market data and insights to enable you to secure the best pricing and terms. Our goal is to empower you to strengthen your financial position and support your company’s financial objectives.
With expertise across hedge accounting, regulatory compliance, valuations, and hedging transactions, we can support all aspects of financial risk management. Our ChathamDirect platform provides convenient workflow, robust analytics, and comprehensive accounting methodologies, supported by our unmatched commitment to client service. This unique combination of strategy, operations, and technology will empower you to run a best-in-class hedging program.
Our featured insights
Fed meeting dominates a busy week
Wednesday brought us another FOMC meeting with the committee voting unanimously to keep the fed funds rate at the target range previously arrived at during July’s meeting (5.25%–5.50%). More notable than the expected outcome of holding rates steady, though, were the updates in the Fed’s Summary...
ECB hikes 25 bps while BoE keeps rates steady
The Bank of England (BoE) announced it would keep rates on hold at today's meeting, following 14 consecutive rate hikes that have taken borrowing costs to 5.25%, the highest level since 2007. A 25-basis-point rate hike was expected at the start of the week, but the release of August inflation...
Semiannual Market and Economic Update
Join Chatham for our latest webinar update on global economic conditions and events. Jackie Bowie and Amol Dhargalkar will share insights and discuss opportunities to manage risk and enhance decision making in the capital markets.
A broken record: rising fuel prices drive major economic data readings
Soaring fuel prices drove major economic data releases in August. Oil prices reached 10-month highs last week amidst production cuts and continued demand. The uptick in prices highlights the importance of having robust hedging programs in place so your firm can be prepared for market movements.
U.S. dollar rallies under threat of additional rate hikes
The U.S. dollar continued its recent upward trend, as markets grappled with hawkish messaging from the Fed and the potential for a November rate hike.
A mixed bag of economic data causes constant recalibration in rates
Mixed signals from a variety of economic data reports caused investors to constantly adjust their bets that the Federal Reserve will refrain from hiking interest rates further, resulting in a whipsaw in yields and a relative rebound in equities.
Jackson Hole: higher for longer?
Powell underscores the potential for future interest rate hikes at the Jackson Hole Symposium. The downgrade of regional banks and decrease in existing home sales poses challenging borrowing implications for the average consumer.
5 things you need to know: managing interest rate risk after the Fed remains hawkish in 2023
With high levels of uncertainty looming over the U.S. economy, many organizations are taking a fresh look at their interest rate hedging strategies. Because of today’s highly inverted and irregular yield curve, it is still possible to lock in a lower fixed rate than the current floating rate....