Treasury Today asks Amol Dhargalkar about how corporate treasurers can lead their organization's commodity risk program
“The treasurer sits in this unique spot of seeing the risks and how they manifest on the liquidity and financial results of the company,” says Dhargalkar.Treasury Today
Corporate treasurers have typically felt frustrated when they attempted to hedge commodity risk, but that is beginning to change as market volatility has brought the issue to the fore. “Commodity hedging has always been an area where treasurers have been consistently saying there is a role for them to play, but it has been so hard for them to get the right people to the table,” says Amol Dhargalkar, Managing Partner, Global Head of Corporates, and Chairman of Chatham Financial, which specialises in managing financial risk.
Things have changed over the last year, however. As the world recovers from Covid, there have been various shocks – such as oil price hikes, the war in Ukraine and the impact of sanctions on Russia, for example.
“In the last year we have seen more companies take action on their commodity price risk programme,” says Dhargalkar. “Rather than lamenting about how hard it is to get everyone to the table, they are now getting to the table, putting a game plan together and executing it,” he explains. “It is quite an exciting time as it is allowing treasurers to expand their skill set and make themselves more valuable to their organisation,” he adds.
In a recent survey of treasury and accounting professionals, Chatham Financial found that 42% of the respondents said their companies do not have a commodity risk policy in place. And for those that do have one, only 32% found their company’s plan to be clearly understood, easily defined and well-implemented.
Part of the issue is that managing commodity risk is a team sport – it’s not just about treasury. Unlike rates hedging, for example, which would fall solely in their domain, commodity risk hedging involves many others such as counterparts in the procurement and supply chain teams. “Lots of siloes need to come together to understand the risk and determine the right strategy,” says Dhargalkar.
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.
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