The Need for Trade Risk Management
Good corporate governance.
Retain an acceptable, controlled and well understood level of risk on the balance sheet. Compliance with Board risk committees and legal and regulatory requirements such as Sarbanes-Oxley. Ensure the appropriate balance between pro-active receivables risk management alongside a risk transfer program in line with your risk retention criteria.
Trade receivable credit and operational risks.
Receivables are one of the largest, if not the largest asset on the balance sheet and tied closely to revenue and client relationships. The trade risk management strategy strikes the right balance between commercial risk mitigation and revenue growth supporting a dynamic environment for efficient time-critical decision making.
Competitive advantage.
An effective trade risk management solution is often a minimum competitive requirement in most industries. In many situations it can support a company's competitive advantage by enhancing funding arrangements and cash flow supporting sales growth, reducing reserve requirements and avoiding catastrophic risks.
Market confidence.
An ineffective trade risk management solution can leave unexpected holes
in the balance sheet, increase cash flow variability and damage reputations
internally and externally.