scholarly journals Liquidity Risk Financial Disclosure: The Case Of Large European Financial Groups

2011 ◽  
Vol 7 (7) ◽  
Author(s):  
Abderrahim Boussanni ◽  
Jean Desrochers ◽  
Jacques Préfontaine
Keyword(s):  
Risk Management ◽  
Financial Services ◽  
Management Practices ◽  
Liquidity Risk ◽  
Cash Flows ◽  
Financial Disclosure ◽  
Annual Reports ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
Financial Groups

This paper examines the informational content and the usefulness of financial groups' liquidity risk public financial disclosure. This theme is of interest since the factors that influence the level of liquidity risk are complex, and they strongly interact with other originating factors from related financial risks. These characteristics have made it more difficult for financial services industry regulators and private sector ERM experts to recommend a practical and well defined framework for the management and subsequent public disclosure of liquidity risk financial information. The results of the study are based on an in-depth content analysis of the Annual reports (2004) published by twenty-one of Western Europe's largest financial groups using the liquidity risk management factors proposed by the Basel Committee on Banking Supervision and its Joint Forum (2003, 2006). The results of the study revealed a disparity between commercial banks from the same or different European countries as to the level and extent of liquidity risk public financial disclosure. The same was also found for the description of the risk management structures and the accompanying explanatory comments on liquidity risk management practices. In addition, the study documented the overall scarcity of quantitative data which supports qualitative discussions on liquidity risk management. There were also areas of more complete financial disclosure that apply to factors explaining the origins of cash flows, and the explanations and discussion about foreign exchange risk management.

Managing Currency Risk

1998 ◽  
Vol 2 (2) ◽  
pp. 6-10
Author(s):  
Devi Singh
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Management Practices ◽  
Price Volatility ◽  
Foreign Exchange Rate ◽  
Exchange Market ◽  
Indian Market ◽  
Foreign Exchange Risk ◽  
Exchange Risk

With market frontiers expanding and financial price volatility and risk going up, management of foreign exchange risk assumes importance. The implications of increased involvement of Indian companies in international trade and finance require managers to measure the foreign exchange exposure and manage it to maximise profitability, net cash flow and the market value of the firm. An analysis of the foreign risk management practices of some Indian companies reveals that they neither have a model for forecasting foreign exchange rate movement nor a detailed mechanism to evaluate the effectiveness of their foreign exchange risk management practices. The general perception among the managers of these companies is that Indian companies are small players in the foreign exchange market and better management practices would evolve only after the Indian market for hedging products fully developed and experience gained in this regard.

scholarly journals An Analysis of Foreign Exchange Risk Management: Techniques Employed in Indian Pharma Industry

2019 ◽  
Vol 8 (1) ◽  
pp. 92-107
Author(s):  
Prakash Basanna ◽  
K. R. Pundareeka Vittala
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Cash Flows ◽  
Foreign Exchange Risk ◽  
Futures Options ◽  
Currency Derivatives ◽  
Exchange Risk ◽  
Currency Exposure ◽  
Current Article ◽  
Exchange Risk Management

Foreign exchange risk management (FERM) involves using both internal and external techniques such as forwards, futures, options, and swaps that are called as currency derivatives. The firms with greater growth opportunities and tighter financial constraints are more inclined to use currency derivatives. The Forex market provides various derivative instruments to hedge against currency exposures such as currency forwards, options, futures, and swaps. The current article aims at studying various FERM techniques used in the Indian pharmaceutical industry and its impact on exchange gain/losses. For this purpose, foreign exchange cash flows arising out of imports and exports and exchange gain/losses of the companies during 2010–2017 of 10 sample companies chosen from the pharma industry are used. It is observed from the study that only two currencies—USD and EUR—hold command in the forex market and other currencies are being used minimally. It is also noted that there are several currency derivatives available to the business firms such as forwards, futures, options, and swaps for hedging currency exposure. However, among all these techniques, forward contract is considered to be an effective hedging tool and easier to understand.

scholarly journals INDIAN IT FIRMS CREATING MANAGEMENT CODES FOR FOREIGN EXCHANGE RISK

2021 ◽  
Vol 5 (2) ◽  
pp. 115-129
Author(s):  
Nitin Shankar ◽  
Fatima Beena
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
High Growth ◽  
Jel Classification ◽  
Annual Reports ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
Management Techniques ◽  
The Impact ◽  
Exchange Risk Management

Purpose: India has been a preferred I.T. service sourcing nation globally and has been registering high growth. India has a significant pie of the global sourcing market, accounting for nearly 55 % share. It covers significant global through its more than one thousand centres spread across continents. With a year-on-year growth of 6.1%, India’s I.T. and ITES industry will increase to the U.S. $ 350 million by 2025. The extensive expanse of geographical coverage also translates into foreign exchange risk; hence foreign exchange risk management becomes an important strategy. The current study attempts to assess the impact of foreign exchange risk management on the Indian sector over 2007-2017; the period includes the 2008 financial crisis taken up in the current study. Design/Methodology/ Approach: We analyzed the Indian I.T. companies listed on the BSE Ltd on their exposure, approach, and management towards foreign exchange risk. We investigated their annual reports from 2007 -2017 to understand their exposure and the adopted external foreign exchange risk management techniques. We further assessed the impact of these foreign exchange risk management techniques on the firm’s value. Findings: The impact of foreign exchange risk management was significant on small-cap I.T. companies for the study period. Though for the during the 2008 crisis term, it was found to be insignificant. Practical/Implications: Foreign exchange risk management is crucial for Indian I.T. companies indulging in cross-border trade. The current study incorporates external methods of managing foreign exchange risk management; hence even if the impact were found to be insignificant for Mid Cap and some Large-cap companies, they would be practicing internal hedging methods, which puts a strong case tapping trillion-dollar business through a fully functional competitive International Financial Centre. Originality/Value: Our paper contributes to the literature on Foreign exchange risk management by Indian I.T. companies, which contributes handsomely to India’s GDP and Foreign exchange reserve. JEL Classification Codes: F31, G32.

scholarly journals Foreign exchange transaction exposure of enterprises in Serbia

2016 ◽  
Vol 61 (209) ◽  
pp. 161-177
Author(s):  
Jasmina Bogicevic ◽  
Ljiljana Dmitrovic-Saponja ◽  
Marija Pantelic
Keyword(s):  
Foreign Exchange ◽  
Management Practices ◽  
Foreign Currency ◽  
Negative Impact ◽  
Practical Importance ◽  
Cash Flows ◽  
Foreign Exchange Risk ◽  
Exchange Rate Fluctuations ◽  
Exchange Risk ◽  
Foreign Enterprises

Enterprises involved in international business face transaction exposure to foreign exchange risk. This type of exposure occurs when an enterprise trades, borrows, or l?nds in foreign currency. Transaction exposure has a direct effect on an enterprise?s financial position and profitability. It is one of the three forms of exposure to exchange rate fluctuations, the other two being translation exposure and operating exposure. The aim of this paper is to assess the transaction exposure of enterprises in Serbia operating internationally. In addition to identifying and measuring transaction exposure, this paper explores the practical importance that enterprises in Serbia attach to management of this type of foreign exchange risk. We do not find significant differences between domestic and foreign enterprises in their choice of the type of foreign exchange risk exposure to manage. Although transaction exposure is the most managed type of foreign exchange risk, research has shown that, compared to foreign businesses, Serbian enterprises do not use sufficient protective measures to minimize the negative impact of this type of exposure on their cash flows and profitability. We expected that there would be a statistically significant dependence between the volume of enterprises? foreign currency transactions and the level of applied transaction exposure management practices. However, the results of our research, based on a sample of enterprises in Serbia operating internationally, show that transaction exposure management practices can be influenced by factors other than the level of an enterprise?s foreign currency transactions, such as the enterprise?s country of origin.

scholarly journals Bank Liquidity Risk: Significance of Financial Disclosure and Governance Practice

2021 ◽  
Vol 11 (9) ◽  
pp. 724-744
Author(s):  
Niluthpaul Sarker ◽  
Probir Kumar Bhowmik
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Corporate Culture ◽  
Liquidity Risk ◽  
Financial Disclosure ◽  
Annual Reports ◽  
Corporate Governance Mechanisms ◽  
Governance Practices ◽  
Governance Practice ◽  
Liquidity Crises

The objective of the study is to show the remedial effect of bank liquidity risk in the marketplace by disseminating financial information and practicing corporate governance mechanisms. The link between financial disclosure, corporate governance, and banks' liquidity risk management in Bangladesh is examined in this paper. The study used panel data on 32 commercial banks from the 2008 to 2018 with 346 observations collected from published annual reports. Based on the preliminary diagnosis, the study chose the two-stage least squares (2SLS) regression method to minimize the errors arising from heteroskedasticity, autocorrelation, and endogeneity issues. The study found that adequate financial disclosure and corporate governance practices minimize bank liquidity risk to maintain a stable image in the minds of investors and withstand immense regulatory pressure. To allow banks to detect issues early, they must implement changes quickly and be more robust to crises, thus risk management efficacy and excellent corporate governance implementation are required. Moreover, banks are mainly concerned about liquidity risk as it directly affects the market's performance and stability. Liquidity crises can be eradicated by proper monitoring and providing information pertaining to risks to prudent investors in a reliable and transparent corporate culture.

SEC proposes sweeping new liquidity risk management rules for mutual funds and ETFs

2016 ◽  
Vol 17 (1) ◽  
pp. 74-82 ◽  
Author(s):  
Michael Rosella ◽  
Bill Belitsky ◽  
Alexandra Marghella
Keyword(s):  
Risk Management ◽  
Mutual Funds ◽  
Financial Services ◽  
Management Practices ◽  
Liquidity Risk ◽  
Securities And Exchange Commission ◽  
Exchange Traded Funds ◽  
Content Type ◽  
Asset Value

Purpose To discuss a September 22, 2015 Securities and Exchange Commission (“SEC”) proposal for a set of broad and sweeping rules mandating that open-end mutual funds and exchange-traded funds (“ETFs”) develop and implement formalized and written liquidity risk management programs (“LRMPs”). Design/methodology/approach Describes the purpose of an LRMP, the six “liquidity buckets,” the nine factors that must be considered in determining an instrument’s liquidity, the need to continuously monitor the liquidity of each position, the set of eight mandated factors used to assess a fund’s liquidity risk, the requirement for a fund to define a three-day liquid asset minimum, the role of the fund’s board of directors, a separate rule permitting “swing pricing” to adjust net asset value to take into account the costs of unexpected redemptions or cash infusions, disclosure requirements, and proposed compliance dates. Findings In proposing this new program, the SEC stated that its goal was to enhance effective liquidity risk management practices by funds and thereby reduce the risk that funds will be unable to meet redemptions under reasonably foreseeable stressed market conditions. Originality/value Expert guidance by experienced financial services lawyers.

Sign in / Sign up

Export Citation Format

Share Document