6533b821fe1ef96bd127c116
RESEARCH PRODUCT
Why FX Risk Management Is Broken - And What Boards Need to Know to Fix It
Håkan JankensgårdAlf AlviniussenLars OxelheimLars OxelheimLars Oxelheimsubject
OfficerIT riskShareholderEnterprise risk managementbusiness.industryFinancial risk managementAccountingBusinessForeign exchange riskRisk managementTreasurydescription
In this paper we rethink the role of Foreign Exchange Risk Management (FXRM) in corporate management. We believe it is fair to characterize FXRM, on the whole, as a legacy activity rather than something that reflects a realistic cost-benefit analysis at the enterprise-level. The Board of Directors, as the designated guardians of the interests of shareholders, has a key role in setting the firm on a path towards a cost-efficient and centralized FXRM that preserves the firm’s transparency and predictability towards the investor community. A policy conclusion from our analysis is that responsibility for FX policy should shift from the traditional Finance/Treasury orientation to a group risk function (e.g. a Chief Risk Officer) supported by a risk committee dedicated to integrated risk management.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-01-01 | SSRN Electronic Journal |