Topic
Treasury Risk Management: FX, Rate & Credit Risk
The other half of treasury. It doesn't just move cash — it identifies, measures and manages the financial risks the business runs: currency, interest rates, and the counterparties it depends on. Getting this wrong can sink a profitable company; getting it right keeps risk inside a deliberately chosen appetite.
Written from 18 years in SAP FI & TRM — the R is Risk Management — these are the core concepts and decisions explained plainly, with what usually goes wrong. It's educational treasury practice, not investment advice. Start with what treasury risk management is, then follow the exposures that matter to you.
Foundations
FX
Hedging
Natural Hedging vs Financial Hedging
Natural hedging offsets exposures by structuring the business; financial hedging uses instruments for what's left. Why you reduce naturally first, then hedge.
FX Hedging Instruments: Forwards, Options and Swaps
FX hedging instruments explained: forwards lock a rate, options give the right for a premium, swaps exchange cash flows. Which suits which exposure.
FX Hedging Strategy: How Much to Hedge and When
FX hedging strategy: deciding your hedge ratio, tenor and timing — how much of an exposure to hedge, over what horizon, and static versus layered.
Interest Rate
Interest Rate Risk in Corporate Treasury
Interest rate risk is when rates raise floating-rate debt costs or cut investment income. The main lever is the fixed/floating mix; swaps and caps adjust it.
Interest Rate Hedging: Swaps, Caps, Collars and FRAs
The instruments treasury uses to hedge interest rate risk — swaps fix the rate, caps insure against rises, collars fund the cap, FRAs lock a single period.
Interest Rate Benchmark Reform: LIBOR to SOFR and Risk-Free Rates
The move from LIBOR to risk-free reference rates like SOFR and SONIA — why it happened, how RFRs differ, and what the transition meant for corporate treasury.
Commodity
Measurement
Value at Risk (VaR) in Corporate Treasury
What Value at Risk is, how it's calculated, and why corporate treasuries use it to size market risk — plus the limits that make VaR only half the picture.
Cash Flow at Risk (CFaR) Explained
Cash Flow at Risk measures the worst shortfall in a company's cash flow versus plan over a period at a chosen confidence level — the corporate answer to VaR.
Stress Testing and Scenario Analysis in Treasury
Treasury stress testing and scenario analysis probe the severe tail that VaR and CFaR leave undescribed — and fail on imagination, not maths.
Counterparty
Counterparty and Credit Risk in Treasury
Counterparty risk is the risk that a bank or partner treasury relies on fails to meet its obligations. Managed with limits, diversification and monitoring.
ISDA Agreements, CSAs and Collateral Management
How the ISDA Master Agreement, its schedule and the Credit Support Annex document and collateralise the counterparty risk in over-the-counter derivatives.
Accounting
Hedge Accounting Explained
Hedge accounting aligns the timing of a hedge's gains and losses with the hedged item, so the P&L shows they offset. Why it exists, and the three hedge types.
Hedge Documentation for Hedge Accounting
Hedge documentation: what you must designate at inception — objective, instrument, hedged item, risk and effectiveness method — for hedge accounting.
Hedge Effectiveness Testing and the Hedge Ratio
Hedge effectiveness testing proves your hedge offsets the hedged risk — the evidence you need to keep hedge accounting and avoid artificial P&L swings.
Governance
Risk Appetite and Risk Limits in Treasury
Treasury risk appetite is how much financial risk a company chooses to bear; risk limits are the measurable guardrails that enforce it — why both matter.
The Treasury Risk Management Policy
A treasury risk management policy turns risk appetite into enforceable rules — permitted instruments, limits, approvals — so hedging never becomes a bet.
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