Distressed Risk Management

A medium sized metals fabricator discovers that its hedge manager has created a complex speculative derivatives program masquerading as a hedge and is suffering a large financial loss, risking the company’s survival. The board and executive immediately seek the help of outside experts with objectivity and experience structuring hedge books to bring the situation back into control. We are selected to:

• regain control of the hedge book so it again covers operational risk
• safeguard the company with improved control and reporting

On taking control we simplify the derivatives book to a basic profile. Programs are then rebuilt for the main plant and all subsidiaries and control systems and hedge accounting are introduced. Over time commercial pricing is optimized to ensure all price risk is eliminated. Longer term we participate in the company’s hedge committee meetings and ensure a strong risk management culture is left in place.