watch out..........

There are two principles of financial risk management.
1. protect your back
2. Always Remember 1

There are always entities who forget pt 2 and there are entities who are unable to judge the size of the back and hence cannot protect their back. Earlier markets used to have phases of lull and volatility. We recollect one such lull in 2007 when euro was stuck in a mere 300 pt.range for full three months. Just to make a contrast, in 2001 we were at the desk holding the line for a copper quote on LME. 1767 / 1790 .... the trader added, Its an indicative only (13$ spread and that too indicative) its like borrowing at L+ 1000 bp in Oct `08 which too was at one time indicative.

Copper rose incidentally from 2001 to 2009 .It saw 8000$/t . The rumour is that cost of olympic stadium has increased with rise in copper and other metals. Well the guv is there to bail them out. But what about others ? for others self help is the best help.

There is again a common fally. The moment a contract is signed the exposure begins. Yes it does, but it may not be in a format compatible to implement a meaningful hedge plan. Put in other words, the effectiveness of the hedge plan may not be noticeable in immediate financial year.An exposure which is getting rolled over every six months for as good as three years is not an exposure.Its like sanctioning a blueprint of a project whose construction may start 3 years hence. The project cost today is 100 crores with Rs. 50 crore of forex element in form of imported machinery whose delivery schdule is not yet fixed. The whole board will make a fuss out of it but none would have a solution.

Then there are always common problems which assume the shape of critical mass -- all thanks to the extraordinary volatility of yester years which are these days appearing as daily/weekly movements. What should be the yardstick to base decisions on, what should be the instruments to be used to cover the back and more important what is the size of the back ? .........So finally the SME promoter runs to an expert who willingly runs the treasury operation as an BPO. -- But tell us -- is your operation really so big OR your understanding about markets so small ?

Talk to us. we believe in empowering you & your staff to understand "backs", what can hit them and how to protect them . -------Ater which , we step back !!