Nordea: Financing risks of most large companies are well managed

03.06.13 9:00 | Lehdistötiedotteet

Many companies are exposed to various financing risks even though more than every second large company has a written financing risk policy. The most hedged financing risk is the exchange rate risk related to the company's cash flows.

According to a survey conducted by Nordea, market risk management is systematic in large companies. However, they often concentrate on the management of familiar risks, such as exchange rate risks in exports or interest rate risks of loans.

- More and more large companies own subsidiaries outside the eurozone which generate a significant part of the group's earnings in their respective currencies. The risks caused by this on the company's earnings and balance sheet are managed clearly less frequently, says Chief Analyst Jari Liede who gives financing risk advice to companies.

In Finland, the hedging horizon of companies is shorter than in the other Nordic countries. When compared to international companies, the difference is even greater.

- This may mean that Finnish companies are more exposed to negative exchange rate movements than their foreign competitors, says Jari Liede.

The financial crisis has affected financing risk management

The significance of counterparty credit risk has grown considerably as a result of the financial crisis. More than half of the companies that participated in the survey have set a minimum credit rating for their derivative counterparties.

- By far, the most common limit is A-/A3, and for certain companies, it may be as high as AA-/Aa3, says Seppo Sederholm from Corporate & Institutional Banking.

The share of liquid cash assets is also larger than before and their safe diversification is high on the agenda.

Small enterprises can take avail of the best practices developed in large companies

In relative terms, market risks are just as high in small enterprises as in large companies, but their management is not as systematic. That is why it would be advisable also for small enterprises to draw up a risk management policy.

- When you write these things down, it forces you to identify risks and assess their significance. When doing this, it is natural to use the practices of large companies as a check list, says Jari Liede.

Nordea surveyed the financing risks of large companies in early 2013. A total of 168 large companies from Finland, Sweden, Norway, Denmark, Poland, Latvia, Lithuania and Estonia participated in the questionnaire survey.

For further information:
Jari Liede, Risk Advisory & Solutions, +358 9 165 59935
Seppo Sederholm, Corporate & Institutional Banking, +358 9 165 42320
Anni Kuusisto, Chief Press Officer, +358 9 165 42320