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Financial risks and their management

Financial risk management seeks to support your company in achieving its financial targets and preventing unwelcome events.

Business always involves some kind of risks. The better you are aware of risks associated with your company's business, the better you can manage them and protect against them through relevant and effective measures in advance. Successful risk management also helps to gain a completive edge in the long run.

Funding and liquidity risks

Through effective funding and liquidity management, you ensure that your company is able to fulfil its payment obligations irrespective of external factors.

Your company should secure sufficient, well-balanced and well-performing financing in all circumstances. Funding liquidity risks and loan refinancing risks constitute the key risks against which your company  should hedge. Your company can mitigate risks through sufficient reserves, such as long-term committed credit facilities and a well-balanced loan repayment plan.

Interest rate risks

Interest rate risk management aims at reducing uncertainty related to interest expenses and interest expenses related to unfavourable interest rate movements.

Interest rate risk arises from changes in interest rates in bond markets. The more your company has floating rate debt, the greater is the risk associated with a rise in interest rates. Interest rate movements may bring about variations in cash flows and profits while weakening your company's business predictability.

You can use interest rate swaps as a tool to manage interest rate risks. With interest rate hedges, you can modify your company's market view and risk tolerance to be in line with interest rate risk.

Market risks

Market factors affecting your company's business differ depending on the nature of the business but may cause major fluctuations to profit performance and cash flow.  The management of market risks is the basis for predicting your company's business, maintaining liquidity and reducing profit fluctuations.

Exchange rate risks

Your company will be exposed to an exchange rate risk whenever it does business in a non-euro currency. Exchange rates may vary between the time of entry into the contract and currency repatriation or payment.

Your company can effectively hedge against exchange rate risks by means of currency hedging products. We will offer a hedging product to meet your company's needs in terms of flexibility, length and terms.

Customer and counterparty risks

By hedging against customer and counterparty risks, you can secure business with your foreign partner.

No matter how good your foreign business partner's financial standing, payment capabilities and delivery reliability are, your receivables may be in jeopardy caused by economic risks in the country of destination, such as economic and foreign exchange policy, and/or political risks, such as foreign and trade policy pursued by the country of destination.

Your company can protect against risks in international trade beforehand by doing business with reliable and recognised partners, selecting a relevant payment methods and using OP's solutions in your company's management of risks in international trade. These solutions also enable you to show your own payment capacity to your foreign business partner.