The Corporate Treasurer’s Corner: A Paradigm for Considering Legal Issues That Relate to Hedging and Managing Risk
Managing a company’s cash and financial assets equates to managing a company’s risks. This is axiomatic. Derivatives—and related contractual arrangements—have been widely used for risk management purposes in the financial markets for many years. This is common knowledge.
Nevertheless, in our experience, there is a wide range of familiarity and expertise among corporate treasury teams (broadly defined to include the in-house attorneys who support such teams) when it comes to the use of derivatives for risk management purposes, in general, and legal issues related to their use, in particular.
At one end of the spectrum is the extremely sophisticated corporate treasury team supported by one or more dedicated in-house attorneys with deep experience negotiating derivatives trading documentation. This scenario, while ideal, is not very common, even among some of the largest companies.
At the other end of the spectrum is a solo corporate treasurer or chief financial officer using derivatives for the first time and working without the support of a dedicated attorney (in-house or otherwise). This scenario, while less than ideal, is also more common.
To read the full post, please visit our BR Derivatives Report blog.