For neophyte hedgers
The preliminaries for instituting a derivatives-based risk management program include the following steps:
- Identify market exposures that could significantly impair profitability.
- Quantify how much of the exposure under consideration to address.
- Educate yourself as to the various types of derivatives – how they’re designed, how they’re priced, how they’re traded, and how they perform.
- Determine the desired length of time for the intended hedge coverage.
- Evaluate achievable hedge objectives that current market conditions allow.
- Select the hedging derivative (i.e., type and size) consistent with the company’s risk appetite.
- Assess the expected hedge performance under alternative market scenarios.
- Draft and implement policies to control for trading abuses and compliance with statutory and accounting requirements.
For the uninitiated, each of those steps could be daunting. Kawaller & Company will guide the process from start to finish, assuring comfort and understanding by all the necessary personnel. Instituting a disciplined hedging program could be only days away!
For current hedgers
For many organizations, hedging knowledge is concentrated with an individual or a small group; and in most such cases, senior management and corporate boards are ill equipped to assess the hedging strategies or how they are devised and executed. Kawaller & Company will review and evaluate current risk management practices and policies and offer a win/win proposition: Either we will reinforce the confidence that you’ve place on your risk managers, or we’ll provide concrete suggestions to improve or enhance current operations and add greater discipline to your risk management processes.
Services also include full range of support relating to the accounting of derivatives, including writing or revising hedge policies, preparing hedge documentation, devising hedge-effectiveness testing methodologies, performing hedge-effectiveness tests in accordance with prescribed policies, generating derivatives valuations, and calculating amounts for journal entries and disclosures.
For litigants or legal counsel
Kawaller & Company assists counsel in litigation where the use of derivatives play a role. Kawaller has worked both as an expert witness and as a behind-the-scenes consultant during the initial stages of case preparation. (A listing of litigation experience is presented in Mr. Kawaller’s CV.)