We have surveyed many companies regarding their goals for financial risk management. The vast majority of companies have stated that their ultimate goal is to reduce volatility to
plus/minus zero around zero.
Companies feel as long as it is not prohibitively expensive, the goal is not just to protect 75 or 80% of their exposure - as often written in the risk management policy - but rather to protect as much as possible. They state that the policies are written with significant room in order to be able to state that the company is policy compliant. Goals are defined with room, but lack definitive intend.
Does your company:
- 1) Manage to the minimum protection (i.e. 80%)?
- 2) Manage to 0 +/- zero around zero?
- 3) Take a view on the direction of the underlying exposure and given anticipated market direction actively decide to manage towards either end of the allowed spectrum?
