Risk Management in Practice: Ensuring the Right IMAGE©
THERE ARE MANY APPROACHES TO risk management in practice, and each firm needs to institutionalise the practice that works for its Treasury design, culture, objectives, and management.
The IMAGE© methodology consists of five easy-to-implement and manage steps:
Figure 19.1 outlines the IMAGE© methodology.
The objective of the risk identification stage is to identify the financial risks to which the firm is exposed. These arise because of the nature of business activity and geographical presence across markets.
How does a firm know which risk it is sitting on? Anything that moves or has variability is a risk—these include market exposures, supply chain elements, balance sheet items like accounts receivable (ARs) and inventory across currencies, dependence on liquidity, exchange control, process implementation, and so on.
Risk identification uses some simple methods to identify, bottom-up, ...