The Top Five Things That Must Be Established When Setting Up a Hedging Program
Minneapolis, MN | January 17, 2024 | By: John Trefethen, Director and Co-Founder
This week’s Top 5 list is the top five things that must be established when setting up a hedging program.
Number 5 – Risk Identification and Assessment – Clearly identify the specific risks and quantify the magnitude of those identified risks.
Number 4 – Hedging Objectives and Strategy – Clearly articulate the objectives of the hedging program. Based on identified risks and objectives, develop a comprehensive hedging strategy.
Number 3 – Risk Tolerance and Policy Guidelines – Define the acceptable level of risk exposure and determine the degree to which the company is willing to accept market fluctuations and develop a set of clear and well-documented policy guidelines that outline the parameters of the hedging program.
Number 2 – Documentation and Compliance – Ensure that all hedging relationships are formally documented and comply with relevant accounting standards such as ASC 815 and IFRS 9.
Number 1 – Monitoring and Reporting Mechanisms – Implement robust monitoring procedures that regularly assess the performance and effectiveness of the hedging program and develop a reporting mechanism that communicates the results of the hedging program to key stakeholders.
Next up: Thank you for tuning in to this week’s Top-5 list, and check back again next week for another HedgeStar Top-5 list.
Author: John Trefethen, Director and Co-Founder
Mobile: 612-868-6013
Office: 952-746-6040
Email: jtrefethen@hedgestar.com
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Megan Roth, Marketing Manager
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Email: mroth@hedgestar.com
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