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4 The 2012 <strong>guide</strong> to GLOBAL RISK TRENDS Navigating the new risk landscape The world is becoming an increasingly risky place to do business. Corporates must adapt to a new risk paradigm, with a greater range of risks to mitigate than ever before. To avoid pitfalls, expertise and a broader understanding of global risk are required. Michael Spiegel, Head of Trade Finance and Cash Management Corporates, Deutsche Bank Since 2008, the overall risk environment for corporates has been transformed by waves of financial, economic and liquidity crises that has swept through many developed economies. As we approach the end of the year, there are few who think that 2013 will be any easier. The slowdown across the emerging markets appears to be gathering pace, while geopolitical uncertainties persist in many of the world’s regions. Businesses must identify the key risks to which they are exposed if they are to navigate such troubled waters successfully. At Deutsche Bank, we identify four key risk trends facing our clients in 2013. We take time to get a deeper understanding of the client, its processes and its internal challenges and targets, to see how we can add value to its operations” Firstly, as corporate default rates begin to increase, so companies face increased commercial counterparty risk. Correspondingly, there is an increasing need to hedge that counterparty default risk. Next, clients also face counterparty risk relating to financial institutions. Managing their concentration risk has become all important, with far more attention paid to the credit quality of each individual counterparty. The times are over when corporates were willing to deal with one bank only. Thirdly, geopolitical risk now plays a bigger part in our clients’ thinking. As a result, we see an increase in hedging against country risk, and a greater focus on geopolitical strategy. Fourthly, many suppliers and distributors are experiencing a continuing liquidity shortage. As a result, mitigating supply chain risk is a growing theme for our clients. This often means companies must look beyond the risks to their own legal entity and consider the totality of the supply chain.
The 2012 <strong>guide</strong> to GLOBAL RISK TRENDS 5 In short, firms must identify all the different risk pockets in their organization, including the broader enterprise risk outside their own legal entity. Then, they must determine a suitable strategy to mitigate these risks. They will face decisions over where to pool their cash, how best to hedge their positions, how to get their chosen banks involved and whether to use private risk insurers. Finally, when evaluating a potential banking partner, in addition to evaluating credit and jurisdictional issues, clients must ask themselves a further question: Is the prospective partner committed to the business for the long term? Does it have the critical mass to stay in the business for 10 years? Can it manage the business successfully, and is it willing to invest in already-excellent technology and services for a sustained period? The pace of globalization means that companies now have counterparties in more countries than ever, in addition to foreign subsidiaries and joint ventures. We continue to support our clients, bringing them expertise with in-country client implementation and service through our network of offices around the world. Our solutions-based approach uses superior technology and state-of-the-art products that help our clients stay abreast of continuing developments. With the needs of the client at the heart of our business, we will continue to invest and expand to meet the challenging global business environment. Focusing on clients’ needs At Deutsche Bank, our superior approach to cash management and treasury services starts with our focus on the needs of the clients. We take time to get a deeper understanding of the client, its processes and its internal challenges and targets, to see how we can add value to its operations, rather than simply turning up with a basket of products in which we have an edge. We pride ourselves on our state-of-the-art technology solutions. We utilize the close links with colleagues in our award-winning sales or trading teams to provide hedging and FX strategies tailored to the needs of our clients. We also provide liquidity not only by making use of our balance sheet and sharing the risk with other banks, but also looking for innovative solutions, broadening the investor base over time.
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