According to Debus of KPMG Germany -- one of the leading auditing firms in the world -- speaking at a risk management seminar organized by Garanti Bank’s corporate banking division on Thursday, one of the primary reasons for the global financial crisis wreaking havoc on markets was the over-reliance by banks and other corporations on computer models that could not predict volatile price movements.
Debus stated that the volatility of foreign exchange and commodity markets has made it difficult to hedge against risk, as companies become more and more interconnected with external markets and expose themselves to more foreign currencies and different commodities used in production. Moreover, Debus highlighted that the increase in the cancellation of orders by customers or suppliers becoming unable to meet company demands during the financial crisis meant that another dimension to the risk variable had been added.
Stating that effective financial risk management is not independent of exchange and interest rates, commodity prices and counterparty risks, Debus stated that the lessons learned from the financial crisis pointed toward centralized treasury departments in order to better manage company-wide financial risk. He also added that there isn’t one specific solution to managing such risk, stating that all companies must design their own methods to hedge against risk by increasing transparency of transactions, accountability and strong corporate governance.
Garanti Bank board member Cüneyt Sezgin, who also spoke at the event, said regulation in the Turkish banking sector has had positive effects on its performance but stressed that “too much regulation can be just as bad as no regulation.”
