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How CFOs and CIOs find hedging help

Ed Zwirn | Jan. 31, 2012
With commodity prices on a roller-coaster ride, and the world's currencies in a state of frightening flux, companies large and small have become mindful of the need to keep up with ever-more-complex derivatives and other hedging strategies. And the actions of standards-setters only add to the challenge.

Theories Of Evolution

SunGard was formed in 1983 as a spinoff of the computer services division of Sun Oil Co., during a period of low crude oil prices. The name of the company originally was an acronym for Sun Guaranteed Access to Recovered Data, a reference to the disaster recovery business it helped pioneer.

SunGard continues to have a solid grounding in disaster recovery, which currently accounts for about 33% of its business, says Paul Bramwell, senior vice president, treasury Solutions, for SunGard AvantGard.

But the fortunes of SunGard, which as a hosted disaster recovery provider makes it one of the original cloud companies, are increasingly up in the cloud. "It's one of our strategic growth areas." CFOs and CIOs, he says, can go cloudward to "get rid of any operational issues, we take all that on board with no loss of connectivity and function." He adds, "There's always a healthy level of paranoia, but what we've seen is a big push to cloud-based solutions."

Reval's Brimfield agrees. "I think that we're seeing a shift," he says. "In Y2K, software-as-a-service wasn't called software-as-a-service. Now we're actually seeing RFPs that state SaaS as a requirement."

He notes that "Reval from day one has been software-as-a-service. If you've got the URL to get online to, whether at home or on the beach in Bermuda, you have access to the application. We buy the servers, we buy the disaster recovery and free up the client from having to worry about software. We just allow you to do your job."

The Lower-Tech Way

That said, there are still plenty of companies out there going for the lower-tech solutions to hedge accounting.

"The reality is that there are plain vanilla derivatives like futures, swaps and options," that can be tracked via spreadsheet, says Ira Kawaller of Kawaller & Co., a Brooklyn, NY-based risk management solutions consultancy. "Most of my clients have fewer than half a dozen contracts," he says.

While some of his customers include dairy companies hedging the price of cheese by purchasing cheese derivatives, but "if it's a major bank or financial institution they may have thousands of contracts, but they won't be my clients.


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