Unformatted text preview: ues on the Company’s financial performance. The Treasury reports to
the Chief Financial Officer. The responsibilities of the Treasury includes the proposal of the
Company’s corporate risk management policy and its implementation, and the evaluation of the
effectiveness of the Company’s overall risk management strategy.
The Company may use derivative and non-derivative instruments to implement its overall risk
management strategy. However, by using derivative instruments, the Company exposes itself to
credit and market risk. Credit risk is the failure of a counterparty to perform under the terms of
the derivative contract. Market risk is the adverse effect on the value of a financial instrument
that results from a change in interest rates, currency exchange rates, or commodity prices. The
Company addresses credit risk by restricting the counterparties to such derivative financial
instruments to major financial institutions. Market risk is managed by the Treasury. The
Company does not hold or issue financial instruments for trading pur...
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This note was uploaded on 02/05/2014 for the course ECON 101 taught by Professor Gottlieb during the Spring '08 term at Rutgers.
- Spring '08