Taking the “Risk” out of “Risk-Management”

By Prasanth Prasannakumar and Jim Lawrence

O verriding confidence and acknowledgement of the enormous challenges that lurk behind every geopolitical corner – that is how we can characterize the spirit of shipping companies that responded to the recent Deloitte & Touche/Marine Money Survey of Maritime CEO’s/CFO’s.

One of the noticeable findings from the survey results was the widespread but very uneven use of derivative instruments by the maritime industry. About 25% of the respondents plan frequent use of interest rate hedging in the next 12 months. In addition, another 50% expect moderate usage during the same period. This brings the total up to 75%, an overwhelming indication of shipping’s comfort with interest rate instruments.

The survey findings about the absolute number of firms using interest rate derivatives are impressive. With central banks and governments all over the world trying to kick-start economies by lowering interest rates, LIBOR has been under pressure. Since 2002, LIBOR has been inching its way down, so it is not surprising the respondents are attuned to the interest rate hedge.

This is only an excerpt of Taking the “Risk” out of “Risk-Management”

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