Managing Risk and Opportunity through Uncertainty

CENTRALIZATION OF RISK MANAGEMENT (CONT.) Corporations continue to deploy various constructs to achieve greater centralization and more effectively manage risks. Almost half (45%) of companies reported using an in-house bank, 90% of which did so on a global or regional basis. 72% utilised shared service center constructs in order to establish processing hubs. CENTRALIZATION OF RISK MANAGEMENT Level at Which Risk is Managed Implementation of Intercompany Netting Process Percentage of Intercompany Flows Participating in Netting System Most of the companies surveyed (80%) reported managing risk on a centralized basis and do so utilizing constructs such as netting, in-house banks, and shared service centers. With less than half (48%) of respondents having reported implementing an intercompany netting process, netting exposures across entities as a natural risk management technique appears to be a missed opportunity among a number of corporates. Even among those that do, only 54% include more than 75% of intercompany flows in their netting system. No Yes Centralized Local Regional 11% 9% 80% 48% 24% 16% 16% 30% 52% 14% 25% or less 26-50% 51-74% 75-94% 95% or more 54% 72% Use of Shared Service Center(s) 4% 57% 28% 11% Multiple regional IHB Other Single global IHB Percentage of Intercompany Flows Accounted for by In-House Bank No Yes 30% 39% 11% 11% 9% Use of In-House Bank 45% 55% In-House Bank Construct 24% 66% 10% 25% or less 26-50% 51-74% 75-94% 95% or more Both No Yes, insourced Yes, outsourced 90% 24 25