The thin capital base of many non-listed companies continues to be chipped away by unexpected movements in the financial markets. Dealing with the effects of this volatility and affording companies more flexibility in operational decision-making is the main benefit of risk management. So, it would seem that risk management is alive and well – right?

Subjectively speaking, many factors support this view. Given the emergency injections of liquidity by the governments in many places, long-term thinkers are planning for “inflation”, while the market responds to “deflation”. Lower commodities prices and a reduction in economic investments are fuelling fears of a resurgence in upward price pressures. Rejoicing about dollar strength is dulled by premonitions of the next dollar collapse. These contradictions present the clearest argument in favour of using derivatives for hedging purposes.

“It takes two to tango!”

But there has never been a shorter list of banks willing to take part in such transactions. The insistence with which companies are inviting bankers to the dance floor, is equalled or surpassed by the banks’ unwillingness to oblige. Thus, it would indeed appear that the answer is: dead – If nobody wants to dance!