Abstract: The key to companies successfully using hedging to create shareholder value is communication. It sounds simple, but the inability to communicate the structure and success of this risk management strategy could destroy – rather than preserve a firm’s value. Risk management managers have to clearly articulate to top management and board members why the hedge is needed and the source of the potential benefit. Managers also must make investors aware that some losses may occur.
Author: René Stulz
Date: Fall 2013