5 Risk Management Myths Debunked
Many eFX companies are reluctant to utilise risk management software, often believing that they’re costly, complex, and unnecessary to the success of their business. In reality, this is not necessarily true, and a quality risk management system is imperative to ensuring that your P&L remains stable in the event of market volatility.
Here are five of the most common myths surrounding risk management, and why you shouldn’t pay attention to them.
1. It's too rigid
False! Lowering the volatility of the P&L not only increases the value of your business, it also improves the sleep quality of your business owner - so it’s well worth exploring. Everyone has their own risk limit, and our technology allows you to see how different limits affect your P&L and P&L variation, so you can pick the one that best suits you.
5. It’s expensive
Not only can risk management be affordable, it can actually become self-funding. As long as you have the right technology to identify changes, there’s sufficient variation in pricing to wait for opposing skew to hedge very cheaply.
2. Risk management is the same as bucket tipping
Well, maybe it is. However, bucket tipping is still a million miles away from optimised risk management. The trouble with indiscriminately tipping your risk out is that you have very little control over the conditions. Is it the right time to trade? What are spreads like? What specifically are you tipping - currency pairs or currencies? You need the intelligence to tell you when, based on a range of parameters.
3. Reconciliations are difficult
At MahiFX, we make it simple. We can host reconciliations on either a currency or currency pair basis in near real-time with whatever books and records a client wants.
4. Skewing with risk doesn't matter
This comes down to whether skewing is an issue for your business or not. If you don’t care about it, there is no downside. If you do, you’ll win some trades you wouldn’t have, which also reduces risk. If risk is added, you’ll have a little extra cash to fund any hedging costs. It’s a no-brainer!
