Managing Financial Risk in an Evolving Market: Insights from Market Leaders
Managing Financial Risk in an Evolving Market: Insights from Market Leaders
In an increasingly complex global economy, understanding financial risk is no longer optional — it’s essential.
In the latest episode of FX in Focus, Sean Coakley, Director of Strategic Sales at Corpay Cross-Border, sat down with Craig Haymaker, Managing Director of Hedging Solutions at Eris Innovations, to dissect the evolving landscape of financial risk and the strategies organizations are using to stay resilient.
The conversation was rich and wide ranging, and we have published the podcast and the companion article in two parts. Here we present Part 1.
Let's begin, shall we?
As market volatility persists and regulatory frameworks shift, businesses and institutions are facing increasing pressure to not only understand their exposure but to actively mitigate it.
From the distinct challenges facing corporates and financial institutions to the growing role of private credit and liquidity strategies, this discussion will offer a candid look at how organizations are navigating risk and managing to thrive.
Understanding Risk Philosophies: Corporate vs. Institutional Mindsets
Financial risk management isn't one-size-fits-all. As Sean and Craig explore, the type of organization you are – a multinational corporation, institutional investor, or financial institution – drastically shapes how you approach risk.
For corporates, FX risk might be a line item buried deep in the P&L. It’s material, but rarely existential, asserts Sean.
Sean, who specializes in supporting corporate and institutional investor clients, notes that while FX risk is material for these entities, it’s rarely existential. Companies might experience margin pressure or cash flow volatility due to currency swings, but these challenges usually don't threaten their survival.
Whereas for banks and insurance companies, interest rate risk is woven into the very fabric of their operations – it can make or break them.
Craig works with financial institutions where interest rate risk is often existential. “For large institutions, interest rate risk is part of their daily operations – it's baked into their lending products, asset portfolios, and funding strategies,” he explains. “But for smaller community banks, an adverse rate movement can be deeply destabilizing.”
My goal,” Craig says, “is to remove barriers to managing interest rate risk – to democratize access to the tools and make it fundamentally easier to do.”
The Hidden Impact of FX Exposure
Sean shares that at Corpay, clients range from mid-market companies with $5 million in FX exposure, to multinational organizations with exposures approaching 11 figures. As such, no two clients approach FX risk in the same way.
“A manufacturing firm sourcing 60% of its inputs in Mexican pesos is going to feel currency movements much more directly than a SaaS company with international payroll,” Sean explains. “But even businesses with high margins and low direct exposure can suffer – they just don’t always see it right away.”
For example, a tech company might be losing millions annually in unhedged operating expenses, but without proper analysis, those losses can remain hidden in the P&L or cash flow statements unless they are made visible – often by consulting with experts.
Sean emphasizes the importance of bringing visibility to this risk so that organizations can take proactive steps to protect profitability.
Hedging as a Competitive Advantage
Risk management isn’t just about downside protection; it’s a pathway to operational flexibility and financial strength, it is learnt. Both Sean and Craig agree that when done well, hedging enables businesses to take on more risk strategically.
“Effective risk management reduces volatility, improves working capital, and enhances your ability to plan,” Sean says. “That means you can carry more debt in your capital structure, increasing your return on equity and business valuation.”
Craig echoes this sentiment from the institutional side: “Managing interest rate risk allows institutions to price assets more competitively and gives them greater control over deposit and lending strategies. It's not just about compliance – it’s a true differentiator.”
Liquidity in Private Credit: A Growing Need
As traditional banks pull back from certain segments of the credit market, private credit providers are stepping in – and they face their own set of challenges. Many of these funds operate with limited liquidity windows and need tools to manage the timing mismatch between asset realizations and investor redemptions.
Corpay addresses this gap by offering uncollateralized hedging facilities and flexible FX execution options that help funds reduce liquidity drag. “We’re not regulated in the same way a bank is regulated, which allows us to offer structures that minimize cash requirements while still protecting against risk,” Sean explains.
Craig adds that the move toward evergreen fund structures – particularly in private credit – has made liquidity and rate risk management even more critical. “Being able to hedge funding volatility allows these funds to remain agile and meet redemption obligations without selling assets at depressed values.”
The Role of Derivatives in a Volatile Market
Another key theme of the discussion is the increasing use of derivatives – particularly interest rate swap futures – by institutional investors and lenders.
“Derivatives allow these institutions to synthetically lock in interest rates and reduce volatility in their funding costs,” Craig explains. “We’re seeing this not only among mortgage originators but also in private credit and asset-based lending.”
This proactive approach allows firms to protect margins, stabilize cash flows, and remain competitive even in rising rate environments.
Regulatory Shifts and Market Structure Transformation
The conversation also touched on the long-term regulatory changes stemming from the 2008 global financial crisis. These frameworks have transformed how banks manage capital, risk, and liquidity. While they’ve improved transparency and reduced systemic risk, they’ve also driven up the cost of doing business.
As a result, many traditional lenders pulled back from segments like mortgage origination, creating space for non-bank lenders and private capital to fill the gap. But these alternative players face the same FX and rate risks – just without the same regulatory infrastructure or oversight.
“It’s a classic case of risk not disappearing, just transforming,” Sean observes. And in today’s post-COVID environment, Craig sees a cautiously optimistic trend toward deregulation that may spur further innovation in credit markets.
Final Thoughts: A Strategic Approach to Risk
At the end of the day, managing financial risk is no longer just about weathering volatility – it’s about unlocking growth, scalability and stability. Whether you're a community bank navigating rate risk, a multinational grappling with FX exposure, or a private credit fund juggling liquidity windows, proactive risk management can be your ally.
By leveraging tools like derivatives, swap futures, and customized hedging strategies, organizations can turn financial risk into strategic opportunity.
As Craig puts it: “When you do financial risk management well, it allows you to take bigger, smarter risks elsewhere in your business.”
This article has been adapted from Sean and Craig’s two-part video podcast on Financial Risk, FX Hedging, and Hedge Accounting, published as part of Corpay Cross-Border’s FX in Focus series. Our guests engaged in a lively discussion on the challenges of managing risk in an evolving market.
Click here to book a meeting with Sean
Click here to book a meeting with Craig
DISCLAIMER: Opinions expressed in this article are those of the author. This article is for informational purposes only and does not constitute advice. Hedging products involve trade-offs, risks, and costs, and results may vary. Before making any decisions, consult an independent advisor not affiliated with Corpay to ensure that the solutions discussed are suitable for your business needs. A comprehensive under-standing of the complexities, benefits, and drawbacks of each hedging product is essential.
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