In a recent webcast we explored how globalization has increased currency risk and posed new challenges for investment managers. 

Given an increasing portion of revenue that many companies harvest from multiple countries, managers must make additional considerations when monitoring portfolio risk.

The emphasis of discussion came from the headlines: How are firms responding to the European sovereign debt crisis? Furthermore, how can they control their currency exposure in this environment?

View the full recording of the webcast. You will need to enter your business email address.

A similar discussion will be occuring at both our FactSet Investment Process Symposium in the U.S. and in Europe. We encourage our clients to join us at those events. 

Below, we briefly summarize some of the main themes contained in that talk. 

• If you don't control currency exposure, you're held ransom by it
• Volatility in general runs up when fear increases
• An exposure-hedged portfolio will experience the least losses, in our model, if one or more country leaves the euro
• Most people focus on factor, idiosyncratic risk, and other types rather than currency risk
• One can stress test various countries leavnig the euro due to interest rate parity relationships

 
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Once again FactSet will be attending a two-day conference hosted by GARP (the Global Association of Risk Professionals) from February 28-29. We hope to see you there!

This year we wanted to share with you the Top 3 Sessions we're looking forward to most this year at the GARP Annual Risk Management Convention. 

1. In the keynotes this year, we were intrigued to see two presentations that seem to piggy-back off one another.
   
   They are The Wall Street Monolith Myth and Medium Term Prospects for Enhanced Financial Stability. The reason I'm intrigued is the first presentation discusses what it was about Bear Stearns corporate culture and process that made it fail while Goldman succeeded. The following presentation with the less interesting title has the distinction of being led by none other than Gerald Corrigan of Goldman Sachs. 
   
   Kidding aside, however, after what must be years of research, what does author William Cohan have to say about the avoidable mistakes that Bear Stearns made?Also, from an investor perspective and a managerial perspective what did it take for big banks like Goldman to outlast the conditions of 2008-2009?
    
2. The next session that caught my eye was Stress Testing: Computability and Emergent Phenomena. The most interesting point that Professor Timur Gok, who will lead the session, will discuss is whether you can truly manage risk with a "rearview approach." In short, can looking back truly be an effective way to move forward? I'd say yes, in the sense that we can only learn to mitigate risk from looking at the likely investment conditions it creates. And while looking at past crises to anticipate the shock of current ones is by no means a perfect solution, it is one that gets us as close as we can get (short of being fortune tellers) to anticipating the impact of a market shift. Stress testing also has the honored distinction of being deemed valuable to be required by many new accounting standards such as Dodd-Frank.
    
3. Finally, Geo/Political Risk Amidst World Turmoil rounds out our top three sessions. This session is likely to be a packed session, considering all we've seen from Europe. I'm particularly interested in hearing about how diversifying on a country basis may now pose unwanted risks. The session, led by Daniel Alpert of Westwood Capital, will also focus on the impact that politics has on the market. It's an extremely relevant topic for the eurozone where several heads of state must agree to come to any resolution. And also, where austerity measures have caused a wide range of reactions in Greece and elsewhere.

More on the Annual Conference agenda.

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Recently on FactSet's podcast, we spoke with Laurence Wormald, Head of Research for Sungard APT. In our conversation we discuss one of the topics most on risk managers minds today: the ongoing crisis in Europe.

In our podcast, we asked how investors can gauge expected results from a possible Euro breakup, default of one of the GIIPS countries, and other scenarios for the troubled eurozone. Hear the episode here, or read the recap.

Want more on Eurozone risk? Register for our webcast, Managing Risk in Uncertain Times, with FactSet's Steve Greiner as he discusses how currency risk can increase in tumult-afflicted GIIPS-country companies and discusses options for measuring portfolio risk in multi-currency Eurozone fallout scenarios.

Related Links:

FactSet's audio podcast with Laurence Wormald

Recap of our interview with Wormald

Registration link for free webcast: Managing Risk in Uncertain Times