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Control the risk you actually carry
Market risk, credit exposure and liquidity pressure are related but distinct. A hedge may reduce earnings volatility while creating margin calls. Limits need named owners, escalation times and pre-agreed actions.
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Working relationship
Liquidity buffer = available cash and facilities − stressed cash requirement
What to keep separate
VaR is not a worst-case loss and a profitable position is not necessarily liquid.
Your task
Draft a breach response with immediate action, independent escalation and a review deadline.
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Key terms in plain English
- Hedge
- An arrangement that changes exposure to uncertain prices or other variables. It reduces specified risks, not necessarily every risk in a business.