Stop driving risk management by the rear-view mirror

Would you drive your car by only looking in the rear-view mirror? Probably not, but that's how many companies approach risk management - only implementing hedging after being hit by a major adverse price move.

Reactive fixes in finance are far too frequent. Consider a few examples:

Barings Bank - controls after the collapse

Due to weak controls, Nick Leeson built up huge unauthorized derivatives positions which ultimately sank the 233-year-old institution.

Reactive fix: Widescale adoption of segregation of duties (the same person being unable to both enter and confirm trades).

Enron - governance after fraud

Enron used aggressive accounting and off-balance-sheet structures to hide debt and inflate profits, destroying billions in value and compromising major audit firms.

Reactive fix: The Sarbanes-Oxley Act, which forced stronger internal controls and significantly improved operational risk management and financial reporting.

2008 Global Financial Crisis - capital and liquidity after the crash

Excessive leverage, thin capital buffers and complex securitized products caused a systemic financial crisis with the failure of Lehman Brothers, the near-collapse of AIG, and an ensuing global recession.

Reactive fix: Basel III capital and leverage rules, liquidity coverage ratios and regular stress tests for large bank.

Wizz Air - fuel hedging only after prices spiked

Before the Russia-Ukraine war, Wizz Air had shifted to a no-fuel-hedging stance. When oil and jet fuel prices surged after the invasion, the airline was heavily exposed and took significant hits to costs.

Reactive fix: Restarting the fuel hedging program once the damage from the unhedged exposure was clear.

Many corporates learn the hard way

These examples are just a few siblings from an unfortunately large family. A broker FX survey in early 2025 revealed that over three-quarters of UK and US corporates suffered losses in 2024 due to unhedged FX risk, and many are now lengthening hedge tenors or increasing hedge ratios in response.

Don't try and install a fire alarm after the house has burned down

Risk management needs to be proactive and not reactive. But it doesn't need to be expensive, complex or take long to implement.

At Forge aHedge we can help you manage market volatility and protect profit margins before the next shock. If you want to move from reactive damage control to deliberate risk management, reach out – we’re always happy to chat.

Let’s Forge aHedge!