A View Inside Corporate Risk Management

A View Inside Corporate Risk Management

Gordon M. Bodnar 

Johns Hopkins University – Paul H. Nitze School of Advanced International Studies (SAIS)

Erasmo Giambona 

University of Amsterdam – Finance Group; Tinbergen Institute – Tinbergen Institute Amsterdam (TIA)

John R. Graham 

Duke University; NBER

Campbell R. Harvey 

Duke University – Fuqua School of Business; National Bureau of Economic Research (NBER)
May 16, 2014

A number of theories have been proposed to explain why firms hedge. Unfortunately, these theories are hard to test: While we might observe the hedges, it is hard to answer the question of “why” hedging occurs. Our paper attacks the “why” by directly questioning the managers that make the risk management decisions. Our results present a fresh, inside view of corporate risk management. Rather than hedging being conducted solely by “firms”, our results suggest that personal risk aversion in combination with other executive traits plays a key role in whether a company hedges. As such, our results suggest an important deficiency in many modern theories of risk management which ignore the role of the individual manager.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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