Listen to your auditors as well. Remember that risk management is not an exact science, so don't be fooled by spuriously precise answers or be impressed by people who talk in such terms. 1.20 Policy statements should give substantial objectives and policy guidelines, as opposed to the meaningless platitudes that abound in modern corporate life. Dealing with Derivatives 2.1. Don't be put off the use of derivatives by recent well-publicised problems.
Derivatives are very useful tools, when used properly.
If you are thinking about using derivatives, be clear why. Derivatives can therefore increase or decrease your overall risks, depending on how you use them. In particular, make sure that you have not agreed to hidden options or other contingent payoff clauses that could lead to large losses later on. When dealing with derivatives providers, recognise that they always know more than you do. When considering contracts with derivatives providers, satisfy yourself that you broadly understand the risks you are thinking of taking on.