With today’s increasing demand for transparency and accountability, an examination of your valuation process through the lens of key attributes is worthwhile. Reputational risk varies inversely with the quality of your financial statements, both for your company and for yourself as a treasury professional. Having an explicit, well-documented process in place to audit-proof reported valuations is your key to a strong reputation for transparency. If audit is a gateway, transparency is your passport. Having passage denied, even if later fixed, is a matter of reputation and goodwill to all users of your financial statements.
If you hold financial instruments that must be valued to report gains and losses, hedge effectiveness or off-balance sheet disclosures, a robust valuation process can contribute to your transparency. Although the valuation process ultimately depends on your portfolio holdings (more exotic issues may require more documented reasoning for valuations), there are steps you can take to increase reliability and decrease valuation risks. In this whitepaper, seven simple and practical steps are outlined and discussed.
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