Introduction to Financial Risks
FMO finances companies, projects and financial institutions in developing countries and emerging markets. Developing countries are often considered high risk, and even their most promising businesses often have insufficient access to the financing needed to reach their potential. FMO fills this gap with a range of services and products.
In this context, FMO has a particular financial risk appetite. The only risk FMO is actively pursuing relates to credit risk stemming from debt and equity instruments and private institutions in developing countries. This credit risk profile is supported by holding very prudent levels of capital and liquidity and though strong diversification of the portfolio over regions and sectors. Although other financial risks cannot always be fully avoided, FMO mitigates them as much as possible. FMO does not have trading positions and in general has no appetite for foreign exchange (FX) risk and interest rate risk. Furthermore, FMO’s risk management policies are supported by a governance structure that ensures application of a solid four-eye principle and proper involvement of an Investment Committee (for credit risk) and an Asset and Liability Management Committee (ALCO) for market risk.