Author: Dan Keeler

Dear Reader

May 2010 | Vol. 24 No.5

Corporate finance executives could be forgiven for being somewhat confused at present. The worst of the financial crisis seems to be well and truly over, and in many areas—particularly in the emerging markets and, counterintuitively, banking—business seems to be even better than usual. In stark contrast to the dark days of the credit crunch, yield-hungry investors are practically falling over themselves to offer debt financing to companies, while even some of the countries most brutalized by the recent crisis are beginning to emerge from recession.

But, as we find out in our cover story, the situation might not be quite as rosy as it seems at first glance. While investors at present are clamoring for the opportunity to provide businesses with debt finance, that situation will almost certainly reverse in the near future as a surge of refinancings swamps the market. At the same time, the recovery in some of the world’s less robust economies—particularly those in Central and Eastern Europe, as we discover on page 26—can only be described as “fragile.”

In a normal market, such potential pitfalls would not be too daunting, but this is no normal market. The post-crisis world is an anxious place where investors are more than usually sensitive to any sign of trouble. Witness the chaos that surrounded the Greek sovereign crisis: The fear that Greece would be unable to pay its debts was almost enough to push Greece into default. That nervousness is prevalent across multiple markets and asset classes. At the first sign of trouble, investors head for the hills—and with good reason. These past few months have seen the spotlight turn on a whole range of risks—such as sovereign risk, political risk, regulatory risk, environmental risk—that during the previous boom times just didn’t appear on most businesses’ radars.

Sure, the sky is not about to fall in again, but some serious risks remain—and no doubt some new, unexpected hazards will emerge in the coming months. If we learned anything during the recent crisis, it is that effective risk management is more important than ever. The aftershocks from that financial earthquake are only reinforcing that lesson. More fool anyone who doesn’t take it to heart.

Until next month.

Dan Keeler