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Corporate Use of Derivatives in Hong Kong and Singapore: A Survey

This survey of corporate risk management practice in Hong Kong and Singapore examines the use of derivatives and the oversight of risk management programs in 131 firms. The survey format is the same as that used previously by the Wharton School in its survey of US non-financial corporations, to allow for cross-country comparisons. The analysis finds very little difference in risk management practice between Hong Kong and Singapore. When these two Asian centres are compared with the United States, the survey finds that a higher proportion of firms in Hong Kong and Singapore use derivatives and they do so with greater intensity. Firms in Hong Kong and Singapore are more likely than their US counterparts to use selective or active hedging strategies based on market views. Therefore it is worrying to note some significant gaps in the oversight of risk management in these firms, especially in relation to reporting and valuation of derivatives. The survey finds that only a minority of firms in Hong Kong and Singapore have implemented risk-adjusted performance measurement for treasury so it is unclear whether or not their activities add value for owners.