In this economic recession, it seems like every day another story surfaces where another silent problem is exposed, and without warning. These events place individuals, businesses and their livelihoods at stake. Today a story surfaced over at Bloomberg about KIKO currency trading options ( knock-in/knock-out, or KIKO, options) that are popular in South Korea and around the globe. The story states:
Growth skidded to a halt in mid-2008 — and not because orders dried up. Along with the rest of the Korean economy, Kumkang had been on a roll amid surging exports. The company’s crash came after the fallout from currency contracts that Choi signed with banks and now says he didn’t understand. In September, Kumkang filed for bankruptcy because of changing exchange rates and terms of the deals. In November, one bank closed the last of Choi’s contracts, costing him $15 million, half of his annual revenue last year.
A common denominator amongst these Without Warning stories is “Risk.” In this story, a business leader was attempting to control risk, yet in reality he was being exposed to an even greater risk. And just as few people saw the subprime crisis coming, it appears that noone foresaw the Korean won depreciating by 33% against the dollar. Suddenly the risk they were attempting to control came with it an even greater risk, which they didn’t expect. According to the article, 50,000 businesses around the globe are in a similar predicament.
As economies claw their way out of this recession, discussions around Risk will be at the center of every organization.
