The Use of Derivatives in Slovenian Non-Financial Firms: Is Financial Risk Already Well Managed?

Abstract

Recent research about the financial behaviour of Slovenian firms has documented enterprise risk management as being one of its weakest areas. The goal of this article is to present insights into financial risk management, i.e. into the extent of the use of derivatives in the largest Slovenian firms and the related practices. The results are confronted with the same types of characteristics of US and German firms although being much larger) revealed in comparable studies. These firms provide relevant benchmarks for assessing the development gap since they operate in more advanced financial environments and are therefore expected to have much more refined approaches to the use of derivatives than Slovenian firms. A survey points to the much smaller extent of the use of derivatives by Slovenian firms. There is a substantial gap, especially in the area of risk management policies (e.g. documentation, reporting, counterparty risk, valuation etc.).

Keywords: corporate risk management, financial risk, survey analysis, risk determinants, exchange rate risk, interest rate risk, commodity risk, corporate finance, derivatives

JEL Classification: G30, G32