The emerging markets pose the greatest risks when it comes to banking counterparties, according to Diageo group risk financing director Scott Tricker.
Speaking at an ACT webinar on counterparty risk sponsored by information provider S&P Capital IQ, Tricker revealed that although the alcoholic beverages giant has tried to reduce its use of non-relationship banks, it has acquired some historic local banking relationships in emerging markets. “In some markets, our relationship banks can’t provide the full suite of products and services that we require,” he said.
Tricker said that Diageo used a ‘probability of default’ tool to monitor its banking counterparties, but a lack of data and ratings made it hard to assess banks in emerging markets in the way it monitors its relationship banks.
Diageo works with a number of global relationship banks internationally and it works out a relative rating between those banks to determine how much money it will allocate to each of them.
Tricker highlighted that it is important to use both long-term and short-term metrics to assess counterparty risk since there is a growing interconnectivity between risk and the pace of change. “You have to react to the world around you,” he said.
Sally Percy is editor of The Treasurer
To listen to the webinar in full, please visit