Our Approach to Managing your Risks

We help our clients navigate the full spectrum of market risk

from high-level capital structure decisions to precise execution of hedging strategies.

Our approach follows a clear four-step process:

Risk Discovery & Quantification

• We identify, analyze, and quantify currency and financial risks across your operations or portfolio.

Strategic Recommendations

• We assess your overall capital structure, liquidity needs, and investment horizon to design appropriate hedging frameworks.

Tactical Hedging Solutions
Based on your strategic goals, we structure tailored instruments including:

• Derivatives (e.g., swaps, options)
• Cash tools (e.g., currency-linked debt)

Execution Support & Benchmarking
We assist with:

• Best-price execution of hedges
• Regulatory onboarding and credit line setup
• Price benchmarking and competitive auctions across counterparties

... we help sponsors safeguard performance by managing currency risk at the source. At IRIS Advisory, we focus on managing FX risk at the fund level. Currency exposure at the fund level arises when portfolio companies operate in different currencies than the fund’s base currency, leading to risks that can impact performance.

Our approach includes:

• Aggregation of FX Exposure: We help funds aggregate and assess currency exposure across portfolio companies, considering factors like foreign revenues and international debt.
• Setting Up Credit Lines: We support funds in establishing credit lines with multiple hedging counterparties, ensuring flexibility and optimal pricing for hedging solutions.
• ISDA Agreements: We assist in setting up ISDA agreements to enable the use of derivative instruments(forwards, options, swaps) to hedge currency risks effectively.
• Long-Term Hedging Strategy: We help funds mitigate currency risk across their portfolio lifecycle that align with the fund’s objectives and investment horizon, ensuring consistent risk management.

Through these strategies, we help funds mitigate currency risk, optimize returns, and protect their portfolios over the life of the fund.

..... with your financing team and looking after your market risks (rates, FX, commodities, inflation, etc.)

Our Role Begins Before the Deal Closes

• Pre-Acquisition Hedging Strategy
  We design risk mitigation solutions ahead of completion, even in cases of timing uncertainty. This includes:
  • Contingent hedging for interest rates, FX, inflation, and commodity exposures.
  • Structuring hedging to match financing covenants, ensuring alignment with lenders.
• Strategic Risk Integration with Financing
  We help sponsors:
  • Navigate interest rate hedging requirements under financing packages.
  • Align hedge structure with the investment strategy and exit horizon.
  • Optimize the currency mix of debt vs. EBITDA, balancing Sources & Uses across currencies.

Execution Support You Can Trust

• Implementation and Coordination
  We work alongside your deal team, including accounting, legal, and tax advisors to ensure smooth execution.
• Negotiation & Documentation Review
  • Negotiate hedge pricing and credit terms with banks.
  • Review and assist with documentation: ISDA, Hedging Letters, term sheets, EMIR compliance.
• Benchmarking & Monitoring
  • Run hedge price benchmarking exercises.
  • Track hedge effectiveness and adjust strategy post-close based on market shifts.

...we will help the Private Investment fund or the Portfolio Company efficiently address the risks early as an integral part of the restructuring or refinancing agreement

Assess the Existing Hedge Portfolio

• Valuation of Existing Positions
  We evaluate the mark-to-market of current derivatives and assess how banks perceive the value of these hedges — including their exposure to counterparty risk.
• Waterfall & Covenant Integration
  We analyze how hedge unwind values interact with inter-creditor agreements, the payment waterfall, and relevant loan covenants.

Recalibrate the Risk Management Strategy

• Updated Hedge Requirements
  We reassess hedging needs in light of the company’s revised EBITDA profile, free cash flow, and balance sheet structure.
• Cost Negotiation & Benchmarking
  We negotiate credit costs related to unwinds, novations, or new trades — and benchmark pricing to ensure execution is competitive.

Support FX-Linked Capital Flows

• Foreign Currency Equity Extraction
  We assist in hedging FX risks associated with distributions, dividend recapitalizations, and equity carve-outs.
• Earn-Out or Dividend Hedging
  We structure and help execute FX hedges for contingent payments such as earn-outs or expected cross-border dividends.

IRIS Advisory helps sponsors manage financial market risks throughout the entire divestment process.

Our Role Across the Exit Lifecycle 

Planning for Change of Control

• We assess the implications of a change-of-control, including potential early repayment of financing facilities and the unwind of existing hedges.
• We perform a valuation of hedge positions, focusing on their mark-to-market value and how banks perceive counterparty risk in a transition scenario.

Integration with Financing Agreements

• We analyze how hedge unwind values interact with:
  • Inter-creditor payment waterfalls
  • Loan covenants
  • Exit-linked conditions

Managing FX Risk on Exit Proceeds

• For international exits, we help structure and execute hedges to manage FX risk on equity proceeds, whether from trade sales or public listings.
• We evaluate the contingent nature of an exit (e.g., IPO timing, pricing stages), and model how exposures evolve through:
  • Pre-price range marketing
  • Book-building
  • Final pricing
  • Settlement

... IRIS Advisory provides tailored support for managing long-dated financial market risks that are integral to the project’s structure and success.

What We Do

Embed Market Risk in Financial Modelling

• We integrate market risk exposure directly into the financial model, considering:
• Interest rate, FX, inflation, and commodity sensitivities
• Project balance sheet and income statement stress testing
• Alignment of hedging strategy with the overall financing structure and investment thesis

We also translate risks from contractual frameworks (e.g. concessions, off-take, and O&M agreements) into financial exposures that can be managed effectively.

Design Risk Management for the Full Lifecycle

We address project-specific complexities including:

• Currency mismatches between long-dated revenues and debt service
• Post-Financial Close adjustments to hedging strategies as project phases evolve
• Monitoring during grace or construction periods where market risk can shift but instruments may be illiquid or restricted

Support Implementation and Documentation

We actively support the sponsor in:

• Binding the industrial proponent to financing and hedging terms
• Negotiating credit charges for hedge instruments with banking partners
• Reviewing and negotiating legal documents including:
  • Off-take agreements
  • Financing agreements
  • Hedging Letters, ISDAs, term sheets, EMIR-related documentation

Execution & Benchmarking at Financial Close

We assist in hedge pricing analysis, benchmarking against comparable market rates, and managing the execution of derivatives in the run-up to Financial Close — ensuring compliance, alignment, and competitive pricing.

• Efficient and cost-effective execution will be achieved through price benchmarking to measure and limit the hedging cost
• Having been hedge providers on the bank side for 35 years for corporate finance/structured finance/treasury transactions, we have in-depth knowledge of banks’ risk pricing and valuation techniques, including your counterparty credit risk pricing
• We share our experience with our clients to help them benchmark and execute trades, providing a see-through approach to transact at a transparent while realistic price to achieve the required trade in a risk-controlled environment
• We work with leading-edge pricing providers for the derivatives and capital markets industry, which enables our clients to access real-time cross-asset pricing,  risk position management and valuation for all major asset classes: FX, rates, inflation, equity, commodity and hybrids 
• Independent validation of pricing ensures price transparency and cost-effective execution: benchmarking prices to model and thereafter with selected counterparts to be able to measure and limit the hedging cost

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Whether at the pre-investment stage or during the holding period, IRIS Advisory helps you identify and assess the true market risks embedded in a company or asset. Our analysis supports better-informed investment decisions and risk-adjusted performance over time.

When We Intervene

• Pre-Investment Due Diligence
  We assess market risks before an acquisition or capital deployment, integrating into the broader investment thesis.
• Interim Risk Reviews
  We conduct targeted mid-hold risk reviews, typically in preparation for refinancing, performance benchmarking, or material strategy shifts.

What We Do

Risk Mapping and Quantification

• Identify and map direct and indirect market risks (FX, rates, inflation, commodities, etc.)
• Quantify exposures and translate them into potential P&L and cash flow impact
• Determine the right KPIs and financial indicators to monitor and manage those risks

Engagement with Management

• Interview key management and operational teams to understand:
  • How risk is perceived and managed internally
  • The corporate’s business model, strategic goals, and risk appetite
  • Existing mitigation policies or blind spots

Strategic Recommendations

Based on our findings, we may recommend:

• New hedging solutions, with execution support provided by IRIS
• Adjustments to the debt mix, aligned with the risk-return profile of the asset
• Re-framing the risk/return logic of the investment — surfacing concerns or advantages that may not be captured in the financial model