Derivatives, clearly explained.
Many plans of finance proposed by the investment banking community involve derivatives, from interest rate swaps to rate locks. These products are very lucrative for investment banks — but poorly understood by the average nonprofit.
Independent advice, on your side of the table.
Our goal is to provide independent advice focused on suitability, affordability, and risk analysis. We translate complex derivative structures into terms your board can evaluate — and we have no interest in whether a swap is executed.
We often recommend the implementation of a swap policy to help guide future decisions, so that every derivative your organization considers is measured against a clear, agreed-upon standard.
Three questions before any derivative.
Suitability
Whether a derivative belongs in your plan of finance at all — and if so, in what form and size.
Affordability
The real, all-in cost of the product and its impact on your budget under a range of scenarios.
Risk analysis
The termination, basis, and counterparty risks that too often go unexplained to nonprofit boards.
Consider a formal swap policy
A written swap policy sets the guardrails — permitted products, size limits, counterparty standards, and reporting — so future boards inherit discipline rather than improvisation. We can help you develop and adopt one.