It may seem a little surprising given all the negative publicity that has swirled around the derivatives market over the past year, but a large number of end-users have not changed their practices or policies to any significant degree, according to a recent survey of more than 100 multinational corporations by Emcor Risk Management Consulting, an Irvington, NY-based firm.

Fifty-three percent of the respondents--treasurers, chief financial officers and other financial executives--said they had reviewed or updated their controls and procedures for using derivatives, and the same percentage said their senior management had begun making greater inquiries into these activities.

But only 18% said they had made adjustments to their current risk management policies; 10% had actually reduced their volume of derivatives transactions, and 11% had increased their use of simple instruments over complex ones. In other words, many corporate end-users put their derivatives activities under close inspection, but only a small minority have backed away from the controversial instruments.

Emcor managing director Heinz Binggeli points out that as multinational corporations with extensive experience in derivatives, most of the respondents already had policies and procedures in place. Indeed, outside of a handful of highly publicized cases like Procter Gamble Co. and Gibson Greetings Inc., derivatives have been a bigger problem for mutual funds or municipalities like Orange County in California. "If we had targeted the fund management community, we probably would have gotten a larger response," Binggeli says.

The respondents were generally cool to the prospects of greater regulation or derivatives legislation--although 460/o said they would like a standardized method of measuring risk for dealers and end-users. Thirty-four percent also favored consistent regulation and supervision of all dealers on a global basis, and 31% supported increased derivatives disclosure by end-users.

Binggeli feels the survey's results are a positive omen for the future of derivatives. "It will be, if anything, a healthy market, and the instruments will be used in an appropriate fashion," he says.

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