SAN FRANCISCO - A majority of 200 multinational companies surveyed by Bank of America made no change in their hedging practices in the wake of serious risk management failures reported in 1994.

The events caused more than half the responding companies to review their hedging policies and practices, nearly 40% presented their review findings to senior management, and one in four submitted those findings to boards of directors, but in the majority of companies, no significant changes were implemented.

"We wanted to gauge whether companies have changed their risk management philosophies in response to the events of 1994," said Arnold Miyamoto, Bank of America vice president and manager of the foreign exchange risk analysis desk.

Bank of America conducted its second annual risk management survey in order to determine the impact of a volatile 1994 on the current risk management environment.

The publicity surrounding high profile failures indeed seemed to encourage reviews.

Last year alone, 70% reviewed their policies for various reasons. The most oft-cited included management and exposure, media coverage of large losses, and market volatility or recent developments in accounting standards.

Several findings were of note: few companies employ exotic structures as hedges; hedges are usually easily valued and liquid; and the majority of companies value positions at least monthly - with 30% valuing positions on a daily basis.

Minimizing risk, stabilizing accounting gains or losses, and optimizing cash flow are the three most important areas of concern, said respondents.

Less than 10% of the responding companies consider their risk management operations a profit center.

The Bank of America survey found a 50-50 split between active and passive hedging practices.

Eight out of 10 companies have written policy statements. Most of those with policy statements have reviewed them in the past three years.

Most risk management policies identified three key foreign currency exposures: translation, transaction, and anticipated. In addition, 30% identified contingent and economic exposures as key.

Fifty percent of the companies did not have a risk management performance benchmark, although 90% review their positions at least monthly and 30% review their positions on a daily basis.

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