Why “Noah's Rule”
“Predicting rain doesn't count; building Arks does”, is Noah's Rule.
For all the advances in finance theory and the enormous expansion of products and service providers to help companies manage their risks; nothing replaces stark, honest, self appraisal and a healthy dose of common sense when it comes to recognising and managing risk.
"Predicting rain doesn't count; building Arks does", like many old adages, summed up for us the timeless sensibilities that should exist at the core of prudent risk management. It encapsulates the acceptance that prediction for its own sake is overrated. The ultimate test is the ability to consider alternatives, harness advantage and ultimately prevail, sometimes against considerable odds.
This rule we believe forms the core of sensible and prudent market risk management. This rule means, accepting that along with everyone else in the market, you don't really know where it is going; but knowing that, you can work with what you have and what is on offer to reduce the range of potential/negative outcomes. In the markets, as in all things, you need a bit of luck - the kind of luck defined by the intersection of opportunity and preparation. If you are appropriately prepared for what can go wrong (whatever it might be) you are more likely to survive, and more likely to prosper. A case of the harder you work the luckier you get. Another old adage true of most things but certainly true in the financial and commodity markets. These adverse events include unexpected price moves or those major events which statistically just shouldn't happen in your (corporate) life time.
At Noah's Rule we see hedging first and foremost as the application of a set of tools to minimise harm. If the downside is covered then the upside will look after itself. However we also recognise that there are occasionally times when the markets present astute players with short lived opportunities to harvest long term gains. The same set of tools applied in different ways can be utilised to deliver superior low risk results in both environments.
If your business is exposed to the vagaries of the markets, put Noah's Rule to work for your shareholders.