In simple terms, counterparty risk is defined as the possibility that someone you do business with will be unable to meet their obligations to you. The higher the odds of a default, the higher the level of counterparty risk. This is all well and good on paper, but as any treasurer knows, counterparty risk is far more nuanced in reality. It’s a multi-faceted threat that is constantly changing and evolving. The vast majority of corporate treasury risk management frameworks were based solely on credit ratings. Whilst still important the risk parameters have increased considerably.