FX Risk Management

Adding Certainty, Building Trust

Although high levels of currency volatility are currently limited to certain markets, and the cost of hedging is low in many currencies, treasurers cannot afford to be complacent. Many treasurers will be managing new currencies, or dealing with more complex FX exposures as the business evolves, as the experience of Fisher & Paykel Healthcare illustrates.

 

The global financial crisis raised the issue of risk management in the CFO’s and CEO’s list of priorities, and company Boards continue to be motivated to understand the potential impact of FX volatility and limit negative effects on the business. Consequently, treasurers are renewing their focus on hedging strategies and optimal execution to manage risk and reduce the impact of volatility.

 

Given limits on resources, automating some of the day-to-day business, including using emerging treasury tools such as robotics, machine learning and artificial intelligence, can give treasurers more time to spend on more complex and strategic activities. The example of Puma is particularly interesting in this respect, by combining the value of technology with the experience of treasury professionals. Benoit Rousseau, Group Treasurer, Fromageries Bel also joins the Journeys to Treasury participants in the discussion.

Many companies still do not know what the impact on the business would be in the event of, for example, a currency devaluation. You first need a really solid handle on your exposures, and can then review your systems and reporting to provide better scenario analysis to help define business strategy. Treasurers need to be able to respond to questions from the Board on what would happen to consolidated results if certain currency moves occur. What and how to hedge comes second to a proper analysis of exposures.
— Sebastian di Paola, Partner, PwC