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Insight to All Things Currency and Treasury Management

Last year Deloitte surveyed 130-plus corporate treasury teams and found more than half of corporate treasurers lack visibility in their currency exposures and reliable FX forecasting tools.

Additionally, Deloitte found nearly 40 percent of corporate board members were not receiving sufficient information on their organization’s FX risk, hobbling their ability to truly manage currency exposure. [1]

For many years, FiREapps has talked about the importance of multinationals and executives being “currency aware”, i.e. fully understanding and appreciating how currency can impact their financials.

Considering Deloitte’s findings, now is a good time to discuss those traits that help make organizations currency-aware.

Let’s start by restating an important fact: FiREapps believes the foundation of effective currency risk management programs starts with timely data and cloud-based FX analytics.

Beyond that …

Here are five traits to help enhance your FX management program.

1. Empower Your Treasury Teams

Currency aware teams understand the imperative of managing currency risk and are empowered to do it. In currency-aware organizations, treasury professionals are equipped with the tools needed to manage risk per the policy defined by their board and CFO. The treasury team should know the boundaries within which they are expected to manage currency risk. More importantly, corporate executives must empower their finance teams to act as needed.

2. Leverage Currency Analytics

Effective treasury teams rely on analytics and have on-demand access to critical financial information, straight-through processing and process automation.

Solid data unburdens FX professionals from process and data management, allowing them to focus on answering questions such as: What impact does this morning’s currency surprise have on our results? What action should be taken? Most importantly, effective teams can act strategically and make crucial business decisions using timely, accurate and trusted data.

3: Look for Simple Enhancements

Currency-aware teams often find simply enhancements can have a big impact in managing risk credit. Many FiREapps clients, for instance, report strategic improvements to manual processes as part of their larger FX analytics deployment. These can include recording and inputting accounting data in real time, thereby reducing processing errors and the chance of using outdated data. (As we have seen with the recent currency crisis, even a latency of 2-7 days can cause a material impact on corporate financials.)

4: Periodically Reevaluate Your FX Strategy

Effective FX teams are those that frequently step back and consider new, strategic approaches to their currency program. Make sure your treasury professionals periodically ask the following:

  • Are we taking advantage of all natural offsets and internal currency hedging options?
  • Are we looking at the cost of hedging in the right context? What is the actual cost of hedging and how are we calculating it? What is the size of our unmanaged risk?
  • Are we confident that our exposure and risk management actions will have the intended result? Are there blind spots? Will we know if we are over- or under-hedging?

5: Define What FX Success Looks Like for Your Organization

Deloitte found more than 60 percent of respondents rely on manual forecasting processing. Currency-aware executives must be prepared to equip their teams with the right combination of tools, data, and analytics. These executives understand the full costs and benefits of managing their currency risks. Most winning teams start by strategically defining what “success” looks like. Then they make a business case for implementing a system of analytics.

Gain Broader FX Visibility

There are obviously more actionable items companies should consider when it comes to effectively managing currency risk, but these five items are a good place to start.

If you want to read more about teams who have transformed their programs and benchmark your program check out our case studies.

In the meantime, ask yourself if you know what your currency exposure is now?

At the press of a button, FiREapps clients know their exposures at any given time – regardless of market conditions.

If you are a corporate treasury executive lacking visibility into your exposures, maybe it’s time to talk to FiREapps.


[1] All findings courtesy of Deloitte, Global Foreign Exchange Survey, 2016