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Insight to All Things Currency and Treasury Management

Brexit came as a pretty big surprise to many corporates. In fact, if you had a conversation about the probability of it happening early last month, chances are, you would have heard more than one resounding “stay” hypothesis.

However, when all was said and done, a “Brexit” not only happened, it brought with it a surprise spike in volatility with ripple effects impacting a number of currencies beyond the sterling.

With 8 crises across different currencies in the last 9 quarters, it’s difficult to predict exactly where the next volatility spike will strike— leaving some corporates bracing for the possibility of impact.

 

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Those who are prepared, of course, always have an easier time navigating through the storm. And while most companies are becoming more currency aware and planning for any situation that could effect their currency portfolio, those who are behind have put themselves at a big disadvantage— one that could, potentially, equate to a multimillion dollar mistake.

Where are you on the adoption curve?

It’s true that the latest volatility spike, Brexit, didn’t have a majorly damaging effect on every corporate. After all, those that had a crisis-ready currency program enabled themselves to be more aware and monitor changes/impacts. But simply put, many late-adopters that weren’t directly effected by the sterling/Brexit’s ripple effects— and those that believe any impact they’ve felt was no worse than their peers— may be left far from prepared. They may be under the illusion that they’re “safe”— a potentially costly and time-consuming mistake should the next crisis have a major impact.

Those with mature corporate currency programs that include automation, on-demand reporting and scenario analysis, know that they’re prepared— turning what could be a major crisis into an easily navigable event.

By defining where your corporate currency falls on the adoption curve, you can not only get an idea of how ready you are to weather the next volatility spike, you’ll know how prepared you are for discussions with your CFO, CEO and board when the next currency shakeup occurs.

You can generally identify where your program falls utilizing the following rubric:

Mature — In times of crisis or increased volatility, you are able to answer executive questions about exposures, benchmarks, and where your company could be (given various ripple effect scenarios) within hours. You can easily access data, reporting, and have technology in place that allows you to be strategic and nimble when it comes to mitigating current or potential risks.

In-Adoption — You have recognized the importance of being currency aware. You’re in the process of establishing a corporate currency program that includes the technology and resources you need to snapshot where your currency portfolio is on-demand, pull detailed data from all sources (ERPs, TMS, etc.) and scenario analysis to gauge “what if” impacts in minutes.

Laggard — You’ve been unable to answer key questions during major volatility spikes. For example, during the last crisis, you were unable to report exact gross and net exposure to effected currencies within hours— uncovering that information took days. Likewise, you can’t quickly identify what your currency portfolio will look like in various “what if” scenarios.

No matter which currencies are impacted during the next spike in volatility, one thing is clear— those corporates that have the technology in place to have thorough discussions with their executive team are in a winning position. They understand that, although the past few currency events may not have had a direct effect on them, the past 9 quarters have shown us that surprise volatility can strike anywhere.

Ready to improve your corporate currency program, ensuring you’re prepared for the next volatility spike? Contact FiREapps, we can help.