Thought Leadership Courtesy of FiREapps
An increase in negative FX impacts to earnings sheds light on the problem of under-hedging.
In the case of corporate foreign exchange (FX) programs, blockchain provides a way to leverage efficiency, transparency and trust to generate greater visibility into currency exposures and FX-related losses – which cost multinationals billions of dollars each year.
Although some banks have long considered fintech companies as foes – concerned that financial technology innovations are usurping their customer base – the future of banking to include strategic relationships with fintechs can better serve consumer needs and create a competitive advantage for financial institutions.
In a world where consumers expect transactions to be completed in milliseconds — and technology has delivered on those expectations — a government-approved digital dollar is inevitable.
As we look forward to the new year, three factors will have a large impact on currencies around the world: the changing landscape of digital currencies, U.S. tax reform, and the continuation of the U.K.’s split from the European Union.
Cryptocurrencies will not gain widespread traction with corporations and governments as long as questions about their volatility, risk, volume and shadowy affiliations linger.
Currency awareness allows companies to manage exposures to the point that the impact to their balance sheets is less than a penny EPS – and impacts to cash flow immaterial (relative to EBIDTA).
CFOs cannot control currency volatility, but they can ensure their teams understand and address how changes in global currencies impact an organization.
An increasing number of businesses are now incorporating process improvement practices—such as Lean, Six Sigma, and kaizen—into their financial risk management processes.
In cross-border M&As, differing interest rates can create interest-earning opportunities for the acquiring company. If the acquiring company purchases an inflationary investment, the acquiring company may still earn interest if it hedges its investment. In other words, acquiring organizations generate income while hedging their investment.