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Insight to All Things Currency and Treasury Management

Treasurers are continuously asked to reduce costs while managing risk.

Yet – despite this persistent request – only about half of corporations currently leverage technology to help treasury professionals do their job.

According to a recent study, only 52 percent of 200 risk and IT professionals, executives, vendors who were surveyed say their organizations are currently deploying risk-management technology.

About 25 percent of respondents indicate their companies are currently exploring high-tech, risk-management tools.

MISGUIDED RISK MANAGEMENT CONCERNS

The remaining respondents say their organizations have no plans to leverage risk-management technology – or they intend to take a DIY approach and managing risk internally. When asked to identify the top reasons, the following excuses were shared:

  1. Fifty-four percent say they anticipated implementation headaches
  2. High costs were identified as a barrier for 48 percent
  3. Thirty-three percent say new technology means increased complexities
  4. Nearly 18 percent believe their company’s unique needs are too complex
  5. Nearly 15 percent say any technology will quickly become outdated
  6. Thirteen percent believe their internal tools adequately manage risk

If you are a risk management or treasury professional, you should know none of these concerns apply when you select FiREapps as your currency analytics provider.

Below we debunk these six reasons once and for all:

 

1)    IMPLEMENATION HEADACHES

 

Generally, ERP implementations are measured in years; TMS implementations are measured in months. FiREapps enrollments are measured in weeks. More importantly, once implemented, FiREapps users see value almost instantly.

In most cases, it takes less than 10 hours (per ERP) system to install FiREapps, test, deploy and begin the file upload process. The initial data extraction process takes another four hours. In all, FiREapps clients can count on seeing full FX exposures within four-to-six weeks following the project kick off. Most importantly, the FiREapps Client Services team partners with an organization’s IT crew to make sure everything goes smoothly every step of the way.

In most cases, clients are surprised by the speed of implementation. “I cannot stress enough how easy it was to implement,” said Howard Wardlow, Director, Finance & Treasury, Hubbell, Inc. We hear this a lot.

 

2)    HIGH COSTS

 

When considering technology costs, it is important to weigh costs against savings. For instance, Agilent, a major life sciences manufacture, trimmed 50 percent off its FX spend after implementing FiREapps. Agilent also reduced the time it spent manually managing exposures by 60 percent.

But cost-cutting tells only part of the story. FiREapps also delivers a positive ROI to users.

Newell Brands managed its own manual FX management program, but after the company endured approximately $88 million in cumulative foreign currency transaction net losses (2013 -2015), it recruited FiREapps to design an entirely new workflow. In less than two years, those losses were reduced to less than $2 million, representing a near-$86 million ROI.

 

3)    INCREASED COMPLEXITIES

 

New technology can introduce temporary complexities, but it can also reduce complexities by liberating users from outdated processes.

Consider Cabot Corporation, a global chemical manufacturer operating in 22 countries. Prior to modernizing its currency risk management program, Cabot relied on a manual process where old data was submitted via 100 different spreadsheets from 44 entities. After modernizing its program with FiREapps, Cabot’s treasury team worked with real-time data that identified (and eliminated) 63 percent additional currency exposures. This, in turn, reduced FX impacts from about $0.06 EPS to $0.01 EPS while eliminating the 170 hours previously devoted to manual number crunching.

Taming the complexities of Cabot was no fluke. Dow Corning also selected FiREapps to revamp its highly-complex FX program and introduce an automated straight-through process. The newly modernized program saved Dow Corning more than $5 million annually and helped the treasury team earn numerous highly-prestigious treasury awards. Telecommunications giant, Ericsson, saw similar outcomes: Ericsson’s previous FX program was unable to keep pace with its operations in 180 countries and 500-plus currency pairs. It asked FiREapps to automate its legacy program, which resulted in nearly $7 million savings in transaction costs and three separate treasury awards.

 

4)    UNIQUE NEEDS

 

Every company has unique FX needs.

Tech Data Corporation, a $26 billion technology distributor that serves corporate clients in more than 100 countries, is a prime example. Despite its massive global footprint, prior to using FiREapps, the company used an entirely-manual FX process that required the treasury team to spend more than 200 hours gathering data and completing hedge calculations.

The company’s European operations alone involved 21 entities trading in 12 currencies, which included 16,000 FX trades that had a notional value of €11 billion and associated costs of €3 million annually.

Tech Data selected FiREapps to help standardize procedures and identify all FX exposures by country. FiREapps designed a workflow that tied together the company’s SAP system environment and its FXall execution platform. You can read the full case study here, but in the end, Tech Data reduced annual FX costs by about 50 percent, reduced the time spent on FX by 65 percent and saved €1.5 million in FX-related costs.

 

5)    REMAINING UP-TO-DATE

 

Concerns that technology may fall behind are understandable, but – in the case of FiREapps – misplaced.

Because FiREapps pioneered the use of SaaS technology in FX, it means thousands of users collectively benefit from the FiREapps shared infrastructure. When FiREapps regularly introduces service enhancements to its solutions, those updates are automatically rolled out to all FiREapps users. This is one of the main reasons more than 2,100 users in 38,000 entities around the world depend on FiREapps each day, making it the most deployed FX management system in the world.

 

6)    INTERNAL TOOLS

 


FiREapps has long cautioned treasurers to avoid building a solution when you can buy one. Internal tools have their place, but trusting them to manage complex and costly currency risks is a mistake. The list of reasons you should partner with a currency analytics provider is a long one. Here are just are just a few …

  • Building an internal FX program requires a significant investment of money, resources and time. Those investments continue as an organization grows.
  • As a multinational expands, currency exposures grow as well. Internal tools rarely keep pace.
  • Most treasury teams have limited FX technology experience; FiREapps has been managing FX management for more than a decade.
  • Treasury professionals are not IT specialists; FiREapps developers work hand in hand with our FX specialists.

When you work with FiREapps, you invest in a SaaS-based solution that evolves as industry needs and regulatory requirements change.

 

NEXT STEPS FOR FX SPECIALISTS

What is your organization doing to reduce cost and risk?

When it comes to greenlighting technology to manage risk, the bobsguide survey revealed more than 80 percent of those decisions are made in the C-suite.

If you need to convince a C-level executive of the need to modernize, we can help you build a business case to modernize your FX program.

You can also schedule a demo and see why FiREapps is the leading currency-risk technology provider.