Insight to All Things Currency and Treasury Management

Brexit was an eye-opening moment for corporates concerned about FX volatility. For those that were prepared, it reinforced the fact that having both the right technology and a solid plan in place could help turn any crisis into an easily navigable event. For those on the lower end of the adoption curve, it served as a very real wakeup call, highlighting the gaps and inefficiencies in many corporate currency programs.

For a number of treasury and finance practitioners, getting through these kinds of crises with as few hiccups as possible can be a process full of questions. To dive deeper into the discussion, FiREapps recently hosted “Currency Crisis Q&A: The Practitioner’s Guide to Navigating the Next Crisis.” The webinar focused on some of the top questions from 500+ corporates surveyed by FiREapps over the last 3 weeks.

Over 50 unique questions about successfully getting through times of extreme volatility/crisis were reported to FiREapps. These were questions that corporates received from their teams, from company leaders or that they had for other companies navigating the same volatility. The webinar was hosted by Treasury and Risk and FiREapps, with a panel that included FiREapps CEO, Wolfgang Koester and VP of Strategic Market Development, Andy Gage. The panel also included Kevin Beck, Assistant Treasurer at Timken, and Tim Husnik, Senior Treasury Manager at Medtronic.

Throughout the discussion, a few key themes shined through:

 — Volatility is the Norm

With 9 crises in the last 9 quarters, directly impacting 8 different currencies, the trend is clear. Not only is currency volatility far from an infrequent occurrence, the currencies effected during each event can definitely be a surprise. Although some corporates may have steered clear of any major repercussions so far, the fact remains that those that are unprepared are setting themselves up to be in a losing position.

— Proactive vs. Reactive

The companies surveyed and discussed during the webinar typically fell into one of two categories — those that had proactive corporate currency programs— consistently prepared for times of crisis— and those that were simply reactive.

Those companies that were proactive identified potential hot spots early. They measured, monitored and adjusted accordingly while clearly understanding processes, distribution of labor, and coverage. These that were reactive didn’t have timely access to the data necessary for strategic/proactive decision making and utilized ad-hoc processes— typically undocumented and triggered by outside events.

— Comprehensive Planning: Pre, During and Post-Crisis

Creating a solid plan for getting through times of surprise volatility means being ready for sudden action— being nimble, able to quickly benchmark, and prepared with the identification and research of any risks and possible ripple effects. Likewise, a well-thought action plan also includes a clear blueprint of to-dos in case of crisis, the ability to quickly identify any impact, and a clear go-forward strategy that allows follow-up on correlations, additional hot spots, etc.

Although currency crises can often happen without much warning, the truth is, no one knows for certain where the next volatility spike will be until it hits. By reviewing one’s currency program and more, paying attention to the tactics of those who have navigated crisis successfully, you can ready your company to weather any currency storm.

Looking to create your own Disaster Recovery Plan? Download our Crisis-Ready Checklist as a staring point to help you create a detailed plan for navigating volatile currency events.