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Insight to All Things Currency and Treasury Management

With operations in 23 countries, Sanmina is a recognized leader in integrated manufacturing. The California-based corporation has annual revenues nearing $7 billion and employs approximately 45,000 people around the world. Yet, despite this size and scope, until recently, Sanmina’s treasury team relied on a manual, balance sheet FX process to identify and manage its entire portfolio of foreign exchange (FX) risk.

To accomplish this, Sanmina’s treasury team collected spreadsheets from 30 different entities around the globe and used this information to consolidate forecasts and manually execute trades. It was a time-consuming process that typically took four days to complete.

How Manual FX Multiplies Risk

Sanmina was not unique in this regard; a surprising number of multinationals still use manual, spreadsheet-based programs to manage FX. Not only is manual FX time consuming; it is an approach ripe with risk.

Consider how the typical manual FX program works.

Regardless of the company, in manual environments, treasury professionals are expected to gather data from a multitude of sources, ERPs and other entities across an enterprise. This can be submitted to treasurers in a variety of formats, but it is up to them to use it to populate spreadsheets and perform advanced analysis. Because the data is manually transcribed, risk has already been introduced into the process.

That risk of error grows significantly when treasury practitioners utilize the data to calculate long & short positions and factor in ever-changing currency rates and forecast data. Because these calculations serve as the foundation for exposure definition, hedge calculations and trade execution, the risk of error continues to increase.

One error occurring anywhere in this manual chain of events and manual tasks can be costly. Mistaken entries, miscalculations, transposing long-short positions, misplacing a decimal point … any of these can cost corporations millions of dollars in FX-related costs.

Sanmina’s Automated FX Solution

In the case of Sanmina, the CFO and treasury executives recognized the cumbersome manual process that was being used was negatively affecting the company’s bottom line.

This is why Sanmina collaborated with FiREapps to overhaul and completely modernize its currency risk management process using is FiREapps for Balance Sheet™ with Hedge Performance. The advanced SaaS solution seamlessly meshed with Sanmina’s existing program (which included interfacing with Sanmina’s ERP data collection), as well as CapellaFX Hedge Program Management Software. This enabled automated, straight-through processing. The new automation meant Sanmina’s treasury team could quickly compare as many as 20 trade adjustments, allowing the team to quickly see if its forecasting was off and adjust hedges if needed.

“With FiREapps, we select what we want to trade, push a button and the trade is processed immediately,” explains Ronnie Dang, Sanmina’s Senior Treasury Analyst. “The connection eliminates unnecessary steps, as well as the risk that something may go wrong with the trade along the way.”

Most importantly, the automated program meant Dang and his colleagues no longer had to devote long hours to gathering and transcribing data. Instead, they could use their time to analyze exposures, calculate forecasts and root out the true causes of the company’s FX gain/losses and hedging mismatches.

Next Steps

If your organization is plagued by FX impacts to EPS or EBITDA, the time to act is now. FiREapps for Balance Sheet with Hedge Performance will provide your treasury professionals with the time and insight needed to uncover previously undetected currency exposures.

Download the FiREapps Sanmina Case Study, which documents how FiREapps collaborated with Sanmina’s treasury team to transform the company’s currency risk management program to a state-of-the-art process.

 

Download the Sanmina Case Study