Contributor: Ryan Heaslip
I recently wrote an article (subscription access only) for gtnews giving some ideas on how treasurers can better manage their foreign exchange (FX) risk in light of these unstable times. Currency volatility, which is now particularly evident throughout Europe and South America, has led many treasurers and CFOs to reconsider their FX management and risk policies.
Hedging strategies that worked in the past may no longer be sufficient. As companies look to adjust these hedging strategies, the goal of FX risk management policy should not only be to reduce risk, but also to mitigate FX risk in the most efficient and cost effective manner possible.
A key component of any successful risk policy is the ability to collect complete and transparent data for a timely view of exposures. It is also important to pay attention to operational methods of mitigating risk, such as cash conversions or restructuring of intercompany processes, as these measures can reduce reliance on derivative strategies.
By focusing on exposure gathering and managing operational risk, treasurers will be enabled to develop a stronger risk policy and thereby leave the organization in a better position to handle the next currency crisis that may come along.
I look forward to your responses and feedback.