by Hennie de Klerk, CFO, TreasuryOne
Corporate treasurers and CFOs everywhere are confronted with the seemingly endless volatility and uncertainty that afflicts the global foreign exchange market. The weakness of the commodity sector, the general collapse of equity markets and the lack of clarity about the timing and scope of the next moves of influential international authorities such as the Federal Reserve Bank and the European Central Bank add to the confusion and promise no early respite. Treasurers and CFOs are tasked with protecting the value of their companies’ foreign profits, earnings, and investments – and this task has never been more demanding than it is today.
Companies and corporations which are engaged in global commercial operations are naturally exposed to FX market fluctuations, impacting export-based revenues, import costs, and the value of overseas business and financial investments.
Measuring these exposures can be a demanding technical exercise, perhaps involving the management of large and complex arrays of foreign currency bank accounts, committed future payable and receivable flows, and the most uncertain projected flows based on future sales, investments, and expenditures. Analysing these exposures requires sophisticated data management tools, to produce dependable reporting, and the identification of viable and effective hedging strategies to mitigate the underlying risk. Finally, the hedging programme should be executed by professionals whose market expertise enables them to plan and perform the required market interventions at the best available rates, in compliance with the organisation’s financial risk management policy.