• Corporate FX

Business and Commercial FX Risk Management

How Do You Currently Manage FX Risk?

This will vary based on your company circumstances. If foreign exchange makes up a large proportion of your corporate turnover and has a material impact on commercial profit margins, then it might be useful to have a risk management plan written down.

Do You Agree Import or Export Contracts Over Extended Periods of Time?

This can range from settling supplier invoices in local currency if sourcing product and stock globally. It might be a service or sales contract agreed over 24 or 36 months.

Do You Have Clear Guidelines For Managing FX Risk?

Specific rules, strategies and procedures agreed in writing help reduce uncertainties and discretion. This is particularly useful for implementation.

Do You Have an FX Hedging Policy?

A written policy which has been agreed by all relevant stakeholders will help ensure implementation matches objectives.

When Did You Last Review Your FX Hedging Policy?

Back-testing the performance of your policy is a useful exercise.

Who is Responsible For Implementing Your FX Risk Management Strategy?

If the accountability of managing FX risk is subject to change or is shared by multiple individuals, then a clear strategy in writing with specific rules and guidelines could aid this process.

How are FX Hedging Decisions Made?

Are decisions made/approved by a director or shareholder? Is responsibility likely to change in future? Are decisions made by a team?

How Far into the Future do You Secure FX Costs?

If you are hedging forecast cash flows, what is the maximum term you’ll book FX hedges?

Should a customer, service or supply contract be agreed over 2 years, would the FX hedge be matched over the same period? Do you have any timescale limitations under your current FX hedging facilities for the maximum length hedges can be transacted?

What Proportion of Your FX Exposure is Secured?

If you are fixing forecasted cash flows, what proportion of your FX requirements will you cover?

If you are hedging a sales contract back to back, would you secure the full contract value?

How Often Do You Review FX Cover?

Are there specific intervals/recurring times when percentage hedge levels are reviewed against forecasts? How easy is this process reference systems and reporting?

Do You have Balance Sheet Assets Held in Cross Currencies?

Is the value of balance sheet assets impacted by cross-currency trends and volatility? Have you historically hedged this risk? Are you assessing the strategies available to manage this risk?

Do You Have Budget FX Rates for the Current Financial Year?

What system and process do you use to formulate budget FX rates for the financial year?

Have You Been Impacted by FX Losses?

Have you assessed solutions to reduce or avoid future accounting FX losses?

Are You Satisfied Your Current FX Hedging Facilities Offer the Best Value?

Have you reviewed the credit and cost offering on your current FX hedging facilities? Is there a maximum variation credit limit? Have you historically been margin called for variation margin/collateral? Is there a maximum volume capacity and timeframe you’re able to secure?

The above outlines the range of considerations when formulating new FX risk management strategies or if evaluating the performance of current approaches.

We Can Assess if Any Value Could be Added to Your Current Risk Systems

Reach out today by phone or email. We are always very happy to discuss.

There are no obligations to use our services.

Call Us on 0203 854 6802 or Email dealing@gsnfx.co.uk.

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