Forex Risk Planning

The Investors Centre Risk Planning is a treasury management system (TMS) solution that helps to streamline FX-related processes and hedging strategies. It enables treasury teams to consolidate real-time data across multiple ERP systems, bank portals and other financial systems, ensuring that forecasts are based on the latest information and improving FX risk assessments.

As a result, a strong understanding of FX markets can help companies seize strategic opportunities, mitigate the impact of global economic events and financial crises, and enhance their creditworthiness and borrowing costs. The ability to anticipate and manage currency risks can also help businesses keep profits predictable, reducing the impact of fluctuations in foreign exchange rates on assets and liabilities, including payables and receivables.

Explore Market Patterns: Spotting Trends and Opportunities

While the primary responsibility for this objective may fall on Treasurers and their team, it requires a strong level of awareness throughout the organization. This means that everyone should understand how forex impacts everything from the most strategic plans to the smallest of transactions.

The most important step in this process is establishing a proper hedge to eliminate the volatility of future non-USD revenues and expenses. While it is tempting to simply hedge all forecasted revenues and expenses at the same time, this approach can make it difficult to meet year-end cash flow objectives if the company’s forex market exposure turns out to be different from expectations.

An effective cash flow hedging program provides the company with feedback each month on how well it is doing in achieving its goals, rather than just hoping that it is doing enough. This requires a clear understanding of the sources of variance and the ability to break these down into meaningful components so that appropriate adjustments can be made to the plan as needed.