Foreign Exchange (FX) Risk – Risk & Treasury Management
Posted by Noel Shannon on Wed, Jun 01, 2011 @ 03:01 AM
A recent industry survey identified 37 of the 54 Financial Controllers polled pointed to FX as their largest concern in the area of risk. Perhaps the most difficult aspect of hedging foreign exchange risk for corporations is having visibility into their exposures. This is a common issue for companies worldwide where treasurers are often unable to source exposure information from company systems. Instead, they must depend on informal communications from the departments where FX exposures originate, or rely on their banks to fuel them with this information. As organisations begin to expand their international operations, use of web capabilities linked to a treasury management system can help business units receive timely information on forecasted exposures.
Corporations that are operating in different locations with disparate business practices, controls and systems are often challenged by trying to ensure that the business is adequately protected against error and fraud and that policies and procedures are being observed uniformly. If a corporate treasurer does not have all of the right information in one place, the probability of risk going unmanaged increases and the quality of decisions made based on this information may be compromised. A specialised treasury management system (TMS) can help by putting into place effective controls that can aid treasurers in making better-informed business decisions.
As with many regions throughout the world, the tightening regulatory environment has put treasurers under greater pressure to ensure compliance. Treasury management solutions can establish consistency of data and processes throughout the organisation and thereby promote compliance with initiatives such as Single Euro Payments Area (SEPA) and Sarbanes-Oxley (SOX).
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