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Managing Foreign Currency Risk:
Best Practices from the Treasury Professional
and Technology Solutions Provider
February 18, 2014
Managing FX risk from the treasurer
and treasury manager viewpoint
Managing FX risk
What are the concerns?
• Increased visibility into cash and exposures
• Accurate and timely forecasts

• Risk management and mitigation

*Visibility*

• Optimization of hedging strategies

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

3
Increased Visibility
Cash

Treasury as a strategic partner

•
•
•

Effective financial decisions

•

Financial positions
•

Global visibility

•
•

•

Financial controls

•

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

Investment
*Visibility*
Debt
Intercompany
Foreign exchange

Exposures
•

Productivity

Bank reporting
Cash positioning
Forecasting
Liquidity

•
•

Foreign exchange
Interest rate
Counterparty
Supply chain
4
Accurate Forecasting
50%+ of financial executives cite visibility into data as
the barrier to effectively forecast risk metrics

Source: 2013 AFP Risk Survey
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

5
Risk management and mitigation
Barriers to effective Risk Management

Source: Aberdeen Group, January 2013

© 2013 Kyriba Corporation. All rights reserved.

PRIVILEGED & CONFIDENTIAL.

6
FX risk technology and implementation
What are the concerns?
• Providing controlled transparency into cash and exposures

• Providing functionality for accurate and timely reporting
• Providing useful risk management and mitigation tools
• Providing functionality, tools and utilities for multiple
hedging strategies
• Adherence to regulatory and compliance standards and
incorporating changes

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

7
FX Risk Management Solutions
Providing visibility
1) Consolidate data in one central repository
2) Refine accuracy to build confidence in the data

3) Leverage and implement technology to maintain
consistency via:
• Integrating multiple data sources (ERP)
• Sustaining recurring models
• Supporting remote users

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

9
Assessing the Risks
• Exposures
o Assets vs. Liabilities

• Positions
o Cash vs. Liquidity
• Forecasting
o Actuals vs. Projections

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

*Visibility*

10
Managing the risks
• The known…..
o
o
o

Payables, receivables
Cash positions
Derivative positions

• The unknown…
o
o
o

Future payables and receivables
Market impacts on cash and derivative positions
Regulatory impact on balance sheet and income statements

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

11
Risk technology solutions
• In-house
• Client-server
• SaaS (Software as a Service)
o Accessibility by remote users
o Standardization

o Best practices

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

12
Objectives of Implementing
Risk Solutions
Visibility Objective
Proper implementation can help strengthen:
• Visibility into cash
• Visibility into exposures
• Visibility into market conditions (Rates/Prices)

Quality data + Quality analysis = Better decisions

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

14
Forecasting Objective
Proper implementation can help analyze:
• Impact on cash flow
• Impact on profitability
• Impact of changes in assumptions

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

15
Risk Management Objectives
Proper implementation can help manage:
• Remote users
• Multiple workflows
• Timely reporting
• Consistency and reliability of data

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

16
Hedging Objectives
Proper implementation can help execute:
• Balance sheet and cash flow programs
• Complex hedging strategies
• Hedge effectiveness assessment
• Hedge accounting

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

17
Regulatory Objectives
Proper implementation can help maintain and track:
• Regulatory requirements per global regions
o FASB = United States
o IASB = Europe
o IFRS = “Both”

• Regulated hedging actions / strategies
• Changes in regulations

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

18
Conclusion
Proper implementations will:
• Addresses concerns of treasurer / treasury manager
AND technology vendor
o Visibility into cash and exposures
o Accurate and timely forecasts
o Risk management and mitigation
o Optimization of hedging strategies

o Regulatory requirements
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

19
Additional Resources
Aberdeen Group Report:
Treasury and Risk Management
http://kyri.ba/1hsiXqx

Kyriba Financial Risk Management Solution
http://kyri.ba/1hsj4T3

© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

20
Contact Kyriba
kyriba.com/blog
twitter.com/kyribacorp

linkedin.com/company/kyriba-corporation
facebook.com/kyribacorp

slideshare.com/kyriba
youtube.com/kyribacorp
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.

21

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Managing Foreign Currency Risk Best Practices from the Treasury Professional and Technology Solutions Provider

  • 1. Managing Foreign Currency Risk: Best Practices from the Treasury Professional and Technology Solutions Provider February 18, 2014
  • 2. Managing FX risk from the treasurer and treasury manager viewpoint
  • 3. Managing FX risk What are the concerns? • Increased visibility into cash and exposures • Accurate and timely forecasts • Risk management and mitigation *Visibility* • Optimization of hedging strategies © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 3
  • 4. Increased Visibility Cash Treasury as a strategic partner • • • Effective financial decisions • Financial positions • Global visibility • • • Financial controls • © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. Investment *Visibility* Debt Intercompany Foreign exchange Exposures • Productivity Bank reporting Cash positioning Forecasting Liquidity • • Foreign exchange Interest rate Counterparty Supply chain 4
  • 5. Accurate Forecasting 50%+ of financial executives cite visibility into data as the barrier to effectively forecast risk metrics Source: 2013 AFP Risk Survey © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 5
  • 6. Risk management and mitigation Barriers to effective Risk Management Source: Aberdeen Group, January 2013 © 2013 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 6
  • 7. FX risk technology and implementation What are the concerns? • Providing controlled transparency into cash and exposures • Providing functionality for accurate and timely reporting • Providing useful risk management and mitigation tools • Providing functionality, tools and utilities for multiple hedging strategies • Adherence to regulatory and compliance standards and incorporating changes © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 7
  • 8. FX Risk Management Solutions
  • 9. Providing visibility 1) Consolidate data in one central repository 2) Refine accuracy to build confidence in the data 3) Leverage and implement technology to maintain consistency via: • Integrating multiple data sources (ERP) • Sustaining recurring models • Supporting remote users © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 9
  • 10. Assessing the Risks • Exposures o Assets vs. Liabilities • Positions o Cash vs. Liquidity • Forecasting o Actuals vs. Projections © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. *Visibility* 10
  • 11. Managing the risks • The known….. o o o Payables, receivables Cash positions Derivative positions • The unknown… o o o Future payables and receivables Market impacts on cash and derivative positions Regulatory impact on balance sheet and income statements © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 11
  • 12. Risk technology solutions • In-house • Client-server • SaaS (Software as a Service) o Accessibility by remote users o Standardization o Best practices © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 12
  • 14. Visibility Objective Proper implementation can help strengthen: • Visibility into cash • Visibility into exposures • Visibility into market conditions (Rates/Prices) Quality data + Quality analysis = Better decisions © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 14
  • 15. Forecasting Objective Proper implementation can help analyze: • Impact on cash flow • Impact on profitability • Impact of changes in assumptions © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 15
  • 16. Risk Management Objectives Proper implementation can help manage: • Remote users • Multiple workflows • Timely reporting • Consistency and reliability of data © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 16
  • 17. Hedging Objectives Proper implementation can help execute: • Balance sheet and cash flow programs • Complex hedging strategies • Hedge effectiveness assessment • Hedge accounting © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 17
  • 18. Regulatory Objectives Proper implementation can help maintain and track: • Regulatory requirements per global regions o FASB = United States o IASB = Europe o IFRS = “Both” • Regulated hedging actions / strategies • Changes in regulations © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 18
  • 19. Conclusion Proper implementations will: • Addresses concerns of treasurer / treasury manager AND technology vendor o Visibility into cash and exposures o Accurate and timely forecasts o Risk management and mitigation o Optimization of hedging strategies o Regulatory requirements © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 19
  • 20. Additional Resources Aberdeen Group Report: Treasury and Risk Management http://kyri.ba/1hsiXqx Kyriba Financial Risk Management Solution http://kyri.ba/1hsj4T3 © 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL. 20