CFO: Mastering Foreign Exchange

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We have entered a period of marked volatility in foreign exchange markets. Volatility will be a permanent feature in international business for some years to come. CFOs need to be on top on their game in this area because much economic value is at stake. We offer a program in 3 steps to master foreign exchange risks when you are doing business overseas.

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CFO: Mastering Foreign Exchange

  1. 1. June 2011<br />Currency markets are unforgiving for the unprepared<br />FOREIGN EXCHANGE PROGRAM<br />CFO<br />André Du Sault (LBS, Harvard)<br />Confidential and proprietary to SDA Conseil Inc<br />1<br />
  2. 2. June 2011<br />2<br />SDA Conseil Inc<br />www.sdaconseil.com<br />www.sdaconseil.com<br />On becoming lean & strategic<br />CFO FOR THE 21ST CENTURY<br />Mastering foreign exchange risks<br />When doing business overseas<br />A discipline & tool kits<br />Confidential and proprietary to SDA Conseil Inc<br />
  3. 3. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />High volatility in currency markets is here to stay<br />US$ / C$<br />Financial Times<br />US$ / Euro<br />for three reasons...<br />Confidential and proprietary to SDA Conseil Inc<br />3<br />
  4. 4. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />1. Many Western countries are under severe economic stress<br />High debt<br />Budget deficit<br />Current account deficit<br />Unemployment<br />Slow growth<br />Bad politics<br />With remedies hard to swallow.<br />Confidential and proprietary to SDA Conseil Inc<br />4<br />
  5. 5. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />2. Financial markets remain huge and half regulated,<br /> driven by the opportunities of the short term and <br /> the herd mentality.<br />Confidential and proprietary to SDA Conseil Inc<br />5<br />
  6. 6. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />3. The rise of India-China is remoulding the macroeconomic cycle<br />2000-2010: Worldwide disinflation<br />2010-2020: Worldwide commodity inflation<br />Confidential and proprietary to SDA Conseil Inc<br />6<br />
  7. 7. In a context of macroeconomic instability, there are costs for not being ready<br />July – August 2005<br />Was it really the perfect crisis in 2007-2008?<br />Signals about a forthcoming crisis were there (see Atlantic).<br />Tracking stress indicators allows to anticipate and react in time. <br />Confidential and proprietary to SDA Conseil Inc<br />June 2011<br />7<br />
  8. 8. June 2011<br />You need to have your act together<br />in foreign exchange<br />3 LESSONS<br />Confidential and proprietary to SDA Conseil Inc<br />8<br />
  9. 9. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />Lesson 1: Be prepared<br />Exposure forecasts at hand<br />Hedging objectives defined<br />FX policies in place<br />Instruments ready<br />Confidential and proprietary to SDA Conseil Inc<br />9<br />
  10. 10. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />Lesson 2: Anticipate the stress signals<br />Understanding risks<br />Assessing possible scenarios<br />Tracking relevant stress indicators<br />Seeing clouds and storms ahead<br />Confidential and proprietary to SDA Conseil Inc<br />10<br />
  11. 11. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />Lesson 3: Act on your best options<br />Your initial reference position<br />Scenarios & turning points<br />Your best hedging options<br />Taking positions and negotiating<br />Confidential and proprietary to SDA Conseil Inc<br />11<br />
  12. 12. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />If foreign exchange feels like walking on a tightrope, it is time to get advice<br />on toolkits<br />on best practices for the CFO<br />on policies adapted to your situation<br />on hedging strategies<br />Confidential and proprietary to SDA Conseil Inc<br />12<br />
  13. 13. June 2011<br />Perhaps all you need is a quarterly review<br />to see more clearly ahead<br />to weigh your risks <br />to figure out your best options<br />Confidential and proprietary to SDA Conseil Inc<br />13<br />
  14. 14. June 2011<br />SDA Conseil Inc<br />www.sdaconseil.com<br />Or if you would like to participate in a <br />training session<br />to acquire a new skill set<br />to exchange with peers<br />to build a new comfort zone<br />Confidential and proprietary to SDA Conseil Inc<br />14<br />
  15. 15. June 2011<br />Confidential and proprietary to SDA Conseil Inc<br />15<br />SDA Conseil Inc<br />www.sdaconseil.com<br />For more information, <br />insights<br />& requests:<br />André Du Sault<br />514 777-1538<br />adusault@sdaconseil.com<br />www.sdaconseil.com<br />Conference on FX risks<br />Economic reviews<br />Transfer of best practices<br />Strategic tool kits<br />Complete FX program<br />
  16. 16. SDA Conseil Inc<br />www.sdaconseil.com<br />INTERNATIONAL EXPERIENCE: André Du Sault, B.Ing.F., MBA (LBS), MPA (Harvard)<br /><ul><li>CFO at Novartis 1987‐2000 (country holdings)</li></ul>‐ Small & large affiliates<br /> ‐ Annual hedging programs from US$ 5 M to US$ 150 M<br /> ‐ Evaluated as profit center: Positive results in every year<br /><ul><li>Direct responsibility in times of financial crises:</li></ul>‐ Mexico: 1997 (Asian crisis)<br /> ‐ Philippines: 1994 (Mexican crisis) <br /> ‐ Brazil: 1989‐1991 (hyper inflation)<br /><ul><li>Long time perspective of countries & markets</li></ul>‐ Various sources: FT, WSJ, TE, Reuters, Think tanks<br /> ‐ Economists: Krugman, Brittan, Roubini, Roach, Wolf ...<br /> ‐ Profile: www.sdaconseil.com<br />June 2011<br />Confidential and proprietary to SDA Conseil Inc<br />16<br />

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