The document outlines the best practices for managing foreign exchange (FX) hedging programs, focusing on compliance, procedural elements, and automation of accounting processes. It emphasizes the importance of front, middle, and back office management in integrating FX risk management, ensuring accurate valuations, and adhering to accounting guidelines. Additionally, it highlights key questions to consider for effective implementation of an FX program within an organization.

1. Simplifying Regulatory Compliance for Your FX Hedging Program
July 28th, 2016

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Today’s Presenters
Jonathan Zeman
Senior Consultant
Thomas Gavaghan
Manager, North America Pre-Sales

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 FX Program Management: Procedural elements to managing
your FX Program
 Valuations: Foundational building block to proper accounting
treatment
 Derivative Accounting Compliance
 Automated Accounting
Agenda

4. FX Program Management

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FX Risk Management Processing
Collection
Classification
Aggregation
Policy Setting
Trade Capture
Visibility & Positioning
Limits Monitoring
Scenario Analysis
Valuation & Effectiveness Testing
Confirmations
Settlements
Accounting

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 Balance Sheet
– Translation & Remeasurments
 Cash Flow
– Forecasted revenue and expense
 Integration = Centralization
Exposure Management
Collection
Classification
Aggregation

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 Accounting and economic
strategy and objectives
 Aggregation of executed
transactions in the market
 Calculate market value of
held positions
 Centralized visibility of
existing positions and
exposures
Front Office Management

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 Establish and maintain
limits
 Perform scenario analysis
– What if?
– Stress testing
 Report & Dashboard
creation
– Internal
– Regulatory
Middle Office Management

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 Collection and integration of auditable Market Rates:
– Spot Rates
– Forward Rates
– Volatility Surfaces
 Fair Value Measurements
– Transactional & Portfolio valuations
 Effectiveness Testing:
– Critical Terms Matching, Shortcut, Long-Haul Regression
Valuation & Effectiveness Testing

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 Electronic
confirmation and
matching process
 Generate & Net
settlements
 Automated integration
with GL
Back Office Management

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Best Practices Questions to Ask:
Topic Question
Front Office What tools are available to easily integrate with my ERP(s), and
other exposure tracking tools to track against policies?
Middle Office What is the source of my market rates for valuing my portfolio, and
how easy is it to document our results for audit?
Back Office How do I get the proper accounting entries posted into my GL?

12. Derivative Accounting Compliance

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 Accounting Guidelines
– ASC 815 / 820
• Fair Value, Cash Flow, Net Investment
– Translation vs Transaction Risk
• Disclosures (Quantitative and Qualitative)
– Entity level (e.g. Foreign Exchange Risk)
– Revenue Recognition
– Initial measurement and Re-measurement
– ASC 830
• Functional vs. Reporting Currency
– Parent and Subsidiary Relationship
FASB guidelines that systems can help simplify…

14. Post Trade Environment Automation

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 Seamless End to End Accounting
– Journal entry to general ledger account creation and
automation
– Interfacing capability
 Government Legislature
– Dodd Frank / EMIR / Volcker / Basel III
 Margin Processing
– Cash position monitoring and reporting
Post Trade Environment Automation

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Thank You for Attending! - Further Reading
Blog posts:
(subscribe to receive our blog posts under http://www.kyriba.com/blog)
 FX: Managing Uncertainty in 2016
 FX: To Hedge or not to Hedge, that is the Question
 EM FX hedging: treasury management systems outshine ERP
(Euromoney)

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Thank You For Attending
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