Currency management is a huge global problem: multinational corporations in the USA and Europe admitted, in their annual reports, to losing $9.5 billion dollars in the last quarter due to currency volatility according to the latest Kyriba Currency Impact Report. (And it must have been much more than that, these were just the published figures.)
North American companies experienced greater headwinds than their European counterparts, reporting $5.87 billion in FX-related negative impact -- a staggering increase of 322% from the last quarter. By comparison, European corporations reported $3.67 billion in negative impact.
(To learn about specific industries affected and which currencies were most impactful to multinationals, download the full Q4 2020 Kyriba Currency Impact Report.)
Losses from FX currency swings and processing costs are huge and probably growing.
Not surprisingly, there is a wide range of solutions available. The solutions range from bank-based services which are part of their international payment services, and fintech services which range from simple international payment services to very advanced specialist services. New services are coming to the market regularly. Our reviews of two services show what is happening.
Kantox, a provider in the FX market since 2011, now describe what they do as “using technology to help corporate treasurers, CFOs and CEOs to leverage technology to overcome complex FX challenges and achieve their business goals.” They call this Currency Management Automation.
Kantox started with FX peer hedging which matched different companies' foreign-denominated bills, allowing them to pay each other rather than buying a foreign-exchange hedge from a bank, see. It was basically a netting marketplace where companies could look for and find others companies - their counterparties - with opposite currency flows to match and net their flows.
Since then, Kantox has been developing their service – picking up partners such as BNP and Citibank and many others - and now provide a fully developed Currency Management Automation service that covers all the elements involved in corporate FX management:
Source & Copyright©2021 - Kantox
In 2019 Kantox connected their Dynamic Hedging Solution to the Multi-Dealer Platform FXall and 360T. Full Currency Management became the name of the game. Phillipe Gelis, CEO and co-founder of Kantox explains:
"What we were aiming to do when we started was to provide cheaper prices and more transparency to treasurers than what the banks could offer. At that time, the FX experience was really poor, pricing unfair, and nothing was digital. Here we saw an opportunity to make some change, and our FX trading platform was born.
Next, we focused on creating a great user experience, and we knew the only way to do this was through technology. We transitioned to a SaaS solution that was centred around FX risk management. Specifically, we started automating the end-to-end workflow. We expanded our exposure process functionalities by automating any hedging programs on our client's FX policy, from layering programs or static programs to micro hedging programs.
Now we are creating extra value in Currency Management by first being able to implement fully customised programmes tailor-made to our client's business characteristics; and second, evolving the traditional forecast-based programmes of our clients by introducing orders and creating combinations of programmes.”
Kantox has set the standard currency management automation as to what is required to help busy corporates and treasury departments.
New FX marketplace from MillTechFX
Another example of how comprehensive FX services are now being provided for corporates is the FX Marketplace, launched this month, by Millenium Global’s fintech affiliate MillTechFX.
It provides direct access to multi-bank FX execution from 10+ Tier 1 counterparty banks including Citi, BofA, HSBC and BNP Paribas – enabling access to the wholesale market and opening up significantly preferential rates for corporates that relied on a single bank or broker for their currency execution.
It also offers real-time reporting which enables users to retain oversight and control, consolidate data and FX activity, instruct new trade and adjustments and seamless integration.
Workflow efficiency is a key benefit for users, with MillTechFX offering middle and back-office services for users to delegate additional activities at no extra cost.
It also focuses on demonstrating best execution to its users with independent Transaction Cost Analysis that allows customers to see the total cost of their FX execution.
Corporate users, MillTechFX believe, will typically cut their execution costs by up to 70%. This is derived by analysing the transaction costs of selected clients before and after using the platform.
Eric Huttman, CEO of MillTechFX, believes it provides the ultimate solution for corporates. “Until now, the operational burden, cost and complexity associated with multi-bank FX access was too great for most corporates. MillTechFX is a complete game-changer for these firms as it’s the first time they have been provided with direct access to the comparative wholesale FX market through a single platform.”
CTMfile take: Currency Management Automation really is the name of the game for corporates managing FX transactions and exposures. The link to multiple FX banks is now an essential part of this framework. The next stage is to link FX management with Liquidity Management as we see in our upcoming WEBchat.
Like this item? Get our Weekly Update newsletter. Subscribe today