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FX hedging management: Reconciling To Zero with Hedge Trackers revolutionary new module

Hedge programmes are crucial in running a multi-currency trading company, but it is not easy to explain the FX gains and losses from the 100s of exposures, derivatives and spot trades that have to be made. Reconciling the overall the gains and losses position of a company’s FX programme is a very tedious and manual process that can take days. Indeed, most companies give up once the most material foreign exchange gain/loss components are identified.

The new Reconciling To Zero (RTZ) module in CapellaFX automates the searching for and categorizing the sources of FX gains and losses:

Source & Copyright©2013 -  Hedge Trackers

This process now takes Polycom, an RTZ CapellaFX user, hours rather than days, whilst providing the increased accuracy and depth needed to drive better hedge decisions. Grace Wong, Assistant Treasurer, says, “We always knew there were certain transactions causing more noise in the gain/loss line than we wanted, but without the right tool, finding the source of each problem was a very manual and time consuming process”.

Based on Hedge Trackers’ decade plus of focused FX currency and hedge accounting experience, Capella FX now automatically calculates the impact from the eight legitimate sources of foreign currency gain/loss arising from the hedging program: including over/under hedging, market timing mismatch between hedges and exposures, unhedged exposures and unmanaged currency conversions, and more. Now users are able with RTZ to see their overall hedge performance by category of FX gain/loss:

Source & Copyright©2013 -  Hedge Trackers

And also see which entity in the group produced the gain/loss:

Source & Copyright©2013 -  Hedge Trackers

“What I like about it,” says Grace, “is that when a company has unmanaged conversions the user can know exactly where it came from and what entity triggered the FX impact. I can also send my subsidiaries a report showing the specific impact of their forecast accuracy - that helps communicate the importance of working together to manage these risks”.  

RTZ performance reporting includes two depths of reporting: summary information (to effectively communicate hedge programme performance to senior management) and more detailed exposure and trade data to communicate with the entities as to their impact on hedge performance.  

The development of Capella FX and the Reconcile To Zero technology has taken many years to develop and contains unique Patent Pending methodology and technology.

This is a breakthrough in FX hedging management. 

Today some companies still do not have even elementary SOX controls over the FX line their balance sheet. Part of the problem has been that reconciliation of an FX hedge programme, and all the other FX transactions has always been a nightmare. Indeed, many companies with hedge programmes only look for the large causes of the losses/gains and forget the rest. With the new RTZ module in CapellaFX, corporate treasurers can see quickly and easily where all the problems occurred. And also are able to explain clearly and precisely to senior management what has happened, and to educated their units and subsidiaries around the world how to avoid the problems in the future. 

Hedging just got a lot easier and probably much more effective.

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