FX risk is the most significant area of concern for CFOs and treasurers, who agree that risk management is an area where improvement is needed. While seven out of 10 CFOs said their company has been hit by unhedged FX exposures in the past two years, which could have been avoided, roughly seven in 10 corporate treasurers also said that FX risk management is one of the most important aspects of their job. These are some of the findings from a report, Rethinking treasury, based on two separate surveys conducted by HSBC and FT Remark during the first quarter of 2018. The report asks how CFOs and corporate treasurers are rising to the risk management challenge.
Treasury focus on risk
Overall, the report found that the treasurer, CFO and CEO are working more closely together. CFOs expect their treasurer to react to more risks in a faster and more efficient way, meaning that corporate treasurers need to be both risk managers and strategic partners. This means that treasurers need to focus on strategic, long-term thinking to support the business in its decision-making process. At the same time, treasurers and their teams have to develop new skills to adapt to the pace of digital transformation. The report notes that this may not be easy, with pressures on resources remaining tight in many businesses.
Here are some of the key findings from the report:
- 58 per cent of CFOs in larger businesses say that FX risk management is one of the two risks that currently occupy the largest proportion of their time;
- 72 per cent of treasurers say FX risk management is one of the most important aspects of their job;
- 51 per cent of CFOs say that FX is a risk their organisation is least well-placed to deal with;
- 57 per cent of treasurers say risk management is an area in which they would like to develop further expertise;
- 70 per cent of CFOs say they experienced lower earnings due to significant unhedged FX risk in the past two years, which their treasuries could (or should) have been able to avoid;
- 53 per cent of treasurers expect changes in FX regimes and regulations to materially impact their risk management strategy in the next three years.
FX roundup: Why automation delivers, increasing FX analytics + TMS partnerships, more currencies
FiREapps, Bloomberg, FXall, Execution Quality Analysis, local and cryptocurrencies
Cash flow forecasting – more than just safeguarding liquidity
Don't avoid having a cash forecast - it's easier than you think and will provide you with an array of insightful data
How do you know if your TMS needs additional FX analytics?
A white paper by FireApps looks at how companies can improve their FX management, including the underlying data necessary and six questions to assess if you need an FX addition to your TMS