November 7, 2022

The Science of FX Exposure Management

FX volatility and economic uncertainty are putting pressure on treasury to optimize risk management programs and provide management and the business with insight and foresight on how currency moves can impact revenue and the P&L. FX risk managers are under the microscope. “For the last six months, there’s been more intense attention on what my team is doing than for the past five years,” said a member of NeuGroup for Foreign Exchange. He is not alone. The US dollar’s ascent,…
October 27, 2022

FX Dashboards: Essential Tool to Manage the Volatility Narrative

Real-time dashboards help treasury risk managers tell the FX story, but collecting front-end data remains a challenge. Extreme volatility in foreign exchange markets has underscored the importance of technology tools, systems and solutions that enable companies to better monitor and manage their FX exposures. And for multinationals with far-flung operations, nothing beats a real-time dashboard to keep on top of the FX narrative, experts at Chatham Financial said at a recent NeuGroup for Mega-Cap Assistant Treasurers meeting. The key for companies with…
October 13, 2022

Macros on Steroids: How FX Teams Use Everyday Automations

Many FX risk managers are working to get out of Excel and automate more processes. “When it comes to treasury and finance upscaling, aside from the big TMS systems, who is using what?” That question from an FX risk manager sparked discussion at the second-half meeting of NeuGroup for Foreign Exchange 2, sponsored by Societe Generale, as members shared a variety of approaches ranging from tapping a team of dedicated treasury engineers to using less sophisticated, more user-friendly tools. And the trend was…
September 30, 2022

To Hedge or Not to Hedge FX Exposures When Volatility Spikes

Pausing a hedging program risks undermining the perceived value of hedging by senior executives and the board. “Should we stop hedging?” The surge in the US dollar this year against other major currencies has prompted some FX risk management teams to ask that question as well as others about hedging strategy amid disruptive volatility, bankers at Wells Fargo said at a fall meeting for NeuGroup for Foreign Exchange sponsored by the bank. The questions come amid a big jump in…
FXSenior Executive
September 20, 2022

Answering the CFO’s Call

A soaring dollar is threatening earnings; get ready for more CFO questions. The dollar’s ascent is causing a lot of heartburn for CFOs and boards. A stronger greenback reduces the value of FX-denominated income. For many US companies, foreign income comprises a large chunk of total revenue; thus, the hit to earnings can be substantial. In recent NeuGroup peer group sessions, the topic of containing the impact of a stronger dollar on financial results has been prevalent and reached far…
FXPension and Benefits
September 15, 2022

Avoiding a P&L Punch Packed by Nonqualified Deferred Comp Plans

Methods for hedging NQDC liability gains to avoid the pain of being hit by financial statement surprises. Nonqualified deferred compensation (NQDC) plans allow companies to offer executives the opportunity to defer taxes and earn market-based, notional returns on the deferred amounts while the company gets access to additional capital. That’s all good. The complication is that executives usually choose from a menu of market-based “notional” investments whose gains directly affect compensation expense and the P&L unless they are hedged. Depending…
FXTalking Shop
September 15, 2022

Talking Shop, FX Edition: EUR Forwards; Hedging Depreciation

Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected] Member question 1: “Going out to one year for EUR, what size tranches are you trading for EUR forwards? Could I trade $10 million-$20 million? $20 million-$30 million? Peer answer 1: “The one-year EUR forward is pretty liquid, but to keep the spread narrow, we typically keep our size under USD 30 million equivalent…
FXTalking ShopTechnology
August 11, 2022

Talking Shop: Benchmarking Cash Flow Hedging

Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. Send us your responses: [email protected] Member question: “Here are some benchmarking questions about cash flow hedging: 1. “What percentage of cash flow exposures do you hedge?2. “What instruments do you use to hedge?3. “How far into the future do you hedge?4. “Given the current strength of the US dollar, are you contemplating changing your FX hedging program?” Peer answers, question 1 (hedge…
July 14, 2022

Righting the FX Hedging Ship After a Perfect Storm

Lessons learned and changes made after a plunge in JPY reveals cracks in communication and processes. The plunge of the Japanese yen (JPY) this year to its lowest level against the US dollar in more than two decades (see chart) revealed communication problems at one NeuGroup member company between FX risk managers in treasury and the sales team in Japan—problems that could have resulted in a painful financial outcome. Instead, the company’s treasurer came away with valuable lessons for any…
July 14, 2022

Reducing FX Risk: The AtlasFX Vision

AtlasFX CFO Scott Bilter discusses the implications of a possible commodity bull market for FX risk managers in an interview with NeuGroup CEO Joseph Neu. Managing foreign exchange risk at multinational corporations is never easy. But it’s definitely harder during periods of market volatility and economic uncertainty—like the one roiling FX markets now. Among the recent challenges facing NeuGroup members who manage FX risk: The US dollar has soared against the euro and the Japanese yen as the Federal Reserve…