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 global operations and treasury teams managing numerous currency pairs—one NeuGroup member has more than 50—is to take charge of the FX narrative by illustrating key metrics, program drivers and insights using dashboards that aggregate and display FX information in real time, said Jason Kirwan, director with Chatham’s risk-management platform, ChathamDirect.
- APIs and other tools have greatly facilitated straight-through processing (STP) and the flow of FX data from the front-end to the back-end and the implementation of a dashboard. But challenges remain, members noted.
Storytelling. Dashboards that dynamically illustrate cash flow, balance sheet and other important areas affected by FX volatility, in as close to real-time as possible, allow treasury to take control of the dialogue about the company’s current exposures and the hedging programs in place to mitigate swings.
- “If treasury doesn’t tell the story, then C-Suite executives will find a narrative from someone else, and all of a sudden treasury is no longer in control of the financial situation,” Mr. Kirwan said.
- Overlaying its FX program with real-time data, rather than flipping between the program and Bloomberg, empowers treasury to identify the company’s exposures quickly, explain them in the context of the company’s FX program and make recommendations to management, he added.
Easier STP. Transmitting the necessary FX-related data to and from enterprise resource planning (ERP) systems, especially when acquisitions have resulted in multiple ERPs, has traditionally been a challenge.
- A renewed focus on those integrations, Mr. Kirwan said, has been fueled by the advent of APIs and other tools that have significantly reduced the time and resources to pursue STP.
Ongoing challenges. The biggest challenge for many firms today, Mr. Kirwan said, is making sure the data digested on the front-end is comprehensive and accurate; taking extra steps to ensure its quality and coverage provides abundant rewards downstream.
- Members acknowledged the difficulty in refreshing their companies’ FX exposures frequently enough to trade on a daily basis, much less intraday, especially in jurisdictions where staff may lack expertise. One noted having the luxury of having implemented one instance of SAP systems across the company, enabling treasury to view exposures in real-time.
- Another said his team improved a Brazilian subsidiary’s daily hedging by shifting members of the accounts receivable team stationed at an offshore location, to reduce costs, back to sit with the local treasury. They now post invoices within 24 hours, bolstering the accuracy of reports the FX team pulls.