Deloitte 2016 Global FX survey

Posted on March 14, 2016 by Paul Blank

An interesting FX survey from Deloitte provides insight into the challenges corporations encounter when managing currency risk and possible causes (and solutions) for these challenges, as well as FX risk management structures, strategies, and processes adopted by companies across the globe.

Key findings are summarized below:

Treasury challenges: Lack of visibility into FX exposures and reliable forecasts and the manual nature of exposure quantification is a challenge for nearly 60 percent of respondents.

The board agenda: The survey suggests that boards do not always receive sufficient information in relation to FX risk. Executive management could challenge its
treasurers more in order to better understand the impact of FX risk hedging strategies on profit margins.

Treasury structures: FX risk is predominantly managed via a central structure with 93 percent of respondents using a centralized treasury or in-house bank model, sometimes complemented by regional treasury centers.

Hedging strategies: Hedging strategy objectives are mainly focused on protecting cash and minimizing volatility in income statements. As a result, hedging strategies are primarily centered around monetary balance sheet FX items and FX cash flows, and much less on P&L translation or net asset hedging.

Use of technology: Technology is recognized as an important enabler to achieve efficient and effective processes, yet it appears to be a hindrance for many organizations that still deal with a multitude of source information systems with limited interconnectivity. More than 60 percent of respondents rely on manual forecasting processes.