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Driving growth with currency management automation

Discover essential FX hedging strategies and currency management best practices from our foreign exchange experts.

Driving growth with currency management automation

24 November 2022
3 min read
Agustin Mackinlay

Are you worried that you could be risking your job by putting an automation tool in place? In this article, we analyse the benefits that technology can bring to your team and how you can achieve faster growth.

Many finance professionals have acknowledged that they need to implement automation software to streamline their workflows and processes, and adapt to the future of the industry. However, they are scared that these tools could replace them.We are going to show you why corporate treasurers shouldn't be scared of embracing technology to assist them in their day-to-day tasks.

The two treasurers

To understand where automation could be most beneficial for the finance function, and more specifically for currency management, first, we need to look at the role finance leaders play inside the organisation.In a recent edition of Treasury Management International, Jacques Levet, Chief Digital Officer at BNP Paribas, made a distinction between the 'Morning Treasurer' and the 'Afternoon Treasurer'.While the Morning Treasurer makes sure that all operations are squared and everything is executed smoothly, the Afternoon Treasurer thinks more strategically about longer term projects and ways to increase the efficiency of treasury operations.To arrive at that more strategic position, everything must be done to secure the morning tasks thanks to automation. Now, how do we go from one to the other in currency management? Let's look at this in more detail.Throughout the FX workflow, there are a myriad of morning tasks that are repetitive, time consuming, and that add little value.In the pre-trade phase, some of these tasks include pricing with an FX rate or collecting the relevant exposure information and calculating hedges.In the trade and post-trade phase, there are a number of processes that are ideal for currency management automation, including liquidity provider selection, best price execution, swap execution, and hedge accounting, among many others.Manually executing these tasks, supported only by spreadsheets, carries several operational risks and costs, and ultimately hinders growth.However, you don't want to lose control over your currency risk and FX exposure strategy once you start implementing new technology.

Intervention for controlled automation

Here’s a critically important point to consider: automation does not mean losing control — quite the contrary. You are always required, as a treasurer, to intervene. But what matters is the type of intervention.With Currency Management Automation solutions, you intervene at a strategic moment by setting the parameters of your hedging program, including the situation in terms of forward points, the pricing parameters of your company, the degree of forecast accuracy, and your tolerance to FX risk.And you remove most of those time-consuming and error-prone processes mentioned before. So, with more time at your disposal, you can focus on improving your cash flow forecasts, which was regarded by 68% of respondents in a recent Marsh McLennan survey as a Treasurer's top priority.Now, that creates a virtuous loop because better forecasts can further enhance the precision of your currency hedging. This also means increased accuracy for the projected margins and faster growth for the company.

Succeed with Currency Management Automation

A Currency Management Automation solution not only improves the functioning of the FX workflow and Treasury operations but also improves processes and reduces manual tasks allowing finance leaders more time for strategic thinking. This ultimately leads to company growth.In a well-known study of growth and automation, consultants at McKinsey singled out two conditions for success:

  1. a) you should be an early adopter.
  2. b) you should drive cross-functional teamwork.

According to the same study, the early adopters can expect increased levels of annual revenue as high as 10% growth rate over time thanks to automation. This is because they have a competitive advantage that let's them surpass their competitors.Driving cross-functional teamwork can also be advantageous for many companies. Having teams collaborate creates synergies and allows for better visibility over the full chain of operations.For example, finance and commercial teams do not always see eye-to-eye when it comes to pricing with an FX rate. But using real-time forward exchange rates automatically provided by the Finance team could lead to more competitive pricing without hurting budgeted profit margins.And that's a win-win situation.

The modern Finance manager

As a CFO, you have a wide selection of Treasury automation tools that aim to help with your currency management processes and do the heavy lifting by taking care of time-consuming manual tasks.If you want to become a manager with a forward-looking approach, there are two clear things you should consider about technology: be an early adopter and drive cross-functional teamwork. If you do that, you're going to be perceived as a strategic manager within the enterprise.Want to drive faster growth with the help of an automation solution? Book a free strategy session with our currency risk management experts.

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Agustin Mackinlay
Agustin Mackinlay is a Financial Writer at Kantox. He has previously worked at an investment bank specialising in Emerging Markets. Agustin teaches several courses in Finance at LaSalle University and EAE Business School in Barcelona. He holds degrees from the University of Amsterdam and from the Kiel Institute of World Economics in Germany.
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