83% of CFOs might lose their job
7 October 2013 · 2 min read
When considering companies transacting in foreign currencies, only 17% of them have experienced no FX loss or gains in 2012. This means that for 83% of them, the CFO has left the company exposed to exchange rate volatility and / or has been unable to successfully hedge FX risk (see figure 1). FX strategy must be prioritised by CFOs to ensure costs and exposure are limited.
For one-third (33%) of respondents to our survey, the amount of FX loss or gain has exceeded $1m, resulting in a direct and high impact on their profit margins. As a CFO, you are responsible for protecting your company revenue and profit margin, otherwise, your role is in danger (see figure 2).
It is important to note that although many of these businesses will have seen FX gains this year, their exposure to FX risk means they could just as easily report losses in the future. Overall, small numbers of big winners and losers accounted for most of the gains and losses, although the typical respondent still gained/lost around one-third of a million dollars. Despite these substantial exposures, 14% of the businesses in this sample still did not hedge FX risk (see figure 3).
Those that did so usually preferred simple methods such as forward contracts and natural hedging (when possible), rather than more complex derivatives such as options or swaps.
Surprisingly, 13% could not say how much they hedged. Of those who did know, 39% hedged less than half of their exposure; the typical respondent hedged 59% of the firm’s exposure (see figure 3).
Source: Hedging FX risk – Taking stock of the challenge for mid-caps and SMEs. A research report by Kantox Ltd. in association with Association of Chartered Certified Accountants (ACCA).
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