Why CFOs and Treasurers are turning to FX management automation
20 April 2023 · 3 min read
Currency management automation has become an essential aspect of digitalising the treasury function, and it’s no surprise that many medium-to-large-sized companies with international operations have implemented it. With a recent poll, conducted by us on our Linkedin page, revealing that 63% of CFOs, treasurers, and currency managers believe that automation gives them more time to devote to value-adding tasks, it’s clear that automation is a growing trend.
In this blog post, we share some of the key takeaways from our latest interview for CurrencyCast with Morgane Chavet, Forex and Interest Rate Derivative Sales at BNP Paribas, where we examine the benefits of currency management automation and how it helps the Treasury team to become a more strategic player inside the firm.
Here are some insights from the episode:
What are the main pain points that large companies face with manual currency management workflows?
Reporting, time period, netting, and lack of time are the four main pain points that medium-to-large sized companies face when they lack properly automated foreign exchange workflow.
- Reporting is a challenging task, as it’s hard for corporates to gather all the information from different subsidiaries and ensure proper reporting. Manual reporting can lead to errors, which can be costly in the long run.
- Time is another crucial factor, especially when there’s a time lag between gathering and analyzing information and making decisions. The current high volatility environment makes it even more critical to hedge FX exposure promptly.
- Netting is another area where a lack of visibility can lead to missed opportunities. Treasurers may not see the chance to net some cash flows together, which could result in saving forward points and trading costs.
- Finally, lack of time can lead to underestimating FX exposure, particularly on secondary currencies. This can lead to companies having either no hedging policy or too large a hedging policy.
How does the exposure collection process improve with currency management solutions?
The solution helps large corporates centralize all their information easily, which helps provide real-time computation of the exposure generated. Automating the pre-trade phase of the FX workflow avoids any human error.
Kantox Dynamic Hedging is a currency management automation solution that helps ease the process of exposure collection. It’s directly linked to the ERP, which provides access to the right information without any time delay. This also enables the tool to provide accurate reporting instantly.
Do treasurers have a cost-driven approach to currency management automation?
Currency management automation can significantly reduce costs for treasurers. There are direct and indirect costs associated with this, and while direct costs can be easily quantified, indirect costs are more complicated and can vary from company to company based on the degree of automation.
One major indirect cost is the time savings from process automation. This is especially true when it comes to the different tasks involved in the pre-trade, trade, and post-trade phases of currency management. These tasks include computing exposure, collecting information, monitoring the market, executing transactions, inputting hedges, reassessing needs, booking hedges, recording for accounting purposes, generating reports, and reconciling with the ERP.
With a tool that can easily automate these tasks, treasurers will be able to free up valuable time to focus on more strategic and value-adding tasks.
Benefits of automation
As you can see, currency management automation solutions can provide a host of benefits for companies that include avoiding manual and human errors, saving time and reducing hedging costs, and gaining better visibility of the exposure to FX risk to improve the firm’s profitability.
They have become an essential aspect of digitalising treasury operations for medium-to-large sized companies. By automating their foreign exchange workflow with a solution like Kantox Dynamic Hedging, companies can seamlessly automate their FX workflow and enjoy the benefits of proper currency management.
You can find these and more valuable insights about currency management automation in the episode with expert Morgane Chavet. Subscribe to our newsletter to be notified when another episode of CurrencyCast is live.