Company overview

Siegfried is a pharmaceutical company in the CDMO (Contract Development and Manufacturing Organisation) business, operating across 13 sites in three countries. Led by Giacomo Tovena, Head of Global Treasury, the company manages significant exposure in multiple currencies, primarily US dollars, euros, and Swiss francs, with some exposure to Japanese yen and Canadian dollars.

As a global pharmaceutical manufacturer with international operations, Siegfried faced complex foreign exchange challenges that required a sophisticated solution to protect their financial positions and streamline operations.

FX Management Challenges

• Manual FX Management – Siegfried relied on balance sheets and P&L analysis to detect risks, using basic FX swaps and natural hedging. Currency swaps against the Swiss Franc (CHF) were done manually once or twice a month.
• High Hedging Costs – Large intercompany loan positions resulted in high hedging costs. They hedged a percentage of intercompany loans, which were rolled every quarter, resulting in a high cost of hedging between USD and CHF.
• Invoice Complexity – Managing numerous invoices spread across multiple locations made gaining a comprehensive overview of FX exposures difficult. Invoices were downloaded from SAP only once a month, leaving 30 days of unmanaged currency risk.
• Need for Automation – Increasing market disruptions and a labour-intensive process made it clear that a more efficient and automated solution was necessary.

"We are really happy with what we have achieved in terms of savings, understanding all the processes, how you can manage FX risk, and the openness of the people being involved in these kinds of projects." - Giacomo Tovena

Implementing Kantox

Siegfried's partnership with Kantox began approximately two years ago with a strategic implementation approach that evolved over time. Initially, they deployed Kantox Dynamic Hedging® specifically to address FX risk from intercompany loans. 

Building on this success, they recently expanded their use of the platform to include Kantox In-House FX. This centralised FX risk management solution would enhance the hedging program for accounts payable and receivable (AP/AR) across all their sites globally. This expanded implementation allowed invoices to be automatically netted per site, consolidating exposures at both local and group levels. By establishing specific rules and percentage ranges for automated hedging, Siegfried has optimised their approach to currency swaps, generating meaningful cost savings while maintaining effective risk management practices.

Benefits of Using Kantox

The implementation of Kantox's solutions has allowed Siegfried AG to achieve the following:

1. Dramatic workload reduction: Automation has "immensely" reduced the manual effort required to manage FX risk, allowing treasury staff to focus on higher-value activities.
2. Seamless AP/AR FX risk management: Automatically integrates and nets AP/AR data across ERP systems, consolidating transactions from subsidiaries to the parent company while enabling flexible, automated FX protection daily or weekly through platforms like 360T and FXall.
3. Real-time exposure management: Invoices are downloaded in real-time, with internal rates instantly provided to subsidiaries. Exposures are automatically netted within Kantox and hedged, ensuring optimised cost of carry through business rules.
4. Enhanced visibility: Gained the ability to monitor and track all types of FX risks across the organisation in a consolidated view.
5. Cost savings: Instead of hedging only a percentage of intercompany loan exposure, Siegfriend now hedges all exposure monthly, improving cost efficiency. Using take-profit and stop-loss limits within a 2-3% range minimises hedging costs through predefined business rules.
6. Process improvement: Deepened the treasury team's understanding of effective FX risk management processes.