BUILDING RESILIENCE AMIDST TECHNOLOGICAL CHANGE AND GEOPOLITICAL STRESS

Currency Cast interview with Nino Bergmann, Interest Rate and FX Derivatives Sales at BNP Paribas in Zürich

In this episode of our Podcast CurrencyCast, Agustin Mackinlay asks Nino Bergmann to discuss his views of FX and financial risk management, the role of corporate treasurers in the current financial and economic environment, and the impact of geopolitical tensions. 

‍FX hedging amidst global uncertainty

In the daily task of exchanging views with corporate clients, a key activity of BNP Paris Zürich is to help clients set up their FX hedging policies. Corporate customers have access to an array of financial instruments, including forwards, swaps and options.

This allows them to run cost-effective hedging strategies. This is particularly important in the context of Switzerland, where the high cost of hedging —on account of CHF’s forward premium— is a key consideration. 

The workday of an FX and Interest rate derivatives sales manager includes several meetings —some planned, others of a more reactive nature— devoted to reviewing the main macroeconomic headlines. Both internal and external sources of information are used. 

“There is an overwhelming amount of data that needs to be filtered out. Data points can refer to tactical or ad hoc moves in financial markets, or to more strategic insights including monetary policy and structural economic shifts.” — Nino Bergmann

On days of extreme FX volatility, like in April 2025, when 4%+ moves in currency markets took place, events are assessed in the following terms: 

• Are market moves reflecting technical or fundamental factors?

• Is volatility responding to economic data, or to geopolitical events?

• Are the moves of a temporary or permanent nature?

In scenarios like this, it is important to be proactive rather than reactive. For corporate treasurers, key aspects of FX management include:

• Stress testing FX exposures under different geopolitical situations

• Revisiting hedge tenors

• Conducting simulation with multiple scenarios, not just historical data

• Staying agile and avoiding a purely static approach

• Assessing layered hedging in the face of forecasting risk

In the particular context of Swiss exporters in recent years, it is worth mentioning the companies have become more resilient in the face of the seemingly unstoppable CHF. Here, the level of profitability plays a role in assessing companies' capacity to absorb the impact of currency moves.

‍Forward premia and the cost of hedging

The Swiss franc forward premium against most currencies is one the biggest ongoing challenges for Swiss treasurers. In annual terms, this premium has reached 4% to USD and more than 2% to EUR.

ILLUSTRATION: SHORT-TERM INTEREST RATES

As the Swiss National Bank has again slashed short-term interest rates to zero, parts of the CHF curve, in particular 2- and 3-year swap rates, have turned negative. This creates a serious dilemma. 

“If you hedge the future revenues that you generate abroad at a discount of 5%, any organic growth that you have in that country is offset by the hedging costs” — Nino Bergmann

Short-term interest rates

(Source: central banks)

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High hedging costs create a dilemma for many Swiss corporate currency managers: “Should I hedge at all? And if so, how?” Most of the time, managers respond in the affirmative, despite the hedging costs.

As many have noted, there has been a breakdown in correlations during H1 2025, as traditional safe-haven vehicles such as USD-denominated bonds have been at least partly replaced by the likes of CHF and SEK. 

It would be wrong to assume that this has only a limited financial impact. Indeed, it can have profound effects on demand and economic growth. 

FX and interest rate risk management

When assessing the similarities and differences between FX hedging and interest rate risk hedging, one can see that there is a lot of overlap:

• In both cases, the goal is to shield companies from financial markets volatility

• Both require a keen understanding of the sources of exposure

• Managers should set a solid risk framework and stick to it

• Stress-testing should be thoroughly conducted 

On the other hand, there are some key differences between FX risk management and interest rate risk management. Some of those include: 

• Exposures are easier to forecast in interest rate risk management

• More long-term planning is possible in interest rate risk management

• FX risk management is more dynamic

• FX risk touches on many aspects of the business: revenues, cost, intercompany flows

• FX risk management is more sensitive to geopolitical tensions

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The impact of geopolitical tensions and the role of treasurers

In recent years, geopolitical stress has become a more immediate concern for corporate managers. Trade tensions, tariffs and even regional instability can impact access to funding, cash management and even forecasting. 

While access to capital can become more challenging (witness the recent volatility of credit spreads), capital controls can keep cash trapped in local subsidiaries. The biggest challenge, however, is the degree of forecast uncertainty regarding revenues, costs and cash flows. 

“The role of treasurers has thus expanded. It is no longer only about execution. It’s now also about scenario planning, cross-functional coordination, and building financial resilience” — Nino Bergmann

But what does all that mean for financial teams? Certainly, there is no shortage of challenges. But the situation also creates opportunities for corporate treasurers. Treasuries are becoming strategic hubs inside companies.

To fulfill that expectation in the face of rapid technological change, shifting interest rate differentials and rising geopolitical tensions, treasurers need to build financial resilience by staying agile and keeping broadly aligned with the business.