CurrencyCast is a treasury podcast series from currency management experts. In each episode, we look at the pressing foreign exchange (FX) risk issues facing treasurers and CFOs today and help them identify the potential gaps in their FX risk management strategy.
Treasurers have understood the benefits of currency management and FX hedging in particular for many years. But the fact is that these known benefits were somewhat overshadowed by the perception that currency management is a costly, resource-intensive activity. Here's a piece of (extremely) good news: Currency Management Automation makes it possible for treasurers to seamlessly run the entire FX workflow with the help of robust, easy-to-install software solutions.With an added bonus, embedded in these solutions, Multi-Dealer Trading platforms such as 360T drastically reduce the cost of corporate FX trading. So now is the perfect time for treasurers to step in and become key business strategists in their own right.Let's see how you can accomplish this feat.
Let me illustrate this idea with one example we could choose among many others. It's about one of the tasks that treasurers perform during the post-trade phase of the FX workflow. It consists in adjusting the firm's hedging position to the cash settlement of the underlying commercial exposure.This requires a lot of 'swapping'. Treasurers know very well what we are referring to. Swap execution is undoubtedly one of the most time-consuming, resource-intensive activities of members of the treasury team. Even if the FX transactions themselves are executed through Multi-Dealer Trading platforms, the action of inputting the trades, selecting the liquidity provider and confirming the trades are many times manually carried out.And if that wasn't enough, these processes carry a number of operational risks:
Like other processes across the FX workflow, the task of swap execution can be easily automated. This immediately frees up valuable treasury resources and gives financial managers more time for value-adding tasks such as fine-tuning their cash flow forecasts.So here's what we think is a very powerful message for treasurers: don't let the wrong and obsolete perception of currency management as a costly and resource-intensive activity get in the way of an efficient and modern treasury that can perfectly function as a source of value creation for the whole enterprise.
We've seen companies shying away from the benefits of 'embracing currencies' —selling in their customers' currency and buying in their suppliers' currency— because of the outdated and value-destroying perception that FX management is too costly and too complex an undertaking.Take a minute to reflect on the enormity of this: a wrong perception may be acting as an unnecessary check on your progress as a professional and on the progress of your company. As a treasurer equipped with Currency Management Automation solutions, you can become a more strategic treasurer and turn the 'digital treasury' into a reality that takes your business model to new heights.
