Skip to content
Thomson Reuters

How should corporate treasurers deal with FX volatility?

Joseph Neu

24 Apr 2017

Photographer: Kai Pfaffenbach

In today’s volatile currency market, corporate treasurers are focusing on three key areas in their pursuit of effective FX risk management.

Corporate treasurers know from recent experience to expect the unexpected.

Find out more about Thomson Reuters Corporate Treasury services for effective financial market analysis

After a rollercoaster ride in recent months, their currency market exposure received another jolt with British Prime Minister Theresa May’s surprise decision to call a snap election.

The announcement caused sterling to jump by as much as 1.6% against the US dollar to the highest level since December, with Deutsche Bank describing the poll as a “game changer” for the currency.

Screenshot of Eikon Currency Value Tracker
Screenshot of Eikon Currency Value Tracker

Find out more about Thomson Reuters Eikon

It was a further example of the volatility that treasurers are having to contend with, as even traditionally stable currencies experience a sustained period of uncertainty.

This is set to continue with elections this year in France and Germany and the threat of more geopolitical uncertainty, with North Korea’s nuclear ambitions a particular focus.

Finding ways to mitigate against these fluctuating exchange rates and to deliver a robust FX management program is now a major challenge for corporate treasury departments.

At the recent Thomson Reuters sponsored NeuGroup FX Managers’ Peer Group meeting, global finance and treasury practitioners identified three key areas for consideration as they look to address these FX pressures.

Watch video — The way to keep you ahead in corporate treasury 

  1. FX talent recruitment

One of the main points raised by the peer group was the challenge of finding experienced FX talent for their treasuries, especially at senior analyst and manager level.

The group commented that they need people who already have the requisite experience as they do not have time to train.

The members suggested there should be some sort of knowledge exchange on viable candidates that just missed being hired and might be a good fit for another organization.

The NeuGroup , or a similar place where treasurers go for trusted information, could facilitate this exchange of information on potential candidates, in addition to providing a group job board.

Watch video — NeuGroup Founder’s Takeaways from 2017 H1 FX Managers’ Peer Group 2 Meeting

  1. Focus on measurement and analysis

There has been much focus on the increasing scope of the corporate treasurers’ role, particularly as they are now involved in managing an increasingly broad range of risks:

  • Liquidity maintenance
  • Counterparty risk
  • Operational risk
  • Country risk
  • Overall risk management program

What are FX Managers' Biggest Challenges?

Yet despite this increasing scope, FX management still remains an important part of the corporate treasurers’ role and this starts with the ability to define FX exposures and collect quality information about them.

Corporate treasurers are looking for systems and tools to help with this and are either implementing a new system or expanding the capabilities of the system they have already.

Find out more about Corporate Treasury services for effective financial market analysis

  1. FX bank scorecards

During the knowledge exchange, several corporate treasurers shared the scorecard reports they use internally to evaluate their FX banks on trade pricing and performance, as well as what they share externally with their banks during quarterly or annual reviews.

Screenshot of FXall in Eikon QuickTrade RFQ

Find out more about Thomson Reuters Eikon

Monitoring performance and sharing key metrics is common, but qualitative evaluations of items like post-trade settlement efficiency can lead to significant wins in bank-service levels as well as trade execution performance.

Most of the group’s scorecards started with report data downloaded from Thomson Reuters FXall.

New Execution Quality Analysis tools are coming from FXall later this year to make the service even more effective.

Find out more about how the NeuGroup and Thomson Reuters can help your organization share best practices and implement a robust FX management program today

For more than two decades, NeuGroup has led the way in peer knowledge exchange for treasury and finance professionals.

With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions.

More reasons for wealth clients to pick Unit Investment Trusts Cost of Compliance Report 2017: is there a new risk approach? Is your data friend or foe? 5 steps to better insight The impact of protectionism on global M&A Keeping pace with the big data explosion How real are Germany’s property bubble fears? Quant roadshows shine light on buy-side data science Wealth reporting from the client’s point of view SEC turns up heat on broker-dealers over BSA/AML compliance Modern slavery: what it is and what it isn’t