kyriba currency risk management webinar slides 3.17.16 ss

Currency Risk Management

March 17th, 2016

© 2016 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 2

Today’s Presenters

Ian Argue, CFAManaging Partner, Global Treasury [email protected]

Thomas GavaghanTreasury Advisor, [email protected]

mailto:[email protected]

mailto:[email protected]


Today’s Factors Impacting Currency Risk

Leveraging Technology for Managing Currency Risk

Best Practices for Managing Currency Risk

Agenda

Today’s Factors Impacting Currency Risk


Factors Impacting Currency Risk

FX

Economic

Geopolitical Market


Impact of Currency Risk

1. Pricing / Tender

2. Order

3. Production

4. Shipping

5. Invoice

6. Cash

ForecastExposure

CommittedExposure

Accounting Exposure

Revenue

COGS

Gross Margin

Expenses

Operating Income

Other Income/Expense

Net Income

Balance Sheet

Assets Liabilities

Equity

Exposure TypeBusiness Process Impact

Leveraging Technology for Managing Currency Risk


TMS Risk Management Benefits

Mitigate Market Risk

• Indentify currency and interest rate exposures

• Manage hedging policies and execute hedging transactions

• Perform periodic mark-to-market valuation and market sensitivity analysis

Ensure Counterparty Compliance

• Comprehensive limit reporting engine to manage specific Board of Director mandated compliance policies

• Mitigate Counterparty, Credit Rating and Sovereign risks

Manage Global Liquidity Risk

• Complete cash visibility

• Reduce local balances via target balancing and intercompany loans / IHB

• Reduce fraud at corporate and regional finance level


Transaction Processing in TMS

Visibility

Pricing

Trade Capture

MTM

Limits

Market & Credit Risk

Scenario Analysis

Reports & Analytics

Settlements

Confirmations

Processing

Accounting



Visibility into existing positions and exposures

Ability to calculate expected prices

Manually capture transactions executed in the market

Interface transactions in from banking and trading platforms

Visibility

Pricing

Trade Capture

MTM



Establish and maintain limits

Track risks

Perform scenario analysis– What if?– Stress testing

Create reports– Internal– Regulatory

Limits

Market & Credit Risk

Scenario Analysis

Reports & Analytics



Generate settlements

Electronic confirmations

Verification and approval processes

Generate accounting entries

Settlements

Confirmations

Processing

Accounting


Currency Risk Management in Your Treasury Solution

Analyze global currency positions

Support cash flow and balance sheet hedging programs

Comprehensive exposure management workflow and interactive reporting

Formally designate cash flow hedge relationships

Mark-to-market valuations and

sensitivity analysis

Best Practices for Managing Currency Risk


Best Practices

Front Office

Middle Office

Back Office

Functions related to identifying, classifying and aggregating exposures.

Exposure Management

Processes related to mitigating risks including strategy determination, position monitoring and hedge execution.

Processes that monitor FX activities for policy compliance (limits, Cparty risk etc.) and hedge program performance.

Processes related to the settlement and accounting of all accounting activities.


Best Practices

Income Statement

Revenue

COGS

Gross Margin

Expenses

Operating Income

Other Income/Expense

Net Income

Order to Cash (O2C): Forecast items Foreign currency

revenuePurchase to Pay (P2P): Forecast items Foreign currency

expensesBalance Sheet

Assets Liabilities

Equity

Balance Sheet: Remeasurement Translation

Best Practices

Forecast transactions– Required to mitigate

impact on gross margin

Invoice in functional currency (pass risk)

Take advantage of natural hedges/ align currency profile

Centralize exposure collection

Front Office Middle Office Back OfficeExposure

Management


Best Practices

Front Office Process Policy determination Strategy determination Trade Execution

Best Practices Alignment of economic and

accounting objectives– Hedge accounting

Centralized execution of all FX transactions

Standardized trade execution channels

Banking relationships

Exposure Management

Middle Office Back OfficeFront Office


Best Practices

Middle Office Process Policy compliance– Counterparty limits and monitoring– Trade execution limits

Performance management

Testing

Best Practices Real time limit monitoring Counterparty credit

monitoring FX program performance

reporting– Gross and net impact of

exposures/hedges– Relate to corporate performance

Exposure Management

Front Office Back OfficeMiddleOffice


Best Practices Exposure Management

Front Office Middle OfficeBack

Office

Back Office Process Confirmations

Settlement

Accounting

Best Practices STP – Straight Through

Processing Automated confirmation

matching Settlement Netting Automated accounting of

cash and month-end entries


Additional Resources

Kyriba Financial Risk Management fact sheetGet PDF at: http://kyri.ba/RiskManagementSlipSheet

eBook: The CFO’s Toolkit - Minimize Risk and Ensure ComplianceGet PDF at: http://kyri.ba/minimizeriskebook

http://kyri.ba/RiskManagementSlipSheet

http://kyri.ba/minimizeriskebook


Thank You For Attending

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kyriba currency risk management webinar slides 3.17.16 ss

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