This report from Deloitte talks about the impact of Foreign Exchange (FX) on businesses. The report is based on a global survey that provides insight into the challenges corporations encounter when managing currency risk and possible causes.
- Lack of visibility into FX exposures and reliable forecasts and the manual nature of exposure quantification is a challenge for nearly 60% of respondents.
- Boards do not always receive sufficient information in relation to FX risk.
- Both central and decentralized FX models have similar benefits and challenges.
- Hedging strategies are primarily centered around monetary balance sheet FX items and FX cash flows.
- Technology is recognized as ain important enabler to achieve efficient and effective processes.
- Executive summary
- Survey demographics
- Treasurers face various challenges in managing FX risk
- Lack of visibility driven by complexity and inadequate investment in automation
- Board visibility of FX exposures
- Opportunity to improve reporting to the board
- Both centralized and decentralized models work
- Hedging objectives focus on reducing income statement volatility
- Primary hedging strategies vary by industry
- Missed opportunities in natural hedges
- The majority of derivatives hedge transaction exposures
- Hedging transaction exposures
- Use of technology to manage FX risks
- Accounting treatment influencing hedging strategies
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