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The Treasurer’s Role In FX Management

The role of the corporate treasury is becoming ever-more strategic within the corporation. A new article provided by Deloitte in CFO Journal highlights how the growing list of responsibilities for corporate money managers today is now beginning to include foreign exchange management and risk mitigation.

The U.S. dollar’s recent resurgence in the global market has placed more pressure on treasurers to manage FX exposure, Deloitte stated, meaning these professionals must focus on improving visibility into the volatility of their earnings as a direct impact of FX fluctuations.

According to Deloitte, some potential causes of FX exposure include trading and the treasury function, as well as external factors, like regulatory cash restrictions and currency volatility.

[bctt tweet=”‘FX exposures can hide in plain sight on a company’s balance sheet.'”]

“FX exposures can hide in plain sight on a company’s balance sheet and within various intercompany transactions, which can complicate exposure identification,” William Fellows, Deloitte Advisory partner of its valuation practice for Deloitte & Touche LLP, said.

He added that companies must upgrade their balance sheet examination process and strengthen cash flow forecasting to access the data needed to protect against FX volatility.

“Beyond that,” he added, “companies need a solid understanding of their various forecasts and drivers of those forecasts in terms of revenues and expenses so that they can identify where exposures may lie.”

While there are an array of ways companies can address FX exposures, Deloitte Advisory Partner at Deloitte & Touche LLP Jade Shopp pointed to the role of the treasury function.

“To address FX exposures, organizations should consider connecting operations with the treasury function so there is a seamless integration between business activities and risk management activities that may be directed by treasury,” Shopp stated. “An effective FX risk management program establishes an appropriate balance between protecting the company against market risks and satisfying the administrative requirements of hedge accounting.”

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