For any corporate treasurer, managing financial risk is a core task. Understanding how market developments affect company operations plays an important role in identifying how risk in general—and foreign exchange risk in particular—can affect both short-term operations and longer-term company profitability.
AFP's latest Executive Guide, FX Risk Management in a New Era of Volatility, underwritten by Chatham Financial, aims to support treasury practitioners in developing a strategy and policy to manage foreign exchange risk. It is targeted primarily at practitioners in U.S.-based corporations.
The guide is structured in two parts. The first part examines some of the factors that affect a treasury practitioner’s ability to identify and manage foreign exchange risk, including growing volatility in the FX market, the offshore Chinese renminbi market, and the impact of regulation. The second part examines all the key stages required in setting and implementing a foreign exchange risk management policy, identifying key decisions that treasurers need to make both on a strategic and tactical level.
Almost all companies face some degree of exposure to foreign exchange risk. For companies operating internationally, foreign exchange exposures are evident, at the minimum, in every cash flow denominated in a foreign currency. However, companies operating on a purely domestic basis are likely to be exposed to some degree of foreign exchange risk, even though the exposure may not be immediately apparent. Understanding how foreign exchange risk materializes is a critical first step in identifying an organization’s exposure.
Download FX Risk Management in a New Era of Volatility here.