Risk at the 2015 AFP Annual Conference
- By Staff Writers
- Published: 10/5/2015
FX Option Hedging Workshop
As the USD strengthens against most major currencies, there is a renewed interest from U.S. corporate treasuries to consider the potential use of options to optimize their FX hedges. This workshop gives participants the opportunity to work in groups to learn in practice how to price forward-style option hedging strategies, and understand the benefits and important aspects of each strategy. Participants acquire tools to critically assess which options structures adhere to their treasury policies, calculate (back-test) whether these structures would have provided a more effective hedge historically than an outright forward, and learn essential post-trade calculations, while covering stress testing and how to test for hedge effectiveness.
FX Hedging: Capitalizing on a High Volatility Environment
Geopolitical risk, fluctuating commodity prices, and diverging global central bank policies are amongst the factors that have ushered back an environment of increased currency volatility. The session explores why a simple forward contract is suboptimal and even risky for corporate treasurers in a high volatility environment. Finally, the effect of volatility on several popular hedging structures are discussed so participants can be proactive in structuring their own hedging solutions.
Risk Value Metrics: Driving Customer Focused Value
Enterprise risk management is a mature concept, but many corporations struggle to communicate value effectively. Risk professionals are challenged to demonstrate how the cost of enterprise risks, such as cybersecurity, correlate to business value for stakeholders. Common metrics are not always clear. This session introduces a scalable framework for identifying risk metrics designed to focus on stakeholder value. Using Microsoft’s Enterprise Business Continuity Program as an example, speakers discuss successful measures including common metrics, reporting pitfalls, and best practices from industry leaders.
How Mobile Banking Can Prevent Business Disruptions
When power failures, system outages, or disruptions threaten to bring productivity to a halt, mobile banking can keep business running. In this session, a corporate treasurer will talk about using mobile banking during a hurricane that shuttered his office for a week and displaced him from his home. A leader from Wells Fargo will discuss how businesses can use mobile banking during emergencies and how to incorporate mobile banking into your company’s business continuity plans.
Balance Sheet Hedge Programs: Good to Great
As a highly successful social media company, LinkedIn’s foreign currency risk expanded quickly both in size and complexity. Fortunately, LinkedIn’s proactive approach to hedging has enabled the company to reduce earnings volatility and keep up with constant changes in exposures in the foreign currency landscape. In this session, LinkedIn explains how it gathers currency risk, presents it to make hedge decisions, the challenges Treasury faces to act quickly, and how practitioners identify and address transactions that were undermining the effectiveness of the hedges.
CFO’s Key Performance Indicators for Risk Management
Running an effective, modern risk management program requires on-going benchmarking and visibility to maintain peak performance. In other words, it requires performance indicators which can be monitored in near real-time so that small problems can be diagnosed before flaring up into bigger surprises, especially during times of rapid growth. Uber experienced staggering growth in both size and volume in the past 2 years and in this session the former CFO shares the key performance indicators they monitored to expand internationally.
Systems Thinking and Its Implications for ERM
The 2008 financial crisis revealed that ERM frameworks by themselves were not sufficient in accounting for risk. Instead, practitioners must learn to take a more holistic, systemwide approach to risk management. This approach, known as “systems thinking,” has an overarching objective of understanding that organizations are complex social systems. In the systems thinking paradigm, the business organization, and the risks must be undertaken in pursuit of its strategic goals and objectives. This session explains why through case studies.
Rising Rates & Capital Structure Decisions: Are You Ready?
Is your firm prepared for a hawkish Fed? While expected, markets have consistently tended to undershoot reality when dealing with a tightening central bank, and in the last cycle the Fed raised rates from 1% to over 5%. Companies such as Dunkin’ Brands, Vantiv and Bloomin’ Brands have been preparing. Join this panel discussion to learn about the actions various companies have taken over the year to prepare for rising interest rates, with a focus on derivative and capital structure strategies.
Going International: What I Wish I Knew
When a company grows internationally, a swift learning curve is common: “How does FX impact financial results, and how do we hedge it?” In this session, attendees learn through hypothetical examples how to account for foreign currency’s business impact from the beginning of international operations. Speakers explain why Treasury should have a seat at the table before the decision to grow internationally is made–and why Tax and Treasury must work in partnership to ensure working capital structures support the business worldwide and avoid negative tax consequences.
Hedging Translation Risk: Accounting and Tax Consequences
In times of USD strength, hedging foreign earnings and the net asset value of foreign currency functional subsidiaries receive greater attention by Treasurers and CFOs of public companies. Negative quarterly earnings surprises can result from translation risk and future earnings guidance becomes difficult. This session discusses the accounting treatment of translation risk and the potential hedging instruments including foreign currency debt, derivative financial instruments, options, and cross currency interest rate swaps. In addition, the Federal income tax consequences are reviewed.
Cybercrime: Financial Leaders Fight a Common Enemy
AFP, along with numerous media articles, highlight that cybercrime is a significant issue affecting many corporations. Most companies have had their network compromised by sophisticated cyber infiltration. These breaches put organizations at a competitive disadvantage. Boards, Finance and Audit Committees are intensely worried. However, there are strategies to reduce the risk including training, IT security tools, and professional skepticism. In this session, corporate, university and banking panelists size the cybercrime issue, and provide examples practitioners can use in their fight against cybercrime.
Business Continuity Planning with an Eye Towards Cyberrisks
While most businesses and their treasury units have detailed disaster recovery plans, the majority have yet to include a plan for recovering from a cyberattack. The cyberthreat landscape is expanding and the sophistication employed by the cybercriminals seems to be growing exponentially. So it is critical that companies and treasury especially, as the handler of the cash, develop plans to recover from a cyberattack. This session will offer some tips on how to go about that as well as including other learning from some of the more recent natural disasters.
More information on the 2015 AFP Annual Conference is available here.
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