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Risk Management at the 2015 AFP Annual Conference

  • By Staff Writers
  • Published: 8/12/2015
risk1The risk management track at the 2015 AFP Annual Conference in Denver features an impressive lineup of sessions for treasury and finance professionals focused on risk. Topics include FX hedging, translation risk, cyberrisk and risk value metrics.

FX Option Hedging Workshop

As the USD strengthens against most major currencies, there is a renewed interest from US Corporate Treasuries to consider the potential use of options to optimize their FX hedges. This workshop gives participants the opportunity to work in small groups to learn in practice how to price forward-style option hedging strategies, and understand the benefits and important aspects to consider for each strategy. Importantly, participants will acquire the tools to critically assess which options structures adhere to their treasury policies and to calculate (back-test) whether these structures would have provided a more effective hedge historically than an outright forward. Further, participants learn essential post-trade calculations. Lastly, the session covers stress testing and how to test for hedge effectiveness.

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.

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.

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.

Balance Sheet Hedge Programs

As a highly successful social media company, LinkedIn’s foreign currency risk expanded quickly both in size and complexity. Fortunately, LinkedIn takes a proactive approach to hedging, which 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.

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 correlates to business value for stakeholders. Common metrics are not always clear to leadership. 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.

Moving from Data Overload to Informed Decisions

Practitioners have so much data at their fingertips, but often do not have a clear understanding of what the data means or if it indicates risk. Often times, different people in the organization focus on their own area and create silos-but don’t share or collaborate. UGI and Flowers Foods share their experiences in how they leverage their enterprise data, identify risks and opportunities, and create decision frameworks. By leveraging appropriate and available data across their business, these companies have been able to manage their risks more proactively.

A full list of educational sessions at the 2015 AFP Annual Conference is available here.

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