Few people in the world, let alone the c-suite, expected to face a more devastating challenge than 2008’s financial crisis. Yet, assessing the damage of 2020’s COVID-induced global recession, the pandemic has in many ways dwarfed the aftermath of the global financial crisis.
Amidst this volatility, CFO’s have had to reckon with a number of challenging and rather forthcoming issues. Such issues range from managing currency risks to supply-chain bottlenecks.
Among these issues, one related to firms trading overseas is currency risk management.
As I wrote in my previous blog about the demise of the dollar some time back, companies that championed the dollar’s strength over March and April are now lamenting its weakness. On the flip side of the equation, those on the other side must now reconsider whether this weakness will persist into the New Year. Nevertheless, anyone who has covered off their currency risk certainly benefited from less noise and potentially even some peace of mind.
Taking the time to grapple with and implement a hedging program takes time. However, the pandemic may represent an opportunity to re-think financial risk management in ways that go far beyond where they are now. An investment now can set the tone for years, if not decades, to come.
Amol Dhargalkar of Chatham Financial suggests that “Savvy treasurers can take this opportunity to address their organization’s need to manage volatility while continuing to build an efficient, resilient treasury program that positions the organization to weather the next unknown crisis down the road.”
Constructing an effective hedging program requires effective identification of exposure, construction of a well thought out strategy and strong execution. Many companies who have implemented cash flow hedging programs have made strategic expansions into forecasting and hedge accounting.
Many forward-thinking finance functions have taken the crisis as an opportunity to improve their financial risk management processes and build the foundations for the future. If you happen to be one of these functions looking to raise capital or for an exit, we have worked with some of the industry-leading players and would be keen to hear about your ambitions.
Savvy treasurers can take this opportunity to address their organization’s need to manage volatility while continuing to build an efficient, resilient treasury program that positions the organization to weather the next, unknown crisis down the road.