Deloitte Global FX Survey: Managing risk from currency fluctuations a key challenge for corporate treasurers

Published 

London – With currency shifts making a significant impact on company profits and the current volatility of Sterling, risk in the foreign exchange (FX) market is once again in the spotlight. According to a new survey of global corporations by Deloitte, over half (56 percent) of respondents reported that being able to forecast and quantify exposures is the biggest challenge in managing FX risk.

Exposures arise throughout the entire organisation and often need to be identified by interrogating multiple systems and sources. Indeed, nearly one third of corporations rely on three or more sources, making exposures harder to spot.

Karlien Porré, Partner in Deloitte’s Global Treasury Advisory Services commented: “If you can’t see it, you can’t manage it. Without accurate measurement, value erosion from negative currency rate movements can’t be anticipated or prevented. As companies become ever more international, and a period of relative calm in the FX markets has turned unsettled, this is likely to have an even greater impact. Indeed the current volatility of Sterling highlights this.

“Moreover, there is a tendency to focus what exposure risk information there is on just the ‘here and now’, rather than using it to shape year on year performance. Only 11 percent of our respondents cited managing year on year financial performance as a primary hedging objective.”

Deloitte surveyed 133 global corporations on the challenges of managing currency risk effectively in the 2016 Global Foreign Exchange (FX) Survey. The survey also revealed:

  • More than a third of respondents feel that the Board and executives do not receive sufficient information on FX exposure and risk management, and only 41 percent report tracking impact on gross margin and other profitability measures such as earnings per share (EPS) impact.
  • Nearly a quarter of respondents do not monitor whether their FX risk management activities achieve the defined objectives. Contributing to the challenge of identifying FX exposures is the lack of automation with 62 percent of survey respondents indicating that they use manual forecasts.

“Chances are you are going to hedge less if you don’t believe the forecasts. The survey findings show a direct correlation between levels of automation and confidence in these forecasts. Manual information and processes cause late and unreliable forecasts. Therefore corporate treasurers need to share these challenges with executives and global teams, along with a recommendation for investment in the tools and technology to alleviate the problem,” added Niklas Bergentoft, Principal in Global Treasury Advisory Services for Deloitte Advisory.

“Conversely Boards should push back on treasurers for greater visibility into stress tests, better staple reporting and more complex analysis. Companies could be taking a hit now by not supporting the need for treasury’s roles to change.”

This year’s survey also covers effectiveness of centralized and decentralized models, hedging strategies and transaction exposures, and was created in response to recent FX volatility impact on businesses.

Most recent episodes

£15 Billion Stimulus Pumped into UK Economy to Ward Off Recession Fears

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 7th June...

04:44

Advantage Treasury

Eleanor Hill is joined in the virtual TreasuryCast studio by Nicolas Cailly and Philippe Penichou (Societe Generale) to look at treasury trend predictions for the remainder of 2022, with a particular focus on virtual accounts. In this deep dive into current and future treasury priorities, our guests...

24:22

40th Annual New York Cash Exchange: What Can Treasurers Expect?

Ahead of the 40th annual New York Cash Exchange, two of TMANY's distinguished board members, David Miller and Timothy T. Hesler, CTP, provide TMI CEO, Robin Page, with a quickfire rundown of what attendees can expect from this year’s conference. Our guests share their aspirations for the event, explain...

09:58

Expectation-Beating Inflation Prints Ratchet Up Pressure on Monetary Policy

Welcome to the third edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 9th May...

04:48

Making the Sustainable Transition: A Roadmap to ESG in Treasury

Over the last 18 months, Societe Generale has experienced a steady increase in requests from their corporate clients to integrate ESG features in treasury management.  Louis-David Rouyer, Philippe Pougeard, and Emmanuelle Petelle (Societe Generale) provide TMI's Eleanor Hill with a whistlestop run...

22:24

Lift Off for Fed Rate Rises

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 5th of...

04:58

Treasury in 2022 and Beyond

Industry experts Bob Stark (Kyriba) and Sebastian di Paola (PwC) join TMI's Editor, Eleanor Hill, to explore the very latest treasury trends - and to discuss how smart treasurers can get ahead of th...

43:21

How BearingPoint Harnessed Data-Driven Forecasting with CashAnalytics and SAP

Listen back to our recent forecasting masterclass, where Group Treasurer Eveline Stam, and Conor Deegan (CashAnalytics) provided TMI's Eleanor Hill with a comprehensive overview of how consultancy firm BearingPoint achieved company-wide cash forecasting nirvana by combining specialist solutions from...

37:14

The 3 T’s of The Future: Tech, Treasury, and Transformation

Over the past two years, an increasingly dynamic environment has not only accelerated technology development – from quantum computing to blockchain technology, and even the metaverse – but also technology adoption, bridging colleagues and breaking down silos in a remote work world. In this podcast,...

44:02

Monetary Policy Continues to Drive Markets as Ukraine Invasion Weighs on March Meetings

Welcome to the second edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 3rd of...

05:25