Emerging Multinationals
“We need a complete FX risk management solution.”
This is a situation common to most emerging multinational corporations with revenue under $5 billion. Typically companies in this space have only:
Each one of these conditions poses potential problems that can generally be categorized in three areas:
1. Consulting: Does your risk FX person have the dedicated expertise you need?
Right now, your entire risk management program might depend on a single, sometimes expensive manager or consultant. But what happens if that person moves on, or becomes unavailable when you need them the most?
Additionally, most full-time personnel are only partially dedicated directly to FX risk management throughout the year, as opposed to focusing on it full-time all year. FX risk is critical enough to have a dedicated team of FX experts doing the best job possible.
2. Analytics: Do you have timely, adequate insight into your potential exposure to risk?
Germany decided to switch back to the Deutsche Mark. Do you know how that will that impact your quarterly results?
Even for very established, sophisticated companies, getting accurate and timely FX data is a challenge that can affect its bottom line. Poor visibility into data and understanding of exposures can result from a number of factors, including accounting errors, software issues and inadequate process.
Depending on the level or types of currency exposure, a large or sometimes even small negative currency swing can result in significant losses. Many companies don’t fully understand their own currency risks, and some don’t even know they existed until it’s too late.
3. Execution: Not knowing what you’re paying in fees can cost you much more than you think.
It’s becoming clear to emerging companies—and even those that are more established—that “status quo” FX risk execution is really the heart of what’s wrong with the financial services industry. Since 1996, U.S. banks alone have averaged $1.5B per quarter in trading revenue related to foreign exchange (FX) trading.
With FX derivative contracts representing about 7% of outstanding trades on the market, FX is the single biggest source of revenue among trading instruments—roughly equal to interest rates, credit, commodities, and equities combined. With the way things are currently structured, the top five U.S. banks have over 95% of the market share in derivative trading—and only they know what you are paying.
Banks use spreads, commissions and premiums to make money on foreign currency trading and hedging. Companies should know what they’re getting for the excess spreads they’re paying, and what they’re essentially giving away. The fact is that when it comes to FX, you’re probably paying a lot more than you think you are (See related New York Times article here).
It should also come as no surprise that the International Swap Dealer Agreements (ISDA) signed with banks tend to be one-sided. If the bank defaults on a corporate customer (think Lehman Brothers), there’s no opportunity to collect on collateral. All of this may work well for the banks, but not so well for you.
Today’s emerging multinational companies need a dedicated, expert, outsourced risk management solution.
Building an in-house FX department is a complex and time-intensive undertaking. It requires dedicated and highly specialized expertise, constant refinement and the establishment of complex, interwoven treasury and finance systems. It takes a long time and a large, established financial organization to develop its own world-class, truly operational FX hedging program.
In today’s environment, the stakes in managing currency risks are huge. The good news is that mitigating currency exposures can be fairly straightforward once the hedging strategies and trading platform are in place. Getting your currency hedging program to that point just takes experienced specialists who can implement, manage and maintain the most currently software systems available.
Let Atlas FX handle all three areas for your company: Consultation, Analytics, Execution.
If your business is growing internationally, it’s likely time to invest in a complete, expert FX risk management solution. With its combined 40 years of currency risk management experience, Atlas FX can implement a world-class FX risk management program—including Consulting, Analytics and Execution—for your business in just a few months.
Our hedging process has a proven track record at major corporations, and we offer an OLAP software product that will enable the hedging process, reduce potential for error, and improve transparency of results. We help companies manage their foreign exchange exposures with all or a combination of the following services:
Consulting – Altas FX-C is a turnkey, patent-pending FX risk management solution used by the most sophisticated large multinationals. We can help your company collect, identify and quantify its currency exposures to the appropriate risk management policy (and solutions). We can then recommend a customized FX risk management program that meets your individual needs, or improve on your current hedging strategy.
Analytics – Atlas FX-A is a complete software solution we can implement as part of Atlas FX-CTE services, or integrate with your existing ERP and TMs systems to give you up-to-date information on your currency exposure and hedging effectiveness.
Execution – Atlas FX-E eliminates the need to engage with FX banks and works in your best interests to yield a significant improvement in pricing and counterparty risk mitigation over your current currency trade practices.
If you’re an emerging multinational company seeking an external FX risk management firm with deep expertise, the latest software solutions and a proven execution component—to be outsourced collectively (Atlas FX-CTE) or used individually—please contact us for a free consultation today.
If you're looking for an external FX risk management firm with deep expertise, the latest software solutions, and a proven execution component—to be outsourced collectively or used individually—please contact us for a free consultation today.
