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Advanced FX Risk Management

Monday March 14 & 21 2022, 9am-5pm CET

This course will look at the main types of FX risk, how to manage them and the importance of formulating an appropriate hedging policy suitable to your organisation’s specific needs. The contextual aspects of FX risk such as tax, accounting, reporting and more will also be covered as well as how the use of a Treasury Management System and other automation can add value to your company.

Group discussions and real life case studies are used to illustrate how FX risk management is applied in practice.

Learning objectives

By the end of the course, you will:

  • Understand the dynamics and drivers of different categories of FX risk, such as cash flow, intercompany lending, translational and balance sheet risk.
  • Have knowledge of different levels of sophistication in managing FX risk and the pros and cons of each option
  • Learn about best-of-breed FX risk management for different categories and industries and understand the associated requirements
  • Learn how to make the most of a Treasury Management System, other systems and processes in managing FX risk and streamline work flows
  • Be able to critically assess, review and propose changes to a corporate’s FX risk management policy
  • Work with the other attendees to develop a fully-fledged FX policy for an individual company and also a complex group

Key benefits

  • Deepen your understanding of FX risk management which is growing in importance as well as complexity.
  • Learn about the considerations to be addressed to put theory into practice and to manage it on an on-going basis.
  • Come back to your company with ideas on how to improve its FX risk management

Who should attend?

  • Treasury professionals who work on managing FX risk in an international corporate in a managerial role, as a dealer or in a control function.
  • Finance Directors and Financial Controllers in an international corporate with significant FX exposure who wish to better understand the context and background of foreign exchange
  • Financial institutions, treasury management system providers and other suppliers who want to understand their clients’ perspective.

Course agenda

  • Start time: 9:00 am End time: 5:00 pm

    08:45 Zoom session opens

    09:00 Introduction & key concepts in FX

    • FX markets & instruments
      FX in pricing, budgeting and accounting
    • Day-to-day foreign transaction bookings
    • Overview of regulatory and tax aspects (Exchange controls; Regulatory reporting; Dodd-Frank/MIFID; EMIR; Basel III; Tax considerations with FX gains & losses)
    • FX in cash versus risk management
    • Cash and balance sheet forecasting
    • Common challenges overview (Data reliability in cash forecasting; FX & bank relationship management; ISDA documentation; Illiquid, pegged and costly-to-hedge currencies; Trapped foreign currency cash; Embedded derivatives; Political interference in FX markets; FX ‘accounting’ losses & reputational risk; Investor relations; Senior management understanding and buy-in)

    10:45 Break

    11:15 FX risk management Policy Building

    • To hedge or not to hedge?
    • Basic & best-of-breed FX policy document requirements
    • Risk management methodologies – Pros and cons
    • Practical aspects to be considered when setting policy – Processes, Treasury Management Systems & other systems, outsourcing, reporting and internal controls
    • Industry examples

    13:00 Lunch

    13:45 Group Discussion

    • Designing a single-company corporate FX policy and appropriate environment

    15:15 Break

    15:45 Trends & changes in FX

    • Trends and changes
      • IBOR reform
      • SWIFT ISO20022 standard for cross-border payments
      • Brexit related changes
      • Hedge accounting
      • (Almost) Wholly automated environments
      • AI-enhanced cash forecasting
      • Cryptocurrencies inc Stablecoins & Central Bank Digital Currencies (CBDCs)
      • Instant Cross-Border Payments (IXB)
      • Fintechs
    • Group Discussion
      • Make the previous policies resilient and adaptable to change

    17:00 End of Day 1

  • Start time: 9:00 am End time: 5:00 pm

    08:45 Zoom session opens

    09:00 Recap & questions

    09:15 Group/Multi-Company FX Management

    • Intercompany FX and intercompany loans
    • Intercompany sales
    • Corporate transactions
      • Royalties
      • Management and other recharges
      • Dividends
      • Restructuring and M&A
    • Group multi-currency cash management
    • Offsetting risk
    • Running risk portfolios
    • Best-of-breed structures for advanced risk management
    • Net equity hedging

    10:45 Break

    11:15 Group FX optimisation structures

    • Netting
    • Virtual accounts
    • Payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO)
    • Treasury centres / In-house banks (TCs & IHB)
    • Accounting & tax considerations overview (Intercompany and hedge accounting; Intercompany rates, BEPS & Global Minimum Taxation)

    13:00 Lunch

    13:45 Group Discussion

    • Design a group-wide corporate FX risk management policy and control environment
      • Group policy
      • Treasury centre/FX risk management centre of expertise policy
      • Individual subsidiary-level policy

    15:15 Break

    15:45 Group Discussion – Continued

    16:45 Q&A

    17:00 End of course