Data Overload Stifling Treasurers’ FX Visibility

Corporate treasurers continue to struggle with managing foreign exchange risk and exposure. A recent report by East & Partners found that SMEs are particularly challenged at addressing this issue, but it’s not a problem that discriminates based on company size.

New analysis from Deloitte drives that point home. According to a survey, the results of which were published Tuesday (March 1), the issue could be attributed to the fact that corporate treasurers are getting their information about FX exposure from multiple sources.

According to researchers, nearly a third of treasurers surveyed go to three or more sources to identify their FX exposures, leading to a lack of visibility.

“If you can’t see it, you can’t manage it,” said Deloitte U.K. Global Treasury Advisory Services Practice Partner Karlien Porre in a statement. “Without accurate measurement, value erosion from negative currency rate movements can’t be anticipated or prevented.”

The research also found that the majority of survey respondents said they lack visibility and reliability regarding their FX forecasts and that this is their biggest challenge to mitigate FX-related risks for their corporation.

“The challenges in reporting on FX risk have always been around, but 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,” Porre continued, adding that just 11 percent of corporate treasury professionals said managing year-on-year financial performance was their primary hedging goal.

“How can strategies be developed effectively if the exposure risk information is not being used to shape year-on-year performance as opposed to just the here and now?” Porre asked.

According to Deloitte, more than one-fifth of respondents aren’t tracking FX risk management performance at their companies; 62 percent use manual forecast strategies. It might be unsurprising that inaccuracies, poor communication on forecast changes and nontransparent exposures were cited as the three most common sources of ineffective FX risk management practices, researchers said.