2016 Global Foreign Exchange Survey
The Deloitte Global Treasury Advisory Survey was crafted in response to the recent high profile coverage and impact of Foreign Exchange on business. The survey is comprised of 133 corporations from around the globe, representing a wide array of size, geographies and industries.
Key highlights in the survey
- 2016 is expected to exhibit similar levels of FX uncertainties as 2015 with different expectations around interest rate policies, quantitative easing removals, potential depegging of some currencies and other actions by global economies all driving FX volatility. The Brexit referendum is causing particular volatility for Sterling.
- Corporates’ ability to manage currency risk effectively will therefore continue to be tested in 2016 and the survey considers challenges, the board agenda, treasury structures, hedging strategies and the use of technology.
- The lack of visibility over FX exposures and of reliable forecasts, and the manual nature of exposure quantification is a challenge for nearly 60% of corporates. Without accurate measurement, risks cannot be managed effectively.
- Boards do not always receive sufficient information in relation to FX risk according to 37% of corporates which limits the board’s ability to challenge and guide. Treasurers have an opportunity to review their reports and to communicate key FX risk metrics aligned to wider financial and strategic measures. Boards should challenge why 11% of respondents manage year on year performance and predictability which feels low given the need to manage investors’ and stakeholders’ long term expectations and value drivers.
- Primary hedging strategies (rolling, layering and flat hedge ratio) vary by industry, but overall hedging strategy objectives are focussed on protecting cash and minimising volatility in income statements.
- Technology and innovation are recognised as important enablers to achieve efficient and effective FX processes, yet many organisations still deal with a multitude of source information systems with limited interconnectivity. 59% of corporates use two or more information sources to identify exposures with 62% of corporates relying on manual forecasting processes.
“The Global FX Survey identified that there is opportunity for treasurers to elevate their interaction and improve communications with the Board of Directors. While Boards are gaining reporting around gains and losses, only 15% are seeing things like stress tests and scenario analysis around the type of currency or how currency plays into profitability. By thinking about how they can assist the Board with these issues, treasurers have the opportunity to become catalysts and strategists.”
Karlien Porre, Partner, Treasury Advisory Services