Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014 - (Page 45)

ONLINE WWW VERSION CORPORATE FINANCE Making Exposures across the Company Visible Having a single solution that captures all of the exposures across the group is a key objective for many treasurers. Once a company identifies its interest exposures, commodity exposures, and foreign currency exposures, another challenge is - JUL dealing with multiple data systems as companies need to understand their exposures. For example, a risk manager of a UK based organisation may need to consider the FX risk associated with those commodity exposures. This company might be buying or selling commodities that are routinely denominated in USD, whereas their functional currency may be GBP , bringing on more FX risk that needs to be managed and hedged. Treasury and Risk Management (TRM) solutions delivered as Software-as-a-Service (SaaS) technology with advanced commodities capabilities (i.e. not just FX or interest modules of a TMS) will be able to capture the commodity exposures in terms of notional quantity (tones, barrels, pounds etc.) and determine the price risk and the associated FX risk, automatically. This ensures that FX hedging policies are really being applied to all FX exposures across the group. Determining the quantity of the exposures is necessary, but also important is the forecasting of prices. N°86 and diesel, but also to emissions as they look to reduce their carbon foot print. Retailers are exposed to fuel costs for deliveries as well as many soft exposures - wheat in the cereal, in the biscuits, and in the beer they sell, for example. Beverage companies not only are exposed to the ingredients to make the beverage, but also the paper, aluminium and plastic costs. Commodity exposure management is a complex area, but getting on top of commodity risks can have a significant financial impact. Thus, treasurers should review the following to determine the Return on Investment of commodity risk management: 1. Making exposures across the company visible 2. Monitoring and assessing risk correlations 3. Hedging commodity risk - A recent gtnews risk survey indicates that 44% of treasurers are already responsible for commodity risk management. This is the case for a few reasons: * Greater need for global visibility of all financial risks * Understanding the correlations amongst different asset classes * Optimising hedging strategies for significant cost savings * Growing volatility of commodity prices around the world Previously, many companies - commodity consumers - were reluctant to hedge commodity price risk as they believed their shareholders expected them to be fluctuating according to the market prices. However, the volatility and subsequent impact on the bottom line is no longer sustainable, and hence needs to be actively managed and hedged. Similarly, the banks that are financing those companies are not in favour of this volatility and are looking for more secure profit margins. This is relevant not only for consumers and producers of commodities, but also for many organisations that have some exposures to non-financial items. For example, airlines are exposed to jet fuel LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE Treasury is in different stages of transformation around the world, and what is included in treasury's remit is different too. There is a notable increase amongst multinational corporates for treasury to manage commodity risk. / AUG / SEP 2014 Managing Risks from Aluminium to Zinc 45

Table des matières de la publication Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014

Couverture
SOMMAIRE
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW David Holland
FOCUS
FORUM
CORPORATE FINANCE
15 MINUTES WITH INTIX
THE FINANCIAL RISK OBSERVATORY
NEWS

Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014

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