A Better Way To
Monitor FX Hedges

Currency hedging requires a depth of expertise in forex markets that many businesses simply do not have. The exercise also requires constant – and extensive – monitoring and reporting. Many companies use spreadsheets for this, recoding basic data like expected exposures and foreign exchange (FX, or forex) cash flows, and tracking achieved rates versus budget rates and the forward curve.

“That’s great, but it only gets you so far,” says Aphile Molefe, Head of eFX Sales South Africa at Absa CIB. “Those spreadsheets become quite complex when exotic FX options are introduced.”

Holding those records in spreadsheets also brings further layers of risk, as Molefe explains. “If you have to report your progress to stakeholders, they might struggle to understand the information if the spreadsheet is not laid out correctly,” he says. “There’s also a built-in ‘key man’ risk, where if one person has built and managed the spreadsheet, when they leave and nobody else knows how to update it, that could really hurt the company’s ability to track and report. And that’s just the start of it. Spreadsheets can also be error-prone – and making decisions based on errors can be costly in the FX world.”

Companies can mitigate the inherent risk of spreadsheets by using treasury management software, which uses validated models in the back end and easy-to-understand graphical user interfaces at the front. But as Molefe points out: “The reality is that the software tends to be quite expensive, limiting the use to larger corporates that can afford them.”