RISK MANAGEMENT | 12 October 2023 Make Better Decisions with this FX Management Tool Absa | Corporate and Investment Banking > Insights and Events > Make Better Decisions with this FX Management Tool Aphile Molefe Head of eCommerce – South Africa at Absa CIB SHARE How Absa Hedgebook gives corporate treasurers access to live currency and FX risk management, as well as interactive forecasting and scenario planning. Any corporate, in any industry, that works across borders will have to hedge its foreign exchange (forex, or FX) risk. For years, many companies have used spreadsheets to monitor, report and forecast their currency hedging – at great expense, and with limited results. In 2022 the Absa CIB FX team piloted Absa Hedgebook, a new treasury management service that provides the insights into FX risk that businesses need. “We put the value proposition in front of a few of our clients, offering them a tool that gives them insights into their hedge positions, analyses the risk they are exposed to and creates a range of reports detailing their hedging performance, valuations, and cash flow impact, Head of eCommerce South Africa at Absa CIB. The proof-of-concept phase was well received. “Absa Hedgebook did a lot more for clients than we had hoped it would,” says Molefe. A quick look under the hood shows why. Standardised FX valuations “For most of our clients, currency hedging involves a lot of work,” Molefe explains. “For larger or listed corporates, that work must be done every month, with cash flow and valuation reporting on their open forwards and options contracts. Using spreadsheets to provide that level of reporting requires a lot of manual work and a lot of expertise, especially if you’re a multi-banked business. Each bank will give you a valuation report, but it’s in a unique format with unique inputs. Standardising those reports is required but it can be a pain.” “Our new system enables standardised valuation reporting using inputs that are acceptable by auditing standards,” Molefe says. “And those reports can be run quickly and easily with minimal input. Absa Hedgebook has generated interest because every corporate struggles with these issues – even those that have paid for treasury systems. The tool’s automated offering is one of its many appeals. Instead of relying on manual inputs, Absa will upload trades you’ve done with them automatically to minimise the inputs required” Scenario Planning for FX risk But FX management is not just about what is required today; it’s about identifying risks and planning for them days, weeks or months in the future. Using Absa Hedgebook, treasurers can input their expected foreign cash flows and they can simulate scenarios to see the impact of a market move on their P&L based on a do nothing approach or with a hypothetical trade idea in place. “With the input of what your dollar exposure is according to that plan, and immediately see if you’ve under- or over-hedged for that risk, as well as other stats based on budget rate, current market rates and the company’s hedge policy” says Molefe. The results are presented in a clear graphical manner which makes it easy to see the most important information quickly and to enable better communication with key stakeholders. Easing the FX pain point “Spreadsheets and monthly reporting are a real pain point for corporate treasurers,” says Molefe. ”And I still believe they’ve been largely underserviced from a technology perspective. Absa Hedgebook plugs a big gap, helping our clients to do their work with far greater ease.” Contact us to find out more about Absa Hedgebook’s FX and currency management capabilities Connect with an expert Aphile MolefeHead of eCommerce – South Africa at Absa CIB https://cib.absa.africa/wp-content/uploads/2020/07/file_example_MP3_700KB.mp3 Related Articles RISK MANAGEMENT JIBAR Reform The SARB’s Market Practitioners Group has endorsed that the South African interest rate market adopts a Credit Adjustment Spread (CAS) estimation methodology, consistent with international practices and based on ISDA’s recommendation. Read more RISK MANAGEMENT Africa’s Trade Problem Isn’t What You Think Ask most people about Africa’s trade challenges, and they’ll point to infrastructure—congested ports, unreliable roads, or logistical bottlenecks. But the real constraint isn’t what you can see; it’s what you can’t. Read more RISK MANAGEMENT Rethinking Portfolio Resilience in Volatile Markets Periods of market turbulence have long been a test of investor conviction. When uncertainty grips financial markets—driven recently by shifting U.S. administrative policies, fluctuating interest rates, or geopolitical tensions—traditional portfolios often reveal their vulnerabilities. Read more
