The Art & Science of FX Risk Management

FX risk management can be viewed as both an art and science. This means that the results of currency risk management practices can be measured quantitively like a science, but determining what constitutes good or bad results requires qualitative analysis like an art. There is no single prescription for managing foreign exchange risk, and each organization must decide their risk management objectives, as well as the best approach towards achieving those objectives.

An excellent example of this concept is a Foreign Exchange (FX) Risk Management Policy. A formal written FX Risk Management Policy lays out a plan with clear parameters and guidelines for managing foreign exchange risk across the enterprise. However, the specific strategies for hedging specific exposures often requires subjective day-to-day judgment that falls outside the scope of the master Policy. As a result, treasury staff of multinational corporations typically know what they are trying to achieve, but struggle with how to achieve it.

FX Initiative's Currency Risk Management Training addresses both the quantitive science and qualitative art of FX risk management. From drafting a formal Policy using our FX Risk Policy Drafter to modeling real world scenarios using our FX Transaction Simulator, our training walks you through common approaches to goal setting and then shows you how to achieve those goals using derivative insturments. The ideas that are discussed will help you see how a world-class organization such as Apple is able to set high level objectives as evidenced in their 10-K, and then accomplish those objectives using the judgement of their highly trained personnel.

If you are interested in learning the benefits of training your personnel on both the high level objective goal setting and day-to-day subjective decision making involved in foreign exchange risk management, sign up and take the FX Initiative today. You can use our FX Risk Policy Drafter to create a formal written policy, and then leverage our FX Transaction Simulator to customize specific variables that reflect your actual exposures to determine if you are able to achieve the FX hedging objectives you desire. Our video based curriculum puts academic theory into practice, and can help you and your team excel at both the art and science of managing foreign exchange risk. Take the FX Initiative for your organization by subscribing here.

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Cheers,

The FX Initiative Team
support@fxinitiative.com

Focus First on FX Fundamentals

Foreign exchange risk management is referred to as a topic that’s “an inch wide and a mile deep.” This phrase means that one can easily cover the surface of the topic, but once you delve deeper there is a plethora of nuances and subtleties multinational corporations need to know to succeed.

The concept of “meta-learning” relates to an awareness and understanding of “how” you are learning not just “what” you are learning. In order for companies to solve more complex FX risk management issues, it is essential to look at “how” you are learning the fundamentals of FX risk management first.

For example, many companies struggle with accounting for currency derivatives. However, before a firm can truly grasp derivative accounting, it is essential to first build a foundation of knowledge on how to account for underlying foreign exchange exposures. Taking a step back can lead to a leap forward.

FX Initiative’s Currency Risk Management Training provides an incremental approach on both “how” and “what” to learn as it relates to foreign exchange exchange risk management. Whether you are brand new to FX or have prior experience, the training program can start where you currently are.

Our series of 6 training modules begins by focusing on the fundamentals of the Foreign Exchange Market and concludes with more advanced topics on Hedging FX Transactions & Foreign Subsidiaries. In between, we cover FX Risk Exposures, Risk Management, and Spot & Derivatives. This framework is designed to help the learner jump right into the curriculum at any point to elicit the most critical knowledge for their personal development. The key is that the learner has an awareness of where they are on the learning curve, and that is where the "how" of meta-learning comes into the equation.

FX Initiative's currency risk management training includes the following 6 video modules:

1. Foreign Exchange (FX) Market Overview
2. FX Risk Exposures
3. FX Risk Management
4. FX Spot & Derivatives
5. Hedging FX Transactions
6. Hedging Foreign Subsidiaries

You can watch the free introductions for each program to get an idea of the learning objectives covered, and then begin with the video you want to learn more about. For example, if you already know how to read currency quotations in the newspaper and how supply and demand impacts FX forecasting, then you may be ready to start learning where to look for FX Risk Exposures or how to create a FX Risk Management Policy. Investing the time up-front in learning foreign exchange fundamentals can help you solve more complex issues later on.

If you are ready to enahce your learning experience, become a FX Initiative subscriber today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms recently, and it is now easier than ever to learn the fundamentals of currency risk management. Take the FX Initiative for your international business today!

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Cheers,

The FX Initiative Team
support@fxinitiative.com

Start Learning the ABC’s of FX Risk Management

When it comes to Foreign Exchange Risk Management, finance, accounting and treasury professionals often find themselves dealing with a wide range of complex cash flow and financial reporting issues. In order to provide more sophisticated solutions to complicated problems, it is essential to first build a foundation of knowledge to use as a framework to make decisions. FX Initiative’s currency risk management training helps you learn “The ABC’s of FX” starting with the most basic concepts to help you scale the learning curve and effectively manage FX risk for your business.

Global companies face questions of how to manage currency risk? How to draft a FX risk policy? Where to look for FX risk exposures? What currency risks to hedge and how? Which strategies meet FX hedge objectives? What are the economics? How to do FX accounting?

FX Initiative's foreign exchange risk management training addresses all of these questions with our online video series about:

1. Foreign Exchange (FX) Market Overview
2. FX Risk Exposures
3. FX Risk Management
4. FX Spot & Derivatives
5. Hedging FX Transactions
6. Hedging Foreign Subsidiaries

Then, you can review and test with quizzes and CPE exams. And reinforce learning using real examples with our:

• Currency Code Locator
• FX Risk Policy Drafter
• FX Derivative Speculator
• FX Transaction Simulator
• FX Subsidiary Consolidator

FX Initiative training is available 24/7 365 to help you with FX risk policies, FX accounting, FX hedging strategies, and FX risk management.

Are you ready to manage FX risk?  Take the FX Initiative by subscribing today!

If you are ready to deliver better results to the bottom line, become a FX Initiative subscriber today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms recently, and it is now easier than ever to learn the fundamentals of currency risk management. Take the FX Initiative for your international business today!

Click here to subscribe >

Cheers,

The FX Initiative Team
support@fxinitiative.com

There’s No Free Lunch with FX Derivatives

Milton Friedman, the American economist who received the 1976 Nobel Memorial Prize in Economic Sciences, wrote a book titled "There's No Such Thing as a Free Lunch" and that saying is particularly applicable for understanding currency derivatives. When selecting a foreign exchange hedge instrument, firms can benefit from recognizing the differences and similarities of common derivatives such as a forward contracts, vanilla options, or zero cost collar option combinations.

The FX Spot & Derivatives course explores the concepts of forward contracts, put and call options, and zero cost collars and examines their pricing variables and payoff profiles. Many firms seek protection from unfavorable changes in exchange rates while also seeking to retain the ability to participate in favorable rate movements. This 1 hour program will reveal the mechanics of the most common currency derivatives, and underscore how “there is no such thing as a free lunch” with FX derivatives.

If you are interested in learning more about foreign exchange deritatives and how they are used in practice, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com.  Learn the fundamentals of currency risk management by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's success abroad,

The FX Initiative Team
support@fxinitiative.com

Share Your FX Challenges & Success Stories

Foreign exchange risk management presents a variety of challenges in terms of economics, finance, tax, and accounting among other areas of operations. As a result, multinational corporations and financial institutions view these challenges as daily opportunities to overcome obstacles and achieve success in international endeavors. FX Initiative invites you to share your FX challenges and success stories for our upcoming educational webinar series this fall.

Some questions to consider as it relates to foreign exchange risk management stories may include, but are not limited to:

• Has your financial institution worked closely with you to help solve a economic or accounting challenge?
• Were you able to identify and map out all of the foreign exchange exposures inherent in your business model?
• Did you formulate a hedging strategy that effectively met your foreign exchange risk management objectives?
• Was your foreign exchange risk management policy updated as a result of expanding into new markets?

These questions point to some of the many challenges and successes foreign exchange market participants face on a regular basis. Whether you have already solved a unique challenge to your specific business or are still struggling to find a solution, FX Initiative welcomes you to share your story. Take advantage of this unique opportunity to showcase and solve your foreign exchange risk management challenges by contacting us here to share your FX Success Story.

Cheers,

The FX Initiative Team
support@fxinitiative.com

How Brexit Impacts the FX Bottom Line

Many have read about Brexit in the news headlines, which is a term that refers to the United Kingdom's planned withdrawal from the European Union (EU). Since the EU referendum took place in June of 2016, the British pound sterling (GBP) has declined in value against the U.S. dollar (USD) by roughly 15% from June 24, 2016 levels which hovered around the 1.4500 mark to approximately 1.2500 levels as of April 17, 2017. In less than a year, many companies with foreign currency exposure to the British pound sterling have seen a serious impact to the bottom line of the income statement.

Looking at this political event from a foreign exchange risk management perspective, Brexit would fall under the category of foreign exchange economic risk that is covered in FX Initiative’s FX Risk Exposures course. Economic risk relates to the macro impact fluctuating foreign exchange rates have on business opportunities, and includes the risk associated with the political, economic, and regulatory environment of the country or region in which a firm is conducting business.

The following 3 minute video clip from FX Initiative’s FX Risk Exposures course describes the concept of foreign exchange economic risk, and highlights 2 examples which include Venezuela’s 2010 changes in government policy and Apple’s 2015 10-K disclosures. While Brexit type events may not be predictable or preventable, companies can protect themselves over an extended time frame by laying out a long term and sustainable foreign exchange risk management plan.

If you are interested in learning more about the different types of foreign exchange risk and how you can protect your company against adverse changes in exchange rates, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms for 2017 and it is now easier than ever to learn the fundamentals of currency risk management. Make this the year to reduce FX risk and reap rewards abroad by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's continued success in the new year,

The FX Initiative Team
support@fxinitiative.com

Learn How To Simplify Foreign Subsidiary FX Strategies

Foreign exchange (FX) translation risk applies to companies with foreign currency functional subsidiaries operating abroad. Unlike FX transaction risk, which is commonly hedged, FX translation risk tends to take a more strategic approach to currency risk management, and companies must decide if, when and how to hedge this type of foreign exchange risk. Translation exposure exists as a result of translating local currency functional financial statements (i.e. the Income Statement and Balance Sheet) into the reporting currency of the parent for consolidation purposes. This process creates foreign exchange translation risk in the form of net income (income statement) and net investment (balance sheet) exposures.

The following 5 minute introduction video for FX Initiative’s “Hedging Foreign Subsidiaries” course outlines the two main learning objectives covered, which include: (1) to explore the concept of hedging net income generated at foreign subsidiaries, and recognize the accounting, forecasting, and cash flow challenges associated with hedging future earnings, and (2) to explore the concept of hedging net investments in foreign subsidiaries, and recognize how "elective" accounting treatment can mitigate earnings volatility and better align the financial reporting of a hedge.

If you are interested in learning more about best practices for hedging foreign subsidiaries, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms for 2017 and it is now easier than ever to learn the fundamentals of currency risk management. Make this the year to reduce FX risk and reap rewards abroad by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's continued success in the new year,

The FX Initiative Team
support@fxinitiative.com

Learn How to Test FX Transaction Hedges

Do you test the economic and accounting implications of your FX hedge strategies prior to trading? Testing by definition involves checking the performance of something before putting an idea into practice. This is a prudent and practical step to take when managing foreign exchange risk across the enterprise. When it comes to hedging specific foreign exchange transactions, companies can benefit greatly from testing the most common derivative strategies such as forwards, options, and collars, stress testing the economic scenarios, and comparing the accounting treatment available. By employing this approach, companies can more reliability predict both the cash flow and financial reporting implications of a hedged FX transaction.

FX Initiative’s FX Transaction Simulator allows companies to input their ”assumptions" such as exchange rates, interest rates, and market volatility, as well as company specific variables such at the transaction dates, the amount of the transaction, and the desired hedging strategy. Correspondingly, these assumptions are reflected in our proprietary risk analysis model which visually charts the payoff profile of the selected hedge strategy, ranks the economic performance of the alternative spot, forward, vanilla option, and collar strategies side by side, and displays the accounting debits and credits for default and elective accounting treatment. The following 2 minute overview video shows the 3 steps involved in using the FX Transaction Simulator:

If you are interested in testing your FX transaction hedges prior to trading using the FX Transaction Simulator, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms for 2017 and it is now easier than ever to learn the fundamentals of currency risk management. Make this the year to reduce FX risk and reap rewards abroad by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's continued success in the new year,

The FX Initiative Team
support@fxinitiative.com

Done Your Derivative Due Diligence?

Foreign exchange risk management involves mitigating currency risk to an acceptable level by understanding when and how to hedge using financial instruments or derivatives. In order to effectively use currency derivatives to achieve foreign exchange risk management objectives, firms must recognize their differences and similarities and how they work in practice.

While there are a large number of currency derivatives available in the marketplace, very few of these instruments are employed in routine foreign exchange risk management. The most common currency derivatives include forward contracts, vanilla options, and option combinations. By selecting a derivative from a hedge objective perspective, the confusion often experienced from the endless products available in the market can be avoided.

The following introduction video to the "FX Spot & Derivatives" course addresses the three main learning objectives that are covered throughout this highly informative hour long educational program, which include (1) to explore the concept of forward contracts and recognize their forward point premium or discount and symmetrical payoff profile, (2) to explore the concept of option contracts and recognize their pricing variables and asymmetrical payoff profile, and (3) to explore the concept of option combinations and recognize how structures such as a zero cost collar create a unique payoff profile.

If you are interested in learning more about foreign exchange spot & derivatives and how they are used in routine foreign exchange risk management, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms for 2017 and it is now easier than ever to learn the fundamentals of currency risk management. Make this the year to reduce FX risk and reap rewards abroad by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's continued success in the new year,

The FX Initiative Team
support@fxinitiative.com

“If You Don't Invest in Risk Management…”

“If you don’t invest in risk-management, it doesn’t matter what business you’re in, it’s a risky business.” This quote from Gary Cohn, the current Director of the National Economic Council and the former Chief Operating Officer of Goldman Sachs, highlights the important role risk management plays in achieving business success.  When it comes to international business, the reward of expanding into new markets and capturing greater profits tends to be the primary focus. However, managing risk, and in particular, foreign exchange risk, is an equally important endeavor when venturing abroad, because if not managed properly, rewards can be diminished.

The following introduction video to the "FX Risk Management" course addresses the two main learning objectives that are covered throughout this highly informative hour long educational program, which include (1) to recognize the role personnel, operations, and resources play in the establishment of a foreign exchange risk management program and (2) to explore the nine essential components of a comprehensive formal foreign exchange risk management policy.

If you are interested in learning more about managing currency risk, sign up for our Foreign Exchange Risk Management Training today and access our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Managing FX risk has become a higher priority for many firms for 2017 and it is now easier than ever to learn the fundamentals of currency risk management. Make this the year to reduce FX risk and reap rewards abroad by taking the FX Initiative for your international business today!

Click here to start your FX Risk Management Training today!

Cheers to your global organization's continued success in the new year,

The FX Initiative Team
support@fxinitiative.com