FX Risk Policy Drafter Description
The Foreign Exchange Risk Policy Drafter creates a comprehensive Foreign Exchange Risk Management Policy in 4 steps, and includes the nine essential sections of a comprehensive foreign exchange risk management policy. You can use this tool to improve or enhance your already existing policy or to lay out a brand new plan in the form of a formal Foreign Exchange Risk Management Policy with clear parameters and guidelines for managing foreign exchange risk across the enterprise.
This customizable tool drafts a real-world example of a foreign exchange risk management policy in 4 simple steps. The first step is to enter the company name, home country, functional currency, effective date, and review period. Step two is to establish internal controls by appointing at least three personnel to the segregated duties of trading, accounting and record keeping. Step three is to define materiality thresholds by specifying minimum transaction amounts and hedge coverage levels. Lastly, step four is to specify the derivative hedging instruments authorized for use and counterparty credit ratings required from Moody's, Standard & Poor’s, and Fitch.
Upon completing these 4 steps, the 9 sections of the Foreign Exchange Risk Management Policy are drafted and include (1) Function, (2) Definitions, (3) Policy Guidelines, (4) Roles and Responsibilities, (5) Reporting (6) Internal Controls (7) Counterparty Guidelines (8) Policy Review and (9) Policy Approval. Upon reviewing these nine sections, you will clearly see how the inputs in Steps 1 through 4 are used, and how the program as a whole serves to mitigate currency risk exposures inherent in a company’s business model.
Foreign exchange risk management policies can vary across organizations depending on their size and structure. Getting started or improving already existing policies can be a challenge without knowing best practices and seeing examples. Not only does this tool offer a well written policy you can use to tailor your own policy after, it also provides the level of detail to make implementation feasible. The Foreign Exchange Risk Policy Drafter serves as your own writing tool to help create an optimal foreign exchange risk management policy for your organization.
Questions to Consider
- Are you curious how global organizations report the progress of their foreign exchange risk management program in accordance with policy guidelines?
- Would you like to see how internal controls are applied to segregate the accounting, trading, and record keeping functions of foreign exchange risk management
- Can you visualize the nine essential components of a comprehensive foreign exchange risk management policy and the level of detail required in each section?
- Does your organization need to create, enhance or modify a foreign exchange risk management policy to better mitigate currency risk when transacting abroad?
- Take advantage of this Foreign Exchange Risk Policy Drafter to find the answers to all of these questions quickly and easily.