Treasury in hazardous times

These are unprecedented times, and whereas treasury departments have always had to plan for uncertainty, the COVID - 19 pandemic has made it more vital than ever for organisations to optimise their financial position. The coming weeks and potentially months will be all about keeping your business’ finances as stable as possible. The way we see it at Western Union Business Solutions, the basics centre around three key factors: Visibility, Clarity and Efficiency.

By Alex Lawson, Corporate Hedging Director, Western Union Business Solutions  

Gaining visibility

For companies who deal with currency and international payments, gaining visibility of requirements throughout this period is crucial. The first step should be to put in place the tools to track your day to day currency exposure and help assess the impact of the pandemic on your short-term needs. It should not only provide better insight on your short-term goals as you navigate through the upheavals that the markets are currently witnessing, but in doing so, would also help better understand your longer-term risk allowing you to start to plan accordingly. 

You could be achieving the following:

• Clearer visibility of your past /future exposures
• Identification of currency risk
• Simulation of volatility and its potential impact on your profits

Setting clarity

Whereas in the current circumstances, it is difficult to achieve certainty, the more insights you have about your exposure and resulting objectives, the more likely you are to be able to put in place a plan of action to react as events develop coupled with a clear set of metrics to assess your progress and measure results. 

While working with clients to help them define their strategy, we often encounter these three goals:

• Protecting profits from further negative FX moves or retaining the ability to benefit from favourable FX moves should they materialise.
• The need to retain flexibility on timing of payments as business requirements remain in flux.
• The need to achieve budget or target rates of exchange that are not currently available.

When markets are so volatile and the outlook so uncertain, it should be more important now to have a consistent method for measuring and comparing risk and to not lose sight of your objectives.

Promoting efficiency

In hazardous times such as the one we’re currently going through, this added clarity from having defined objectives and a clear plan should be coupled with a simpler internal decision making process and role clarity. If you can help reduce the need for decisions to be escalated, you should be allowing for higher levels of efficiency and more agility which in turn could help your teams respond faster to the market, and not miss opportunities to trade at favorable levels. 

You can talk to your FX services provider about available resources/ tools to aid decision making and be ready to act when the time is right.
Western Union Business Solutions has the capabilities to help you manage currency risk and help protect your profits. Our experts can assist you to prepare an approach to help ensure visibility, confidence and efficiency for your senior leadership as well as Finance, Treasury, Sales and Operations. In addition to in-house analysts and dedicated account managers, we have a team of corporate hedging managers who can listen to your requirements and business objectives, then work with you to help design and implement a bespoke risk management strategy.