by IWEC Partner, Corpay,
Author: Corpay Cross-Border Solutions https://payments.corpay.com/cross-border
In our previous blog, we explored the importance of visualizing cash flow and balance sheet risks as a precursor to better understanding which FX hedging strategy is a tactical fit for a specific financial period in the overall cash flow cycle.
Building on that foundation, we’ll now dive into the world of finance where managing risks is akin to leading troops into battle while managing the unknowns. The FX strategies and ongoing decisions made by financial managers can have a significant impact on the profitability of their operations. In this blog, we will draw some parallels between General Dwight D. Eisenhower’s tactics during World War II and modern foreign exchange (FX) risk management strategies. We will focus on specific hedging tools, namely Futures, Forwards, Swaps and Structured Currency Options, that can deliver desired outcomes. We will also talk about how layering FX hedges and deciding on various aspects, such as hedge durations and optimal hedge levels, can be part of overall planning.
Comprehensive FX Hedging: Big picture view and attention to detail. General D. Eisenhower, Supreme Commander of the Allied Expeditionary Force in Europe during World War II, was a logistics expert who planned his campaign tactics meticulously to implement his big-picture strategy and achieve the objectives. His education and experience gave him a command of military tactics, including the “combined arms” approach, where different military forces worked together in harmony to achieve the common goal.
In the same way, a comprehensive FX hedging strategy may include combining hedging tools to help minimize currency risk. A strategy based on clear objectives and careful planning, coupled with the flexibility to recognize and capitalize on opportunities, can help businesses achieve their goals.
By employing various types of hedges, companies can protect themselves from adverse currency fluctuations and achieve their financial objectives. Broadly speaking, below are main categories of hedging tools available.
Who we are
About Corpay
Global businesses trust Corpay Cross-Border to power their international payments, execute plans to manage their currency risk and support their growth around the world. We aim to deliver unmatched service and expertise with respect to moving money globally. Utilizing our proprietary payment automation technology and currency risk mitigation solutions, we take pride in connecting companies large and small with the global financial markets and businesses all over the world. You can feel confident working with Corpay, as we are backed by our parent company, FLEETCOR Technologies, Inc. (NYSE:FLT) a leading global business payments company based in Atlanta, Georgia, USA. FLEETCOR is a Fortune 1000 firm, an S&P 500 member and has USD $2.8B in annual revenue with a market capitalization of USD $18.2B (as of December 31, 2021).
To learn more contact Danielle Orcutt, National Account Manager, Corpay 929-504-8791 danielle.orcutt@corpay.com https://payments.corpay.com/cross-border