Improving Foreign Exchange Position Reporting for Group Treasury in Case organization
Porali, Reetta (2019)
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The purpose of this action research was to improve foreign currency position reporting in a case company. The case company is a large and well-known Finnish company in the consumer goods industry and it has operations in eight countries and exports to nearly 40 countries. The treasury department of the case company needed to have improved ways to prepare the foreign currency position report so that all the needed information to the report could be fetched easily any time it would be needed and by any team member in the treasury. The study was commissioned by the case company. The research applied qualitative research methods. The primary research data was collected through workshops in the case company and the secondary research data was gathered from a financial theory of foreign currency risk but also from the information of how other companies have solved a similar problem. The discussions in the workshops brought out very similar problems than other real-life cases have faced, as the foreign currency hedging needs are similar to all companies that have business in the currencies that are not in their home currency. The main challenge for all companies are the accuracy of the estimated currency flows for the future, as they cannot be overly optimistic or too conservative due to the reason that foreign currency hedging can be very costly for the company if the decisions for hedging are based on wrong kind of data. In addition, the companies operate in different ways and they have different programs in use, so one solution does not fit all cases. The author recommends that the Group Treasury in the case company starts to utilize the newly updated collaboration channels to collect the information so that all parties in the team can access the data whenever needed. In addition, there would be a need for a treasury controller, who would take care of reporting, as well as the development of the reporting tools and the data collection. This way the treasury team in the case company could have appropriate level of internal control and risk management but also wisely divided responsibilities would release time to concentrate on their strengths and develop the way of work.