Outsourcing Treasury Operations

Managing FX risk requires several processes to be well-defined and sustainably implemented – accurate and timely information flow, FX policy and operational guidelines, strong market analytics, and, of course, disciplined decision-making and transaction execution. All of these involve considerable expenditure of management time.

We work with clients to outsource certain aspects of treasury in a process that
  • Ensures virtually certain minimum performance (protection of a target level)
  • Reasonably strong opportunity capture
  • Significant savings in management and operations time
  • Can improve the MTM gain/loss in accounts
How it works
  • Build a strong information flow protocol so that exposure and transaction information are sent to the outsourced treasury daily – this ensures that the outsourced operation is in synch with your actual operations
  • Create a set of hedging rules – for example
    • Monitor a 6-month running book of net exports
    • Set the target rate at 3.5% below the  forward rate
    • Minimum hedge of 25% with vanilla options, strike price determined by then current volatility – this will cost less than 1% of exposures each month, after initial set-up
    • Set lock in levels as follows:
      • First lock in 2% above target set date forward rate/ hedge 25%
      • Second lock in 2% above Lock-in 1/ hedge 25%
  • Outsourced treasury analytic engine runs the rules on the daily portfolio and outputs hedge signals when any of the boundaries are reached
  • Needs disciplined implementation to provide sustained improvement in hedge performance