STUDY FOREX WITH HEDGING TEHNIQUE

Step 2 Study Forex With Hedging

FOREX STP for international bulk payments, we also wanted to focus our efforts on improving our FOREX hedging process. There were a number of reasons for this. One of the most important was that FOREX hedging is already relatively complex so if numerous manual operations are also required then the whole process becomes extremely unwieldy. This unwieldiness results in a number of quantifiable additional costs.

The more predictable of these costs include the time taken to input data manually, which results in more value added treasury activities being neglected. (Just making it through the month end close becomes the singular goal of all treasury personnel). Less predictable, but much more alarming, are the potential losses that can be sustained in the case of human error, such as accidentally mis-keying a trade for the wrong amount and/or currency.

This reduction in manual activity, coupled with system features such as the locking of completed trades, also represents a significant improvement in internal controls as regards Sarbanes-Oxley compliance.

The integration of systems possible in an automated environment has also streamlined both settlement and accounting. Orbit has been configured so that, where necessary, settlement dates automatically trigger the release of the appropriate wire transfers to Bank of America for execution. At the same time, Orbit automatically writes accounting entries to a flat file that is in turn automatically uploaded to Oracle ERP system, which spares accounting personnel from having to re-key this information.

Overall costs have obviously been reduced both within and outside treasury, and treasury personnel have also been freed up to devote time to strategic value added tasks, rather than mundane operations. This in turn has obviously benefited staff motivation and retention. Finally, the new FOREX hedging process is scalable and therefore ready to accommodate future growth in FOREX volumes and the range of currencies traded.
Value

Apart from the benefits outlined above, one of the most gratifying points about the FOREX hedging STP
project was how little it cost – less than $20,000. Furthermore, the annual costs of system maintenance and FOREXall access are minimal. As a result, the annual time saving for traders, treasury analysts and accounting personnel has resulted in a payback period of no more than six to eight months. These savings could also be reproduced for most treasuries with more than minimal FOREX activity, making this sort of an STP project an eminently worthwhile undertaking.

As a modest first step, if a treasury group does not have any budget for a treasury workstation, it could still implement some straight-through processing in FOREX hedging by using spreadsheets to upload trades into an online FX portal. Apart from more efficient order execution, this will also offer other benefits such as the ability to auto-confirm these trades using the confirmation and settlement center feature provided by portals like FOREXall.