Operational Issues
Cross-Functional Coordination
While foreign currency issues are often handled by a number of different areas in a corporation, the overall responsibility for hedging typically rests with the Chief Financial Officer. Based on your company’s structure and size, day-to-day hedging tasks may still need to be coordinated across different countries, areas, or departments, such as:
Controller
- General ledger and system setup for foreign exchange revaluations
- Reconciliation controls
- Consolidation and financial reporting, both for management and external statements
- Accounts payable, accounts receivable, and other general ledger account management
Tax
- Transfer pricing
- Intercompany loans
- Cross-border payments, both outbound and inbound
- Tax treatment of gains and losses on foreign currency and forex hedges
Treasury
- Cash management
- Foreign currency risk management (hedging)
Senior Management Oversight
Senior management must conduct a regular review of hedging performance, counterparty risk, exposure amounts (hedged and unhedged amounts), speculative trading performance, and exceptions to the corporate Forex Hedge Policy to ensure proactive foreign currency management. They will also need to review forex hedge performance reports.
Included in the senior management review should be a reassessment of the Forex Hedge Policy every year or two to ensure that the policy remains relevant, reflects changes to the organization, and incorporates information learned since the last review.
