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Executive Education
Clariden Leadership Institute
Hedging Foreign Exchange Risks: Effective Hedging Techniques, Instruments and Strategies (UK)
Eugene O’Connell
Financial Institutions Coaching Practice

This program has been independently accredited and certified by CPD
Eugene O’Connell, Financial Institutions Coaching Practice

 

  • Leading authority in foreign exchange risks management with more than 15 years of experience managing foreign exchange risks and has coached over 5,000 finance professionals globally
  • Former Head of FX Trading and Proprietary Risk at Tokai Bank Europe where he was based in London and Europe, running portfolios in excess of $2 billion and worked closely with regulatory authorities in 6 European countries
  • Clients consulted include National Savings & Investment UK, Paribas, UBS, Bank of America ML, Jaguar Land Rover, Bank of China, UK Civil Service and Qatar

 

Eugene is a leading authority in foreign exchange risk management with more than 15 years of experience managing foreign exchange risks and has coached over 5,000 finance professionals globally.

 

Prior to coaching, Eugene served at middle and senior management levels of many international banks for more than 15 years. He ran proprietary portfolios in Fixed Income, Foreign Exchange, swaps and other derivative instruments. He sat on Risk Management committees in both London and Tokyo before becoming a learning and development professional. He now uses his extensive experience to deliver highly effective finance and leadership coaching to a wide range of businesses.

 

Some of his clients include national and international companies such as National Savings & Investment UK, Paribas, UBS, Bank of America ML, Jaguar Land Rover, Bank of China, UK Civil Service and Qatar and many more.

 

Throughout his working years, Eugene has dedicated his time to training, coaching, and mentoring leaders. Employing many techniques of his profession where appropriate, he actively listens to his clients and helps them find the path which best helps them attain the organizational and personal goals they need to achieve.

This course has been independently certified as conforming to universally accepted CPD guidelines. On average, this executive program contributes 16 hours towards your CPD.

Program Summary

 

Designed for CFOs, treasurers and corporate finance professionals, this comprehensive 2-day program is designed to provide you with effective techniques and proven strategies to effectively manage and measure foreign exchange risks to protect your company’s profitability against uncertainties.

 

Led by Eugene O’Connell, former Head of FX Trading and Proprietary Risk and leading authority who has consulted major companies including National Savings & Investment UK, Paribas, UBS, Bank of America ML, Jaguar Land Rover, Bank of China, UK Civil Service and Qatar, this program will provide you with strategic perspectives and in-depth understanding of hedging principles, hedging instruments and practical tools available to reduce your foreign currency exposure.

 

Utilizing the latest hedging techniques and instruments available from options, forward, swaps, and futures, this program will teach you how to use the right derivative instrument to master effective hedging techniques, tools and strategies and gain deep understanding of the advantages and limitations of each hedging instrument. In addition, you will learn to design an effective risk management framework for successful implementation and execution of your organization's risk mitigation strategies to create a match between hedges and foreign exchange risks.

 

Packed with real-life case studies and industry best practices, you will gain practical skills, proven techniques and in-depth knowledge in managing and measuring foreign exchange risks to protect your company against FX volatility.



Programs, dates and locations are subject to change. In accordance with Clariden Global policy, we do not discriminate against any person on the basis of race, color, sex, religion, age, national or disability in admission to our programs.

Introduction

 

Volatilities in the foreign exchange markets have increased as financial markets grapple with unexpected political and economic developments globally. It is vital for CFOs, treasurers and finance managers to know how to effectively manage foreign exchange risks and executive appropriate risk management strategies to sustain growth and profitability. However, most companies are still facing difficulties in utilizing effective hedging techniques, instruments and strategies to protect their organization from foreign exchange risks.

 

The problem here is that many companies face difficulties in understanding and addressing transaction, economic and translation risks. In addition, they are ineffective in deriving a strategic risk management framework to effectively measure, respond and mitigate foreign exchange risks. Many also highlighted the poor hedging strategies and utilization of hedging instruments.

 

Without in-depth knowledge, effective frameworks and techniques to critically analyze, measure and strategize an effective foreign exchange risk management plan, companies may face increased foreign exchange risks, overpaying, poor foresight and lost of investment and business profits.

 

Designed for CFOs, treasurers and corporate finance professionals, this comprehensive 2-day program is designed to provide you with effective techniques and powerful strategies to effectively manage foreign exchange risks and improve your organization’s profitability.

 

Led by Eugene O’Connell, former Head of FX Trading and Proprietary Risk and leading authority who has consulted major companies including National Savings & Investment UK, Paribas, UBS, Bank of America ML, Jaguar Land Rover, Bank of China, UK Civil Service and Qatar, this program will provide you with strategic perspectives and in-depth understanding of different types of foreign exchange risks involved such as transaction, economic and translation risks, and how to effectively identify, assess and manage them. In addition, you will learn to master effective hedging techniques, instruments and strategies to accurately measure, respond and mitigate according to the type of foreign exchange risks involved respectively and gain clear understanding of the advantages and limitations of each hedging instrument so as to utilize them more effectively. Furthermore, you will learn to derive an effective risk management framework for successful implementation and execution of your risk mitigation strategies, as well as industry best practices to effectively hedge against foreign exchange risks.

 

Packed with real-life case studies and interactive discussion sessions, you will leave this program with practical skills, powerful techniques and in-depth knowledge to safeguard your organization from foreign exchange risks and drive better profitability and business sustainability.

What You Can Expect

 

By the end of this program, participants will be able to:

  • Gain clear, in-depth understanding of the different types of foreign exchange risks
  • Utilize effective strategies to address transaction, economic and translation risks
  • Master effective hedging techniques to accurately measure, respond and mitigate risks
  • Understand the advantages and limitations of each hedging instrument
  • Derive an effective risk management framework
  • Implement reliable risk response and mitigation strategies to proactively safeguard against foreign exchange risks
  • Learn industry best practices in hedging against foreign exchange risks

Who Will Benefit Most

 

This program is designed for, but not limited to, CFOs, Finance Directors, Financial Controllers, Corporate Treasurers, Risk Analysts, Traders, Risk Managers, Finance Managers, Treasury Managers, Accountants, Auditors, as well as all professionals who are involved in managing foreign exchange risks.

Program Outline

 

DAY ONE

 

1. Types of foreign exchange risk

1.1 Transaction risk

  • The size of the transaction, is it material?
  • The hedge period, the time period before the expected cash flow occurs
  • Can we anticipate the volatility of the exchange rates during the hedge period?

 

1.2 Economic risk

  • Directly: If your firm's home currency strengthens then foreign competitors are able to gain sales at your expense because your products have become more expensive
  • Indirectly: Even if your home currency does not move with respect to your customer's currency you may still lose a competitive position

 

1.3 Translation risk

The issues are discussed with case studies:

  • It is the translation not the conversion of real money from one currency to another
  • Severe distortion of reported performance of overseas subsidiaries when there has been a significant foreign exchange movement
  • Should companies hedge translation exposure?

 

2. Hedging transaction risk - the internal techniques

2.1 Invoice in home currency

  • Internal techniques to manage/reduce forex exposure
  • Paying for all imports in your home currency
  • Who owns the exchange-rate risk?
  • Viability for companies in monopoly positions vs. those in a competitive environment

 

2.2 Leading and Lagging - basic hedging

  • Why importers delay payment
  • Appropriate means of delaying payment and consequences
  • How to obtain payment immediately without conflict?
  • The problem lies in guessing which way the exchange rate will move

 

2.3 Matching

  • Matching up receipts and payments in the same foreign currency due at the same time
  • Dealing with the unmatched portion of the total transactions
  • Setting up foreign currency bank accounts
  • Bilateral and multilateral netting and matching tools

Case study: Comparing Tabular and diagrammatical netting methods

 

2.4 Letting the market decide

  • Is the result "win some, lose some"?
  • Do gains and losses net off to leave a similar result to that if hedged?
  • Transaction cost savings vs. short-term risk

 

 

DAY TWO

 

3. Hedging transaction risk - the external techniques

3.1 Forward contracts

  • How forward contracts work
  • How forward prices should be agreed upon
  • Understanding spot-forward parity
  • Relationship between the forward price and expected future spot price

 

3.2 Money market hedges

  • Locking in currency value in advance of a transaction
  • Creating certainty about how much a future transaction will cost
  • Ensuring the domestic company can lock in a price that it is willing and able to pay

Case study: Setting up a hedge from scratch

 

3.3 Futures contracts

  • How futures contracts work
  • Who can or should use them
  • What is basis risk?
  • Should you ignore or hedge this?

Case study: How corporates use Futures to hedge existing exposures

 

3.4 Options

  • What are traded currency options?
  • What is the terminology and what does it mean?
  • When do you allow an option to either lapse or call?
  • Why use options rather than forward contracts or futures I the result is an asymmetric risk exposure?

Illustration: A typical pricing schedule for the US$/€ currency option on the Philadelphia exchange

 

3.5 Forex swaps

  • Access to capital markets, in which it may be impossible to borrow directly
  • The FX swap market and how swap rates are calculated
  • Why banks use forward swaps rather than outright forwards: hedging outright forward transactions
  • Understanding the sensitivity of FX swaps to changes in rates
  • “Historic rate” rollovers explained

Case study: Using FX swaps to facilitate an international construction project

 

3.6 Currency swaps

  • Purposes of Currency Swaps
  • Issues concerning exchange of principal in different currencies
  • The exchange of interest rates - the timing of these depends on the individual contract
  • Fixed for fixed or fixed for variable

Case study: Using currency swaps in conjunction with underlying bond exposures

 

CFOs Leadership :
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Discover how our leadership program has shaped the perspectives of CFOs across Asia
 
Venue: Hilton London Bankside, UK
Date: 20 - 21 Jul 2017
Faculty: Eugene O’Connell
Early Bird 1: £1,795 (by 25 May 2017)
Early Bird 2: £1,895 (by 22 June 2017)
Regular Fee: £1,995
Group Discount: 2nd participant get 10%, or register 3 participants and 4th participant get a complimentary seat
(1 discount scheme applies)
Contact: karen.woods@claridenglobal.org
 
 
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