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Managing FX Risk With Software

Managing FX Risk With Software

Foreign-exchange (FX) risk is a major topic of conversation among those holding executive jobs, particularly given the plight of Greece and the ongoing eurozone debt crisis. Companies around the world have been forced to adapt to volatile currency markets, and one way some have been keeping track of their risk is through software.

According to The Wall Street Journal, software that allows companies to quantify, keep tabs on and manage the effects of currency swings has become increasingly popular. One example of this is Itron Inc., a software and services provider for utilities, the Journal reports. Ed Barrie, treasurer of the company, told the news source that when he took over two years ago, Itron's treasury department was only hedging against risks incurred by its parent company.

As a result, Barrie explained that he decided to begin using three software systems to monitor and manage the company's currency risk. The first is designed to extract data from about the company's currency risk from all over the world based on its accounting systems, while another offers advice on which hedging trades should be completed, according to the news provider. The final software serves to execute these trades. All told, the software costs the company $220,000 per year.

Barrie, however, says it is well worth the price and has "reduced the volatility in our foreign-exchange gain and loss," the Journal reports. Many treasurers like Barrie are now viewing the software as a premium on insurance for significant fluctuations in currency, the news source said.

Keyston Agricultural Producers (KAP), a provincial general farm policy organization in Canada, has also made a recent decision to help its members deal with currency risk. The program will reportedly protect farmers against adverse foreign exchange currency movements from the time between signing a contract and delivering the product, according to the Central Plains Herald-Leader.

Companies and organizations alike need to be vigilant over the current debt crisis in Europe, particularly with many officials admitting the issue is not nearly over. German Chancellor Angela Merkel recently told members of parliament from her party that the current calmness is simply just a "phase," according to AFP.

"Concerning the development of the crisis, we cannot say today that it is over, we still find ourselves in one of the various phases of the crisis," she said during a recent meeting.

Proformative recently delivered a webinar focused on how company's can leverage technology in managing FX risk featuring the Treasurer of Google. ACCESS THE WEBINAR RECORDING.

To learn more about leveraging technology to evolve the strategic role of Finance, Accounting and Treasury, register early for Proformative's upcoming technology conference, ProformaTech 2013.