The ACT and Citi have announced the results of their annual Corporate FX Risk Management survey, with responses from 287 multinationals providing a key benchmark for hedging activities for corporates around the world.
See below for the summary of the current survey from the April 2008 issue of The Treasurer magazine, and the more detailed hightlights of the current survey.
Also available on this page are the results of the previous survey.
A survey of foreign exchange risk management practices in prominent multinationals show that more than 90% of respondents work along a centralised treasury model which drives banking relationships. Add to this that FX management usually means minimising earnings volatility or mitigating transaction risk and a clear pattern emerges: the focus is often on hedging programmes and accounting standards.
In January 2008, Citi and Association of Corporate Treasurers (ACT) conducted a survey of corporate FX risk management practices. 287 multinational companies participated globally from various industry groups.
In summer 2006, CitiFX conducted their second corporate risk management study and received a much higher number of responses than last year. Their findings include:
- Hedging activities continue to be focused on hedging transactional cash flows.
- Twelve-months is the most common maximum tenor for hedging forecasted transactions. However, the regional breakdown reveals a different picture.
- Forward contracts continue to be the hedge instrument of choice. Options, however, seem to be used more frequently than previously thought.
- While minimizing earnings volatility is the most frequently cited main risk management objective, precisely defining the concept is not as easy as one thinks.
- Most North American & European companies make hedging decisions and execute hedge centrally while Asia-Pacific participants show a much higher propensity to utilize a decentralized structure for risk management.
- Market view and interest rate differential influence hedging activities much more than one might expect.
