This week’s International Treasurer editorial meeting brought up several topics we’ll explore in the coming weeks. These include determining the FX program objectives and how best to report on performance to meet them; latest ESMA proposal and companies getting creative with their bond portfolios.
Metrics, Analytics and Reporting
In a coming NeuGroup FX Managers’ Peer Group meeting (September 10-11, 2013) members will discuss developing appropriate metrics to communicate the performance and contributions of the FX function, which can be a difficult balance of granularity and “understandability.” Two members of the group will share their reporting approaches and ideas on how to make them both meaningful and understandable.
Other aspects of the session will include the relative merits of balance sheet and cash flow metrics vs. “the usual” P/L metrics; FX effects on different levels of P/L, sales, COGS, EBIT and offsetting hedges and volatility mitigation: are there better ways to report this/better metrics than these?
ESMA
The European Securities and Markets Authority (ESMA) recently proposed recognizing OTC derivatives rules used by the US and Japan. This means that recognizing the rules as equivalent to European ones, EU authorities can keep banks from having to comply with two sets of regulations; this will also be a cost savings to corporates as they are usually the ones who bear the brunt of this extra work by banks.
Juicing Portfolio Returns
With the “Taper” looming in the very near future – some say this week’s employment data will be the deciding factor – many bond and cash portfolios have taken a hit. We’ll look at what some companies are doing in terms of creativity to squeeze out a little more yield. Just a few months ago that creativity included broadening the investment policy to include lower quality credits. This time around companies are exploring using derivatives.