Common Challenges to Hedging FX Risk

Chatham Financial White Papers – October 2015

 

Early 2015 ushered in currency volatility and dollar strength unseen in decades. Every day, new headlines of companies negatively impacted by large exchange rate movements greeted readers of financial news. Earnings calls are littered with references to “constant currency” impacts and earnings forecast reductions driven by significant currency movements. With this background, analysts, investors, Board Members and senior management have asked, “What is stopping us from hedging our risk more effectively?” This article will cover three key hurdles that companies face when crafting and maintaining currency hedging programs: Data, Design, and Accounting.

 
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