CitiFX Publication - From Crisis Management to Business Recovery

internally through various ways such as the use of wide FX margin buffers or outsourcing the associated FX risks to their Treasury departments. While these actions could solve for the problems introduced by indicative pricing models, it also introduces incremental work, costs and sources of risk for the company. Unsurprisingly, e-Commerce channel managers often find themselves having to win over multiple stakeholders in models 2 and 3 and many well-meaning initiatives never come to fruition. In the last couple of years, we have seen a significant uptick in interest in full-risk transfer solutions where localised pricing is enabled on the back of underlying guaranteed FX rates. By outsourcing intra-period FX volatility to banks that offer guaranteed rates solutions, D2C businesses are able to deliver on localised pricing while outsourcing FX volatility to their banking providers. An added benefit brought about by internalising this process is better control over FX rates, which is a lever that sales channel managers can deploy in improving online sales conversions when selling internationally. Key Takeaway: Localised pricing is a useful lever when optimising online sales conversion funnels and D2C e-Commerce businesses can enable this without assuming the associated FX risks through full risk-transfer solutions Guidepost 5: Future-Proof FX Risk Management Processes by Accelerating the Adoption of Treasury Technology The risk of a reoccurrence of COVID-19 in the future continues to be an unknown and is likely to loom over the world economy for the foreseeable future and indeed, we might even have to contend with imminent latent risks. COVID-19 has taught businesses to reassess their crisis responsiveness and as they rebuild their businesses, they would need to consider new ways to fortify their workforce and operational models. The first guidepost in this article discusses the importance of digitalising FX risk management processes but in thinking about future proofing working models, businesses should think about fully or semi-automating their workflows. The difference between the two lies in that digitalised workflows still involve an element of manual oversight, for example, a treasury dealer executing a transaction over an electronic platform, while full automation sees the process being performed with minimal or no human involvement and relies entirely on pre-defined rules determined by users. The premise of automation is perhaps not as remote as one would imagine and a parallel in our daily lives would be the periodic backing up of our mobile chat messages into a cloud storage facility; a fully automated process that operates on pre-defined rules. Businesses can start examining manual or semi-manual processes to determine which are time consuming and non-core. Often treasury resources are deployed towards basic and non-core FX processes that are administrative and repetitive, namely: 1. Manually extracting FX exposures from ERP systems or TMS and entering these into spreadsheets; 2. Analysing FX exposures across currency pairs and separating exposures according to what needs to _ be executed at spot, forward or with a derivative structure; 3. Calculating the percentage of FX exposures of each currency pair that need to be hedged; 4. Calling banks for quotes or entering deals into online trading platforms and executing them _ individually; and 5. Reconciling deals back into ERP systems through manual data entry 7 5 Foreign Exchange Guideposts for Corporates in a time of COVID-19