Managing Risk and Opportunity through Uncertainty

FX RISK ASSESSMENT FX TRANSACTION RISK 27% 35% 11% 15% 12% Daily Weekly Monthly Quarterly Per request Assessment of FX Risk Proportion of Forecasted Exposures Hedged Frequency at which Hedging Performance is Analysed Yes Ad hoc under specific circumstances No 94% 73% Short-term 54% Approach to Hedging Forecasted Exposures 24% 12% 20% 19% 25% 81% 6% 11% 83% The majority of companies (81%) follow a rolling, static, layered, or opportunistic approach to hedging forecasted exposures. Additionally, many hedging programs continue to be short-term in nature. As a result, the number of companies realizing significant economic and risk reduction benefits has been limited. Over half of respondent companies reported analysing hedging performance at least on a monthly basis. 70% 27% 23% 4% 6% 2% 4% 13% 10% 44% 17% 17% 15% 9% 9% 4% 5% 0% 5% 0% 5% 42% 20% 16% 8% Notional Amounts of Exposures Sensitivity Analysis Value-at-Risk (Portfolio basis) Value-at-Risk (Individual Currencies) Value-at-Risk (Asset class) Greater than 36 months 24-36 months 12-24 months 6-12 months 3-6 months 0-3 months Daily Weekly Monthly Quarterly Half-yearly Annually Per request Never Methodology/Reporting 94% of companies surveyed reported assessing FX risk, of which 73% indicated doing so at least on a monthly basis. Over three- quarters (79%) of respondents indicated that FX risk decision-making and execution is centralized. Often, those with more complex exposures reported applying more advanced risk tools, such as value-at-risk and portfolio analysis. While it remains true that statistics will never be a panacea for all FX risk management concerns, these quantitative modelling techniques and tools can be valuable to a corporate treasurer to apply when formulating a risk management strategy. Level of FX Risk Management Centralization Centralized decision making and execution Decentralized decision making and execution Decentralized decision making; centralized execution 10% 11% 79% Layered hedging Opportunistic hedging Rolling hedges Static hedges Other 75%-94% 95% or more 14 15