Balancing Digital Aspirations While Addressing Risk Management Fundamentals: Observations From Citi Treasury Diagnostics

35 FX RISK MANAGEMENT: BUDGET RATES Approach to Determining FX Budget Rates Bank forecasts Point in time Average forward rate Internally negotiated FX rate Don’t have a budget rate Based on rate of current hedged positions Spot at the time Impacts significantly; budget FX rate causes delays or accelerates hedging decisions and impacts instruments used Impacts somewhat; budget FX rate is taken into account but is not a main driver on how exposures are managed No Impact 46% Impact of FX Budget Rate on Hedging Decisions 10% 36% 54% Nearly half (46%) of companies surveyed reported that FX budget rates impact risk management decision-making. In determining FX budget rates, multiple data points are utilized, with bank-provided rates (31%) being the most popular. Only 5% reported not having a budget rate objective. 31% 23% 21% 16% 14% 5% 10%