CurrencyCast | Episode 1 – The 4 Expectations of FX Automation

26-01-2022 | treasuryXL | Kantox | LinkedIn |

It’s finally here! CurrencyCast, our new podcast, is live.  Every week, we’ll provide bite-sized tips and expert insights to help you better manage foreign currencies and optimize your P&L results.

Click on the image above to watch the first episode: The 4 expectations of FX automation


This week, we offer our view on the make-or-break FX challenges treasurers and CFOs will face in 2022. Last year was a highly unpredictable year in terms of currency volatility and this year looks to follow a similar pattern, especially with a sharp shift in interest rates.

But how can you protect your business and profit margins from such instability and uncertainty? Our FX expert and writer, Agustin Mackinlay, outlines his expectations for shifting interest rate differentials across currencies, ongoing profit margin pressure due to rising costs and more during this episode.

He’ll provide insights on how to handle each issue so you can make more informed decisions for your FX risk strategy in 2022.


Head to your preferred channel and catch episode two, where we look at the: 𝐓𝐨𝐩 𝐜𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 𝐭𝐡𝐚𝐭 𝐰𝐢𝐥𝐥 𝐚𝐟𝐟𝐞𝐜𝐭 𝐲𝐨𝐮𝐫 𝐅𝐗 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐢𝐧 2022. 


CurrencyCast | A podcast by Kantox

20-01-2022 | treasuryXL | Kantox | LinkedIn |

Introducing our new weekly FX podcast, CurrencyCast! A no-holds-barred series on the urgent foreign exchange challenges facing treasurers and CFOs today.


Introducing our new weekly FX podcast, CurrencyCast! A no-holds-barred series on the urgent foreign exchange challenges facing treasurers and CFOs today.

Every week, FX writer Agustin Mackinlay gets candid about what finance departments are doing wrong when managing their currencies and risk. He’ll provide bite-sized insights to help you better understand your FXrisk and push your treasury to the next level.

It’s an FX masterclass, all in under 10 minutes!

Mark your calendar for January 26th at 10am (CET) and subscribe to our YouTube channel to be one of the first to access our new series.

Subscribe now for the CurrencyCast!


Tame the ghost! Cancellations & currency management in Travel

20-12-2021 | treasuryXL | Kantox | LinkedIn |

How to automate the FX treatment of cancellations

It is no secret that the wave of cancellations following Covid-imposed travel restrictions has been a nightmare for travellers, airlines, hotel chains and tour operators alike. In the United States alone, cancelled domestic flights peaked at 137 thousand in April 2021. Largely due to cancellations, air traffic in Europe in 2021 was barely equivalent to 43% of the level seen before the pandemic.

Given the amount of time and resources devoted to adjusting their refunding policies, many players in the industry are still scared by the ghost of cancellations. But is that fear warranted? Not when it comes to FX management. This is because Currency Management Automation gives travel companies the tools to minimise the P&L impact of cancellations.

When it comes to FX management, the message is crystal clear: the ghost can be tamed.

Cancellations and FX exposure

FX risk management is a process in three phases: the pre-trade, the trade and the post-trade phase. Cancellations are an important element of the pre-trade phase, when the exposure to currency risk is collected and processed. Now, the type of exposure and the way it is managed depends, crucially, on each business’ pricing dynamics (see: “The hidden secret behind the different types of FX exposure”).

In the Travel world, dynamic prices are the norm (see: Currency Management Automation in Travel Distribution). OTAs, Bed banks, Hotel chains, DMCs and others frequently update their FX-denominated prices, and their cash flows are at risk from the moment of the bookings till settlement. For this reason, most Travel distribution firms apply micro-hedging programs that take those ‘firm commitments’ as the key FX exposure item.

This is where cancellations kick in. A cancelled FX-denominated booking diminishes the exposure to currency risk if the corresponding hedge has not been executed, or if an already executed trade is closed out at the same FX rate. Otherwise, there would be a situation of over-hedging. Manually adjusting hundreds or thousands of individual pieces of exposure to their corresponding hedges can quickly become an impossibly complicated task.

Taming the ghost in FX-related cancellations

Currency Management Automation provides treasurers with a number of tools to tame the ghost of cancellations. The first line of defence is to include —as part of business rules defined in the process of FX automation— an automatic cancellation rate. For example, if managers set an average cancellation rate of 10%, Kantox Dynamic Hedging® will hedge the remaining 90% hedge of the bookings.

As more information becomes available, this cancellation rate can be refined and adjusted by management when it so desires. While it is good practice to try and anticipate events, perfect accuracy cannot be expected in matters related to travel cancellations, especially in the current situation. This is why a second line of defence is provided by what our FX automation software takes as ‘negative entries’, a more efficient way to deal with cancellations. Let us briefly see how that works.

An entry is an individual piece of exposure. As part of the implementation phase of the software, risk managers establish a set of business rules that include —for each currency pair— the accumulated value of the entries they wish to hedge. These instructions also include a rule for setting negative entries from their own ERP, Booking Engine or Data Lake in the event of cancellations. API-transmitted negative entries automatically cancel the corresponding FX exposure.

But what happens when a negative entry is pushed after the corresponding hedge has been executed? Not much. Because travel-related FX exposure typically includes hundreds/thousands of individual transactions, new positions are constantly entered for the same currency pair and value date. The more granular the information included in these entries, the more accurate the FX hedging process, and the better the traceability of each piece of exposure.

Conclusion: speed is the name of the game

As the effects of the global pandemic still loom large, the ability to quickly process cancellations is a must for airlines, hotel chains and wholesalers in general. FX management is an integral part of this process — and it relies mostly on automated micro-hedging programs for bookings or ‘firm commitments”.

These micro-hedging programs, in turn, automatically treat cancellations as a key element of the ‘pre-trade’ phase of exposure management. If your aim is to tame the ghost of cancellations —while relieving the finance team from performing repetitive, resource-consuming and potentially risky manual tasks—, FX automation is the starting point.

The time to act is now!

The hidden secret behind the different types of foreign exchange exposure

23-11-2021 | treasuryXL | Kantox | LinkedIn

Fresh from leaving the famous Genesis rock band that he helped found, songwriter and musician Peter Gabriel came out with an innovative album called Exposure, where his fascination with electronics and new recording techniques was openly on display. In the eponymous song, he kept on droning the E-word over and over:

Exposure
Exposure
Exposure
Exposure
Exposure

Expert-led Conversation | The Digitalisation of Treasury: Your FX Risk Management toolbox for 2022 | 30 November 2021

treasuryXL | Kantox

 

Date & time: November 30, 2021 at 9.30 am CET | Duration 45 minutes

2022 is just around the corner, and we want to make sure you’re armed with the best technology tools to help push your treasury department to the next level. 

Join Kantox and TreasuryXL in this expert-led conversation on the future of FX risk management and the treasury trends to tap into in 2022.

No More Excuses! It’s Time to Implement the Right Hedging Program

11-10-2021 | treasuryXL | Kantox

More than half the participants of the Kantox & TMI FX Survey describe their existing currency hedging program as inadequate. And that’s not all: 72% of participants admit the need for updates and changes to their policies and programs going forward.

Spreadsheet risk: the silent killer of FX performance

07-09-2021 | treasuryXL | Kantox

Imagine a perfectly designed currency hedging program for a company that seeks to protect its annual budget. Given the specific features of that company —especially its pricing dynamics— such a program would allow the finance team to systematically achieve a hedge rate that would be equal or better than the FX budget rate, avoiding overhedging all the while. The hedging strategy would also consider the firm’s degree of forecast accuracy, as well as the forward discount or premium of the currencies in which it trades.

Now imagine that this optimal FX hedging program was implemented on perfectly designed spreadsheets. Armed with super-efficient spreadsheets, the finance team would project forecasted revenues and expenditures, calculate the firm’s exposure to currency risk and set a time frame for the execution of hedges.

A treasurer’s dream come true? Not so fast.

Any reasonably well-designed currency hedging program goes through a process in three phases: the pre-trade phase, the trade phase and the post-trade phase. Each of these phases, in turn, comprises several intricate steps. And here’s where a wholly unexpected risk would sneak in, with potentially devastating consequences: spreadsheet risk, the silent killer of performance.

Spreadsheet risk is omnipresent 

The real value of Multi-Dealer FX trading platforms

16-08-2021 | treasuryXL | Kantox

(Spoiler: it’s not about trading costs)

A few years ago, PwC consultants proposed a clever analogy to illustrate the difference between single-dealer platforms (SDPs) and Multi-Dealer Platforms (MDPs). For banks looking to provide products and services to corporate clients on a platform, SDPs are like an airline’s website, where high-margin sales occur. Multi-Dealer Platforms, in turn, are the equivalent of online aggregators that let customers compare fares and schedules. While the former emphasizes customer relationship intimacy, the latter work as “transactional supermarkets” with a higher degree of automation.

When it comes to the corporate FX market, where spot and forward transactions take the lion’s share in terms of traded volumes, Multi-Dealer Platforms like 360T and SWAPs have been the venue of choice. The shared technology of Multi-Dealer Platforms has enabled them to better adapt to changing customers’ needs than the proprietary technology of most Single-Dealer Platforms. As a result, corporate treasurers have moved en masse to Multi-Dealer Platforms to improve FX trading processes and reduce spreads. As Kantox’s CEO Philippe Gelis argues, the success of Multi-Dealer Platforms has resulted in a spectacular “compression of FX spreads for vanilla products”.

Beyond trading costs: the value proposition of Multi-Dealer Platforms

Lower FX trading costs, the natural result of the Multi-dealer platform proposition, play an important role by facilitating the participation of firms who see a benefit in ‘embracing currencies’ to access new markets and grow their business. But the fixation with lower spreads is unwarranted. Going forward, treasurers will care less about paying 9 bps instead of 10 bps, if a 2% move in the exchange rate can be easily and efficiently handled by an automated hedging program.

To see where the real value of Multi-Dealer Platforms lies, let us start by briefly looking at the three phases of the FX hedging workflow: pre-trade, trade and post-trade.

The pre-trade phase involves sourcing exchange rates for the purpose of pricing as well as capturing and processing the relevant exposure. Once the FX trade is executed and confirmed, the post-trade phase kicks in with reporting and performance analytics as well as accounting and payments and collections.

In this increasingly automated series of steps, MDPs play a key role. Kantox’ partnership with 360T, for example, provides straight-through processing integration for corporates of all sizes to tailor their Multi-Dealer Platform setup to execution and routing rules of their own making. The range of functionalities includes:

  • Trading in spot, forwards, NDFs and swaps with hundreds of liquidity providers
  • Automated trade and data requests via API
  • Transparent pricing with greater efficiency in sourcing
  • Diversification in order to lower counterparty risk
  • Ability to select preferred liquidity providers
  • Complete trade history and audit trail
  • 24/6 execution capabilities
  • ‘Best price execution’ functionality that puts liquidity providers in competition with one another
  • Conditional orders setup with order management tools
  • Automated trade confirmation by API or email

What emerges from this picture is clear: the ‘trade phase’ of the FX corporate workflow is being automated at lightning speed. The reduction in spreads, while important, only tells part of the story. The real value proposition of a Multi-Dealer Platform lies elsewhere: they are an integral part of the seamless, end-to-end management of corporate currency workflows that Currency Management Automation solutions provide.

This process of automation comes with an added bonus: Application Programming Interfaces (APIs) ensure that data can flow seamlessly between different systems (ERP, TMS) without any need for spreadsheets, reducing spreadsheet risk and freeing up valuable treasury resources.

When viewed in this broader dimension, as part of a larger process that includes all the phases of an automated FX hedging program, Multi-Dealer Platforms are part of an ecosystem that allows companies to benefit not only from automating, one by one, the different phases of a hedging program but to have all these processes integrated with one another, thus creating more value than the sum of the parts.

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Press release | Kantox joins the treasuryXL community as Premium Partner

28-07-2021 | treasuryXL | Kantox

treasuryXL announces partnership with Kantox to strengthen dissemination of the latest trends about currency management automation technology

VENLO, The Netherlands, July 28, 2021 – treasuryXL, the community platform for everyone who is active in the world of treasury, and Kantox, the global leader in currency management automation software, today announced the signature of a premium partnership.

This partnership will create a new content resource for the treasuryXL community. Treasurers will now have access to a regular stream of insightful and practical content on currency management automation. This partnership includes:

● Collaboration on messaging, content production, and visibility
● Mutual distribution on select items of interest
● Collaboration on larger themes: event promotion, speaking and experts contribution, publications

Through this partnership, treasuryXL and Kantox are striving to ensure that treasurers are always up to date with the latest news and events in their field.

About treasuryXL

treasuryXL started in 2016 as a community platform for everyone who is active in the world of treasury. Their extensive and highly qualified network consists of experienced and aspiring treasurers. treasuryXL keeps their network updated with daily news, events and the latest treasury vacancies.

treasuryXL brings the treasury function to a higher level, both for the inner circle: corporate treasurers, bankers & consultants, as well as others that might benefit: CFO’s, business owners, other people from the CFO Team and educators.

treasuryXL offers:

● professionals the chance to publish their expertise, opinions, success stories, distribute these and stimulate dialogue.
● a labour market platform by creating an overview of vacancies, events and treasury education.
● a variety of consultancy services in collaboration with qualified treasurers.
● a broad network of highly valued partners and experts.

About Kantox

Kantox is a leader in Currency Management Automation software that enables corporates to effectively manage their FX workflow and leverage currencies for growth. Since 2011, Kantox’s expertise and solutions have allowed businesses to collect FX exposure data and automate their hedging, pricing, payment and collection processes.

The company is headquartered in London and authorised by the Financial Conduct Authority (reference number 580343) and Kantox European Union, S.L. is based in Barcelona and authorised by the Bank of Spain (reference number 6890) For more information, visit www.kantox.com, @Kantox LinkedIn.

 

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