Foreign Currency Risk

FTI Treasury Case Study Utilities Sector
Client Profile

Utility company.

Client Problem

The company and foreign currency commodity purchases have significant foreign currency income from its non base currency activities and from foreign currency-denominated investments. Continuous changes to the business environment within which the energy company operates, including an increasingly liberalized domestic market, new market entrants, and international opportunities, coupled with FX and commodity price volatility, result in changes to the nature and profile of the financial risks that the company is exposed to.

FTI Treasury Solution

FTI Treasury undertook a review of:

  • The business and competitive environment within which the company operates.
  • The regulated environment and the impact of foreign currency and commodity price movements on pricing.
  • The appropriateness of policy to the nature of the risks being managed and the alignment with corporate business and financial objectives.
  • The current approach to managing foreign exchange transaction and translation risks in the Group, including their source, nature, materiality and commercial/non-commercial hedging approaches.
  • The development and implementation of strategy, the use of treasury instruments (derivatives), and the setting and achievement of budget/target outcomes
  • The end to end process of identifying, reporting and managing foreign currency exposures.
  • The accounting treatment of financial derivatives, including mark-to-market methodology and hedge effectiveness testing.

FTI Treasury delivered, discussed and presented a comprehensive analysis and evaluation of the exposures, an assessment of how they are managed and specific recommendations of actions that should be taken.

Client Benefits:

An independent assessment that either validates, improves or changes the current approach of critical financial exposures that impact directly on the bottom line of the company.

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