Challenge
The client exports to multiple Latin American countries and was facing significant margin erosion due to high FX volatility in local currencies (BRL, ARS). They lacked a formal hedging policy and were managing exposures reactively.
Approach
We developed a multi-currency FX risk management policy and coordinated its implementation with licensed financial partners. The key elements were:
- **Risk Appetite Definition:** Establishing clear thresholds for acceptable FX risk based on the client's financial goals.
- **Hedging Instruments:** Mapping and selecting appropriate instruments (e.g., Forwards, NDFs) for each currency corridor, executed via regulated partners.
- **Automated Reporting:** Designing a dashboard to automatically track net exposure vs. policy limits and the performance of the hedging program.
- **Risk Appetite Definition:** Establishing clear thresholds for acceptable FX risk based on the client's financial goals.
- **Hedging Instruments:** Mapping and selecting appropriate instruments (e.g., Forwards, NDFs) for each currency corridor, executed via regulated partners.
- **Automated Reporting:** Designing a dashboard to automatically track net exposure vs. policy limits and the performance of the hedging program.
Outputs
A formal FX risk management policy and an operational runbook for continuous monitoring and execution.