In transitioning from legacy and largely manual processes for hedging foreign exchange (FX) risk management, the Dublin-based treasury department of Ingersoll Rand sought greater visibility and quantification of its exposures. This involved partnering with a dedicated technology provider and adoption of a centrally-led FX management strategy.
“Kyriba resolves our immediate FX risk management limitations and allows us to develop best in class solutions.”
Assistant Group Treasurer,
Having previously suffered an inability to determine key factors impacting FX exposure in real-time, analysis was reactive rather than proactive; numerous ERP systems with varying capabilities made analysis complicated, cumbersome and directional in nature, so hedging was limited only to known exposures such as intercompany loans; and consolidation tools provided functional currency or USD transparency, without transactional currency details. To address these gaps and translate exposure management into meaningful analysis that adds value to the business, Ingersoll Rand turned to FiREapps, now a Kyriba company. In mapping project objectives to tangible business benefits this is what the team, led by Assistant Group Treasurer Chris Donohoe, set out to achieve visibility and quantification of:
- Net Asset Position by Currency — to map and detail net asset exposure by asset category, legal entity, SBU, region and enterprise
- EBITDA Position by Currency — to map and detail EBITDA by currency, legal entity, SBU, region and enterprise
- Map FX Accounting — to cross check for FX bookings in relation to P&L, CTA and cash flow reporting
- Hedge Determination — to determine Value at Risk (VaR) analysis for all hedging programs and portfolio risk optimisation to determine most efficient strategies
- Advanced Reporting — to explain sources of noise in the FX results and provide dashboard reporting on balance sheet hedging effectiveness
Thanks to working with FiREapps (now Kyriba) for the past two years, Chris and his team are now able to cite quantitative and qualitative benefits beyond expectation, the most impressive of which is achieving 97 percent realtime visibility of group FX exposure. Most note-worthy is the global reduction of risk by an excess of 50 percent over 12 months based on the VaR quantification, which is immense for a company of this size and stature.
“We in treasury have evolved into a true strategic partner to the business rather than just a corporate function,” explains Chris. “We now have have the ability to work with our entities on specific projects and to implement business solutions rather than simply providing high-level FX hedging.” Chris also notes an increased engagement from the business, resulting from awareness training and a more detailed outline of exposures. Global group risk quantification and trend analysis by business unit and by currency and dashboard presentations for business and board perspectives are also clear strategic benefits.