From the September/October 2012 issue of Treasury & Risk magazine

Bronze AHA Winner in Liquidity Management

Adding FX Forecasts to Cash Flow Models: Toyota Financial Services


Toyota Financial Services (TFS) found an innovative way to improve its cash forecasts and finetune its short-term investment portfolio. “We added foreign exchange rate forecasts to our cash-flow models,” explains Nicholas Ro, national manager for sales and trading.

The objective was to estimate future collateral movements based on changes in foreign exchange rate forecasts. In 2011, TFS became the first corporate treasury to perform daily collateral exchanges with zero credit thresholds and same-day settlements with its counterparties. Adjusting collateral daily reduced counterparty risk but increased uncertainty over how much daily liquidity the company needed in its short-term investment portfolio. If the dollar appreciated, TFS would have to send collateral, and if it depreciated, TFS would receive collateral, Ro explains.


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