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

AHA Editors' Choice Middle Market Excellence Award in Financial Risk Management

Automating to Increase Exposure Visibility: FLIR Systems

FLIR Systems, an Oregon-based maker of sensor systems such as thermal imaging and radio surveillance systems that does business in the U.S., Europe, the Middle East and Asia, was having a hard time getting a comprehensive view of its foreign exchange exposures and their potential impact on the company’s income sheet. When the company sought data from its SAP system on which exposures were causing volatility in the foreign exchange gains and losses posted to its income statement, it could not get the level of detail required.

So FLIR turned to FiREapps for cloud-based software as well as advisory services. FiREapps developed an SAP query to pull data on the company’s exposures, and its software also pulls data from other systems, allowing FLIR’s treasury to generate reports on exposure by currency pair in 15 minutes or less. FiREapps also helped FLIR benchmark its hedging program, looking at both costs and risks, as the company considered whether to hedge additional currency pairs.

Randahl Finnessy, FLIR’s corporate treasurer, says the biggest challenge was “validating the FiREapps extract to make sure that what they were pulling was indeed the data that was in SAP,” a process that took about 30 days.

FLIR says it has now identified 95% of its exposures with a 95% confidence level. And having gained access to that data, the company reduced its balance sheet exposure by more than 50% in the first six months and another 20% over the following six months, both by developing hedges and settling or restructuring intercompany transactions. Based on FiREapps’ analytics, it is now hedging five to 10 currency pairs and says that in particular, its hedging of dollar/Swedish kronor has led to a significant lessening in the volatility in the income statement.

 

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