FX Done Right

How Tech Data saved millions of dollars a year by centralizing and streamlining its FX hedges.

Tech Data is a distributor of IT hardware and software in Europe and throughout the Americas. The company generates approximately $25 billion in annual revenue via operations in more than 100 countries, so currency risk is a significant concern. Five years ago, Tech Data mitigated this risk through $8 billion a year worth of foreign exchange (FX) hedges, executed daily across 18 currency pairs. The hedging process provided the desired protection, but it was not standardized or centralized, which led to inefficiencies.

The company’s senior vice president and treasurer, Chuck Dannewitz, launched an initiative to change that. Treasury & Risk spoke with Dannewitz, along with vice president and assistant treasurer Scott Walker, about the project and the FX hedging best practices that Tech Data implemented.

T&R:  You started this project in 2008. Was the global financial crisis also a factor?

CD:  Currency volatility around that time really highlighted the importance of timely, accurate data. During that time, the euro-dollar exchange rate moved approximately 10 percent in one week, underscoring the need for better systems.

T&R:  Are the 20 people in the business units doing any FX hedging anymore?

SW:  At this point, very little. They are making sure their books are up-to-date and accurate in SAP, ensuring accounts are correctly designated as FX accounts for FiREapps to pull from so the exposures reported are accurate. But beyond that, it’s all handled centrally. We’ve eliminated approximately two hours of work each day for our in-country personnel, and when multiplied by 20 people, it adds up. The centralization and automation allow them to focus on value-added activities for their business unit, rather than on gathering and consolidating FX data.

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