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All Eyes on FX Risk

As turbulence rocks the currency markets, companies look to new tools to find hidden exposures and new tactics for hedging.

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Volatile currency markets and a blindness to some exposures were taking some nasty swipes at the income of $1.3 billion ADC, a Minneapolis telecommunications equipment company, in late 2008.

“We believed that we were doing the best that we could with our existing tools and resources,” reports Jason Cohen, vice president and treasurer, “but as the market became more volatile we knew there were exposures on our books that we weren’t finding or hedging. We have 3,000 [general ledger] accounts, and the only way we could have found those exposures with our old system would have been to go through all those accounts one by one. We didn’t know exactly what we were missing as the environment turned more uncertain, but we knew we were not satisfied with the results.” About 40% of ADC’s business is international and it has exposure to approximately 60 different currency pairs.

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