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Cash Flow Hedging Best Practices

Effectively hedging the FX exposures inherent in projected global cash flows brings big benefits. Here's how to get there.

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Hedging the currency risk generated by a global business’s anticipated future cash flows can be a bewildering task. Uncertainties inherent in revenue and cost projections, as well as the complexity of the foreign exchange (FX) market and related derivatives, all may contribute to concerns about the efficacy of hedging activities. Yet a well-constructed cash flow hedging program is worth the investment of time and effort.

A corporation’s valuation is based on the size and stability of its future cash flows, so if it can reduce its earnings volatility, it will increase its valuation and access to capital.

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