Bristol Myers Squibb’s (BMS’s) 2019 acquisition of Celgene Corporation was one of the largest pharmaceutical acquisitions in history. Not surprisingly, combining two behemoths in a tightly regulated market sector brought challenges, some of which came to roost in the corporate treasury function. The newly combined organization was running enterprise resource planning (ERP) systems from two different vendors and was using those ERP systems to manage twice as many legal entities as either company had managed previously.

“We suddenly had 260 legal entities across 60 countries, and we needed to hedge 20 currencies,” explains Sandra Ramos-Alves, senior vice president and treasurer for BMS. As the company’s landscape of exposures expanded, Ramos-Alves and her team embarked on a multipronged initiative to strengthen and streamline financial risk management companywide. One key aspect of the project was improving insights into currency risk.

“Corporate balance sheet FX [foreign exchange] risk increased with the acquisition, and quantifying risk or explaining P&L volatility became increasingly difficult with the technology and processes we had in place at the time,” Ramos-Alves says. The newly combined organization did not have a system providing single-pane-of-glass visibility to currency risk at the corporate level. This challenge was magnified by the fact that BMS used the daily FX rate for balance sheet remeasurement, so every day that they waited to hedge an exposure created additional FX risk for the BMS P&L. The company had historically hedged balance sheet FX once a month, even though exposures were changing on a daily basis.

BMS’s treasury team decided to automate the balance sheet FX hedging process, from identification of exposures in the company’s ERP systems to hedge recommendations, and from uploading approved external trades into a trading platform to the creation of internal allocations associated with each external trade. The treasury group evaluated a variety of options for achieving this level of automation and implemented AtlasFX.

“We discovered that many of our legal entities had inconsistent variants set up in their ERP systems, so we required a custom feed for each entity,” says Ravi Patel, director of financial risk management for BMS. “Additionally, many of the entities’ G/L [general ledger] accounts had transactions from historical currencies that needed to be excluded.” The treasury team set up the data feeds into AtlasFX with these complications in mind. By increasing accuracy in the data aggregation process, they improved their ability to measure the overall company’s daily FX exposures.

At the same time, the BMS treasury team connected AtlasFX to their 360T trading platform and their FIS Quantum treasury management system so that FX trades could flow automatically from AtlasFX to both systems, along with the hedges’ allocations to internal entities. These straight-through data flows replaced the team’s legacy process of creating an Excel spreadsheet with requested trades, distributing it for individual review of the trades, and then manually allocating the transactions within the treasury management system.

With these systems in place, the treasury team also significantly accelerated the pace of their cash flow hedging program in 2023 to mitigate currency headwinds and reduce volatility within the company’s P&L statement. The team completed BMS’s 2023 cash flow hedging by early Q3/2022, including placing the maximum hedges permitted by accounting regulations on the currencies in the cash flow hedging program. They also began purchasing FX options to participate in potential foreign currency appreciation.

In addition, BMS treasury initiated a cross-currency swap strategy to hedge the company’s net investment in several currencies. “We identified an opportunity to synthetically convert a net investment hedge from a long-dated euro bond into a series of shorter-dated cross-currency swaps, enabling the company to monetize the borrowing rate differential between U.S. dollars and euros,” says Patel. “These hedges generated interest-expense savings for 2023 and 2024, while providing additional restructuring flexibility for future market opportunities. This strategy ensured that, as those net assets change over in the future, we won’t have to react by de-designating our bonds. We can just not renew our cross-currency swaps.”

For assistant treasurer Keith Gaub, the introduction of both the cross-currency swaps and the FX options demonstrates the benefits of taking a strategic approach to financial risk management. “Collectively, as a treasury team and up through our CFO, we shared a view that interest rates would remain higher for longer,” he says. “As a result of this perspective, we used shorter-tenor trades to hedge our risk in the event we were wrong, but created a portfolio that would turn over quickly, allowing us to seek a better entry point to execute longer-dated trades. It’s an example of how we take an instrument and use it in its designated way to hedge an exposure, while leaving ourselves flexibility to take advantage of dynamic and rapidly changing market conditions.”

Ramos-Alves sees mitigating the impact of currency volatility on both the P&L and the balance sheet as a means of keeping BMS focused on its core business. “We have reduced the impact of currency volatility on our financials by multiple cents in EPS [earnings per share] every quarter,” she says. “This enables corporate leadership to focus on what’s really important: delivering medicines to patients, innovating, and investing in business development. And our earnings calls can focus more fully on our products, rather than on explaining the potential EPS impact of non-operational issues like FX.”

A second key dimension of BMS’s financial risk management initiative revolved around better mitigating the company’s counterparty credit risk. BMS has always been conservative about diversifying its counterparty risk, and when Silicon Valley Bank and Credit Suisse failed in the spring of 2023, senior management began requesting daily updates on corporate-level exposures to different banks. The treasury group used Microsoft Excel to aggregate data across a range of software systems to capture derivatives, deposits, and investments with each counterparty.

“A lot of healthcare companies, including some of our acquisitions, used Silicon Valley Bank,” Ramos-Alves says. “Our exposure was small, but we saw the need to revamp our processes so that we could easily view companywide counterparty risk at the press of a button, should the question come up from our CFO or the board.”

The treasury team had already begun to pull data on counterparty exposures into a dashboard, but the Silicon Valley Bank meltdown accelerated that process. “The external environment prompted us to improve that dashboard and integrate it with more systems so that we could come up with one number for the entire company—including both the cash side and the derivative side—in real time,” Ramos-Alves says.

Information about cash deposits flows from BMS’s banking partners into FIS Quantum, and from there into a data lake. Mark-to-market information flows from BMS’s Reval system into the data lake. And the counterparty risk dashboard taps into that data lake. “So, when we look at counterparty exposures, we are looking at the mark to market on our derivatives as well as our cash,” Ramos-Alves says. “If management wants an update on our exposure to a particular banking counterparty, we can pull up current information right away.”

The third area of financial risk that BMS tackled within this initiative involved its non-qualified deferred compensation (NQDC) plan, a benefit provided to certain high-earning employees. “Because the IRS has annual limits on how much individuals can defer to their 401(k), BMS established the NQDC so that participants can defer and invest a higher portion of their salaries toward retirement,” said Ashish Saraogi, senior director of benefit investments and international treasury. “At the start of the year, they designate a percentage of their salaries to defer, and they can choose among 12 different funds for their NQDC ‘investments.’”

BMS withholds the specified percentage from each participant’s salary throughout the year, and when the employee leaves the company, BMS owes them the deferred salary plus the amount that their chosen funds have earned over time. However, Saraogi explains, “unlike a 401(k), the NQDC investments are only notional—there are no assets behind them. So, if we retained $100 million in deferred compensation within the NQDC and plan investments achieved 25 percent growth through the years, then when those employees retired, BMS would be on the hook for the original $100 million plus an additional $25 million. That’s a significant exposure we needed to manage.”

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Instant Insights /

Multipronged, Strategic Financial Risk Initiative Delivers Big Value for BMS

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