# UK at Forefront of FX Management Change Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-06-14 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: FX Risk Management Trends in the UK: Insights and Changes Meta Description: Discover how Brexit and Covid have transformed foreign exchange management in the UK. Stay ahead with faster, more accurate FX hedging strategies. URL: https://financedigest.com/uk-at-forefront-of-fx-management-changehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fx-managemen-1736838283632-compressed.jpg) _By **Richard Eaddy,** CEO [Hedgebook](http://www.hedgebookpro.com/)_ **The UK is front and centre in a global increase in foreign exchange hedging as both Brexit and Covid have shaken the pot.  The once steady and reliable Pound is increasingly volatile.  Add to this more UK companies needing to source both suppliers and customers from ‘offshore’ it is easy to see why FX hedging has come to the fore.** This has put the spotlight on the importance of faster, more accurate FX hedging and highlighted the changing landscape for FX management in the UK over the past year.   There are four key areas of change all of which are the direct impact of increased volatility. The UK’s previous relatively stable Sterling enabled many to put FX hedging off the priority list. But that is no longer the case. **FX [risk management](https://www.financedigest.com/aon-announces-agreement-to-acquire-risk-management-firm-creating-a-comprehensive-cyber-risk-management-advisory-group.html "Aon announces agreement to acquire risk management firm, creating a comprehensive cyber risk management advisory group") policy** FX hedging must be part of any [importer or exporter’s risk management](https://www.financedigest.com/the-importance-of-strategic-human-resource-management.html "The Importance of Strategic Human Resource Management") tool kit. Just as you need to have [risk management policies for managing other key](https://www.financedigest.com/early-detection-of-mismatched-trades-is-key-to-managing-risk-and-maximizing-profits-on-the-pl-desk.html "EARLY DETECTION OF MISMATCHED TRADES IS KEY TO MANAGING RISK AND MAXIMIZING PROFITS ON THE P&L DESK") parts of the business, now you need a foreign exchange policy as well. Companies need to identify their tolerance for risk and that comes in all shapes and sizes. Even doing nothing is a legitimate approach, provided the decision is made consciously and not just through hope and crossing fingers. Having an FX [policy in place enables faster and better decisions](https://www.financedigest.com/asian-shares-rise-dollar-dips-ahead-of-fed-policy-decision.html "Asian shares rise, dollar dips ahead of Fed policy decision") to be made but also ensures you are acting within your current appetite for risk. **Cashflow forecasting just got harder** ![Richard Eaddy](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/richard-eaddy-3-450x675-1736838283641-compressed.jpg) Richard Eaddy Forcing a more pragmatic approach is concurrent with the increased complexity in cashflow forecasting.   Once reliable [supply chains](https://www.financedigest.com/in-the-supply-chain-clean-data-is-the-fuel-of-the-future.html "In the supply chain, clean data is the fuel of the future") are anything but.  It makes forecasting – which has always been a challenge – exponentially harder.  If the cashflows are in a foreign currency, you’ve just added another multiplier to risk and difficulty. If you are [managing foreign currency cashflows then your hedging will need](https://www.financedigest.com/struggling-banks-need-to-modernise-and-improve-software-quality-management.html "Struggling Banks Need to Modernise and Improve Software Quality Management") to be dynamically changing at the same time. Whereas you might have covered 100% of every committed forecast previously, now you might be reducing that or buying insurance through FX options. You need to build need some flexibility into your forecasting so if an order doesn’t eventuate, or gets pushed out longer than expected, your FX hedging can be adjusted accordingly. **FX management frequency increasing** All of this has accumulated in the third insight; FX risk [management is no longer a monthly or quarterly activity](https://www.financedigest.com/with-the-right-active-manager-you-really-do-get-what-you-pay-for.html "With the Right Active Manager, You Really Do Get What You Pay For").  To [manage both the currency volatility and the increased risk](https://www.financedigest.com/managing-corporate-currency-risk-the-cfos-balancing-act.html "Managing Corporate Currency Risk: The CFO’s Balancing Act"), companies are reviewing their hedging positions far more frequently, particularly in the UK. The increase in risk has driven much closer monitoring.  There is not only a greater uptake in tools to [manage FX risk](https://www.financedigest.com/aon-launches-new-catastrophe-model-to-manage-the-risk-of-icelands-most-disastrous-peril-earthquake.html "Aon launches new catastrophe model to manage the risk of Iceland’s most disastrous peril: Earthquake") effectively but an overall increase in their use. The majority are reviewing their FX [positions are being reviewed multiple times a month which certainly wasn’t happening a year](https://www.financedigest.com/liverpools-new-chinatown-perfectly-positioned-for-property-investment-this-chinese-new-year.html "Liverpool’s New Chinatown perfectly positioned for property investment this Chinese New Year") ago, with many accessing their position on a daily basis. **No longer in the boardroom** Finally, lockdown spurned another challenge for those managing FX risk.  Conversations could no longer be held [behind closed doors](https://www.financedigest.com/banking-stability-worries-go-behind-closed-doors-at-imf-world-bank-meetings.html "Banking stability worries go behind closed doors at IMF-World Bank meetings"), with the relevant information presented over the table.  Instead, the information now needs to be securely accessible to all, no matter where they are located (including your bank and currency broker). It also needs to be one version of the up-to-date truth as managing multiple versions adds an unacceptable layer of risk. Spreadsheets are no longer fit for this purpose.  Even if your treasurer is an expert and can do the multi-faceted calculations required it just isn’t current, or secure, enough to be viable when working remotely. And this isn’t going to change.  We have lived with remote [working for so long now that most believe a hybrid of working from home and working in the office will remain for the foreseeable future](https://www.financedigest.com/meetings-in-the-metaverse-how-likely-is-this-the-future-of-work.html "Meetings in the metaverse – how likely is this the future of work?").  In our world – it means FX hedging decisions will continue to be made with remote engagement which [supports a higher cadence of FX management](https://www.financedigest.com/how-to-manage-burnout-and-how-leaders-should-support-employee-wellbeing-tom-keya.html "How to manage burnout and how leaders should support employee wellbeing | Tom Keya"). [**Banks slow to change**](https://www.financedigest.com/exclusive-world-bank-seeks-more-funds-to-address-climate-change-other-crises-document.html "Exclusive-World Bank seeks more funds to address climate change, other crises -document") However, banks, currency brokers and auditors are still very much part of this equation.  And while audit [firms have rapidly come on board with moving](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") to digital solutions, banks and currency brokers are disappointingly slower to change. This isn’t just a UK phenomenon as around the world customers are starting to push banks hard for [online FX risk management](https://www.financedigest.com/prince2-and-msp-training-the-rise-of-online-project-management-courses.html "Prince2 and MSP Training: The Rise of Online Project Management Courses"). It is surely in everyone’s interest to be operating off the same information, including the [modelling of different options and attributed risks](https://www.financedigest.com/jaywing-releases-horizon-a-new-ifrs-9-modelling-solution-that-encapsulates-its-extensive-credit-risk-expertise.html "Jaywing releases Horizon, a new IFRS 9 modelling solution that encapsulates its extensive credit risk expertise"). While it was once a monolithic job to install a treasury [management solution](https://www.financedigest.com/exact-launches-practice-management-solution-to-help-transform-accountants-into-trusted-business-advisors.html "Exact launches Practice Management solution to help transform accountants into trusted business advisors"), cloud technology has considerably changed that.  [Banks and currency brokers need to move](https://www.financedigest.com/u-s-to-move-3-5-billion-in-afghan-central-bank-assets-to-swiss-based-trust.html "U.S. to move .5 billion in Afghan central bank assets to Swiss-based trust") faster on this or their customers really will leave them behind. _**About the author**_ Richard Eaddy – Chief Executive Officer and Director Richard has more than 25 [years of treasury experience](https://www.financedigest.com/2021-the-year-of-buyer-experience.html "2021: The year of buyer experience") gained in New Zealand, Australia and Europe. He has worked as both a hands-on Treasurer working for major corporates in New Zealand and Europe, as well as a risk [management advisor to some of New Zealand’s largest companies](https://www.financedigest.com/poor-user-experience-plaguing-wealth-management-firms-warns-radical-company.html "Poor user experience plaguing wealth management firms, warns Radical Company"). In 2002 he established ETOS Limited, which is now the leading provider of treasury services in Australasia. Richard headed up ETOS for ten [years and remains a board member and the largest shareholder](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row"). He was appointed CEO of [Hedgebook](https://www.hedgebookpro.com/) in 2012. Richard currently resides in [London growing Hedgebook’s UK and European business](https://www.financedigest.com/tokyo-based-business-launches-in-london.html "Tokyo-based business launches in London"). [Hedgebook](https://www.hedgebookpro.com/) is a global cloud-based treasury management solution which has been sold in the UK since 2017.  Having captured 75% of the Top 30 UK [Audit firms Hedgebook is now growing its footprint with banks](https://www.financedigest.com/kpmg-stands-by-audits-of-silicon-valley-bank-and-signature-bank-ft.html "KPMG stands by audits of Silicon Valley Bank and Signature Bank – FT"), brokers and corporate treasury managers directly and through channel partners. Richard Eaddy is appearing in a [Treasury Dragons](https://app.livestorm.co/treasury-dragons/fxfortreasury?type=detailed&utm_source=Adaugeo%20Media%20Ltd&utm_medium=email&utm_campaign=12388690_Hedgebook%20Dragons%20Debate%20June%202021&utm_content=register&dm_t=0,0,0,0,0) event on the 24th June. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---