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Treasury Today Country Profiles in association with Citi

Adam Smith Webinar with Roche

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  1. How do you handle currency translation within a centralised treasury?
    Lawrencia's Gravatar

    Lawrencia 2014-03-24 15:29:01

  2. In our setup all subsidiaries that are linked to the Global Cash Pool are required to hedge all their transaction exposures with the InHouse bank.

    There is 2 different way of doing that:

    1. entities with substantial exposures participate in a daily FX-hedging process where the IHB (overnight) runs reports in local ERP-systems to identify any new exposures (eg A/P or A/R invoices). The IHB then creates off-setting FX-transactions between the subsidiary and the IHB in order to neutralize the balance sheet of the subsidiary again. The IHB applies the same FX-rate that was applied for the respective accounting entry - with this we achieve that we have no local FX P&L. The challenge for our central FX-team of course is that we do guarantee FX-rates for 24 hours.
    2. entities with smaller exposures are hedged on a weekly or monthly basis. We then do not analyze the balance sheet but do offset balances on Cash Pool accounts. One example: a EUR-affiliate receives a small USD-invoices and will pay it 30 days later via its USD in-house bank account (Payment Factory). Once the payment was executed the IHB identifies that this affiliate has used its USD in-house bank account and will subsequently sell USD to the subsidiary in order to bring the in-house bank account back to zero. The EUR-countervalue of this internal FX-transaction is of course debited from the subsidiary's EUR in-house bank account.

    Please let me know in case I should specify further or clarify other aspects

    schlagm1's Gravatar

    schlagm1 2014-03-24 15:42:06

  3. Thank you very much Martin. Your explanation is so detailed and concise. This sounds good and so simple going by the ‘Roche system’ (In House Bank). But I was looking at a centralised treasury system without an IHB.
    Lawrencia's Gravatar

    Lawrencia 2014-03-25 11:49:32

  4. Dear Lawrencia, thanks ! Just to clarify: if we speak about the IHB then we "only" mean the Cash Pool Leader (based in the Netherlands). It doesn't have or require an external banking license
    schlagm1's Gravatar

    schlagm1 2014-03-25 21:56:06