Honeywell’s Treasury is responsible for managing the company’s global foreign exchange risk. Honeywell’s large international footprint and global operations result in hundreds of business entities located in numerous countries around the world. Foreign exchange (FX) exposures are created through the normal course of business operations and are managed by individual legal entities.

Daniel Workinger, Director of Treasury Risk Management, Honeywell, explains, “The challenge for treasury is to collect all foreign exchange exposures (balance sheet and transactional) and effectively mitigate the company’s risk through financial hedging.

The solution we implemented is a web-based tool (FX Web-tool) that would collect our global foreign exchange exposures and then facilitate straight through processing with FXall (our FX trading system) and our treasury workstation.”

All of Honeywell’s business units access the FX web-tool through the Honeywell intranet and report their foreign exchange exposures (balance sheet and transactional) on a monthly basis. The FX Web-tool consolidates the collected exposure data and calculates net external trade requirements. These trade requirements are uploaded directly into their FX trading system for execution and then the trade results are downloaded back into the FX web-tool.

The FX web-tool uses the external trade results to calculate internal trades between treasury and Honeywell’s business units, and then uploads both the internal and external trades and the reported exposure data into their treasury workstation.

The treasury workstation is integrated with their corporate general ledger and facilitates net settlement and electronic funds transfers (EFTs) for external trades, intercompany billing for internal trades, and FX trade related accounting entries, including FAS 133 hedge effectiveness reporting.

“This solution has allowed treasury to manage Honeywell’s global foreign exchange risk in a single comprehensive program that increases process efficiency and accuracy, while reducing overall costs,” says Workinger. “Honeywell is now capable of efficiently capturing all foreign exchange exposures on a global basis for nearly 400 business units.”

“The result is the elimination of nearly $3 billion in foreign exchange exposure each month.”

These exposures amount to a net position of over $3 billion per month, that Honeywell now mitigates through the foreign exchange markets with more than 300 external trades and nearly 1,000 corresponding internal trades.

Honeywell’s innovative solution provides straight through processing to capture global foreign exchange exposures and automate the flow through trade generation, competitively bid execution, accounting entries (including FAS 133 documentation), and final trade settlement. This allows one treasury professional to handle all required risk management activities in the course of one day per month.

Workinger concludes, “Foreign exchange exposures from nearly 400 global business units are consolidated, hedged and accounted for via thousands of external and internal trades, with annual trade volumes of over $35 billion. The result is the elimination of nearly $3 billion in foreign exchange exposure each month.”