Photo of Magnus Attoff, Ericsson and Ryan Radloff, FiREapps.
Ericsson has operations in all countries except North Korea. This means operations in 180 countries with exposures to 100+ currencies and more than 500 currency pairs. Their exposures are massive. Hear how they implemented a currency analytics platform to address the situation.
Head of Financial Risk Management and Operations
Founded in 1876, Ericsson (Telefonaktiebolaget LM Ericsson) is a Swedish multinational provider of communications technology and services. The company is headquartered in Stockholm, Sweden and looks to use innovation to empower people, business and society.
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Ericsson has operations in more than 180 countries with exposure to over 100 currencies and more than 500 currency pairs (150 deemed material risks). The scale of Ericsson’s $27bn operation is massive and so too is the scale of the accompanying FX risk management programme.
This scale created key stresses on Ericsson’s programme, which in 2013 drove the Ericsson risk team to begin a three-year evolution to a next-generation currency risk management platform.
Ericsson implemented FiREapps’ currency analytics platform for the automated extraction, validation and distribution of their balance sheet risk data out of their ERP system. Ericsson works with 18 core banks and has integrated FXall as well as a single bank trading platform.
Best practice and innovation
There are three key areas of excellence:
World-class process and change management
During this three year transformation, Ericsson managed to fundamentally change its risk management structure, twice (from 21 to 14 hubs, then from 14 to five); implement a new software platform for FX risk management; and identify more efficient ways to hedge. All the while it was maintaining and optimising ongoing programme performance across $20.46bn of volume in hedges and 70 people worldwide.
Leading with a technology-first approach
Ericsson may be a 140-year old company, but this has not stopped it being one of the early adopters of the ‘Treasury 4.0’ mindset – this is a way of thinking which emphasises the leveraging of technology and automation to empower its biggest asset: people.
Not only did Ericsson implement a new platform for risk management, the team also brought over 70 global team members onboard during the evolution. The effort yielded an estimated 120 person-hours saved each month through elimination of manual data collection and management. This move has also driven a 33% faster decision-making cycle on a monthly basis, equating to real reduction in market risk. Unquestionably, this is an illustration of applying best practices to deliver tangible, ongoing value.
Demonstrating the power of a platform on a major scale
As a simple fact of being in every market but one, Ericsson is in the unique situation of dealing with most of the regulatory and currency environments that exist. Specifically, Ericsson must operate in three distinct types of environments:
Non-regulated markets: no major restrictions to deal with.
Regulated: choice between off-shore and on-shore markets.
Restricted: within these markets, hedging cannot be done cross-border or offshore.
By implementing a platform for collaborating around the comprehensive risk picture globally, Ericsson has created a programme and process which is able to both support and adapt to each of these environments (and their quickly shifting conditions). It has also been able to deliver smart answers and quick insights when trying to decide where and how to manage risk, based on market type, liquidity and regulations.
As Magnus Attoff, Head of Financial Risk Management and Operations for Ericsson notes: “We successfully implemented a massive change in process, structure and technology across 70 people, 14+ global hubs and 100+ entities.” He concludes: “Rarely do projects of this size get fully implemented, and even more rarely do they produce measurable, positive outcomes during implementation.”
Increased the speed and efficiency of the decision-making process in a market where major world currencies have been known to move more than 2% in a day (EUR & JPY in 2015).
Generated more than $6.7m in transaction cost savings from smarter hedges.