Photo of Helen Mason, ANZ, Stephen Lockley, Leon Tompkins, World Vision International and Daniel Hanna, Standard Chartered.
This active foreign exchange risk management programme demonstrates the direct benefits of extracting value from global currency trading on the world’s most impoverished populations.
Global Assistant Treasurer
Director, Global Financial Risk
Established in 1950, World Vision is a Christian relief, development and advocacy organisation dedicated to working with children, families and communities to overcome poverty and injustice. It currently has operations in approximately 70 countries covering North, Central and Latin America, the Middle East, Northern Africa, and Sub-Saharan Africa, Western, Central and Eastern Europe, and Asia. World Vision has an annual turnover of approximately US$2.7bn.
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Currency trading can make a real difference to vulnerable children and communities
Larger fundraising offices commit US dollar support to specific programmes in World Vision’s country field offices about nine months prior to the start of each fiscal year. Then, country field offices, which implement and oversee programming activities, agree to a US dollar value of total commitments approximately three months thereafter. WVI’s global treasury provides forecasted budget rates to both fundraising and country field offices to assist in these negotiations. But, unless forecasted accurately, their projects bear the risk of experiencing significant foreign exchange losses.
Ashwin Ramji, Global Assistant Treasurer explains: “Global treasury introduced a static hedging programme in 2007 based on US dollar budgets. This posed several challenges because specific programming spend is not finalised until at most two months prior to the start of each fiscal year. This means that in many exotic currencies, delaying currency purchases may generate foreign exchange gains at the expense of cash flow certainty. As a result, several larger country field offices were hesitant to work with global treasury. However, by not hedging, they were exposed to abnormal swings in currency rates without sufficient funds to manage them. So, we had to address this.”
Global treasury introduced the concept of cash flow forecasting to country field offices to improve visibility of actual cash flow, which can be highly volatile due to shortages in raw supplies or other challenges inherent with working with vulnerable communities.
With basic cash flow forecasting practice in place, global treasury, with the oversight of Leon Tompkins, Director, Global Financial Risk, introduced active foreign exchange management in 2016 whereby it layers hedges on a monthly basis. The country field offices are encouraged to update cash flow forecasts on a quarterly basis or more frequently for highly volatile currencies. Additionally, global treasury actively monitors a portfolio of stop-losses and forwards to capture potential foreign exchange gains while protecting budget rates.