Photo of Martin Bechtold, FIS and Marc Andre Mohn, adidas AG.
This global sports company has implemented a solution to greatly improve how it manages its currency risk management globally and transacts in more than 50 currency pairs. A real team effort involving group treasury financial operations, group IT, group treasury front office and their strategic partner.
Marc Andre Mohn
Senior Treasury Manager – Global Financial Risk Management
adidas AG is a multinational corporation, founded and headquartered in Herzogenaurach, Germany. It designs and manufactures shoes, clothing and accessories. It is the largest sportswear manufacturer in Europe, and the second largest in the world.
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Global sports giant is top of the league in currency risk management
As a global company, currency risk represents the biggest single market risk in adidas’ portfolio.
Manual reporting is a laborious and inefficient task at best and at adidas, with no way to quickly simulate currency risk positions, it hampered the ability to react to rapidly changing market conditions. In addition, the threat of manual error meant significant effort was required to secure data quality. “Our objective was to build an end-to-end process, to increase the transparency of our currency risk positions with a fully automated solution,” says Marc Andre Mohn, Senior Treasury Manager – Global Financial Risk Management, adidas AG.
With the implementation of a new treasury management system (TMS), adidas has created a bespoke and fully automated solution to enable a reporting of all of its global currency risk positions in a real-time market environment. This significantly increases the company’s visibility of risk, reduces workload and increases the quality of its hedging decisions.
In practice, and as a prerequisite, the cash flow forecasts submitted by entities are uploaded and maintained in the TMS in a streamlined process. Further, all hedging positions are maintained in the TMS environment through a fully redesigned hedging process.
Every new hedging process is actively started by the risk management team in the TMS, based on the hedging decision in operation. All transactions are then dealt via its trading systems.
All steps thereafter to secure hedge accounting have been streamlined via an automated end-to-end process. For FX risk reporting, a real-time market data connection from Bloomberg ensures ‘one-click’ live calculations of market impacts on all global FX risk positions at any time during the business day.
With this fully redesigned set-up, the company can now create a live snapshot of all global currency risk positions whenever it needs to. It can see aggregated net-exposures (per entity), coverage, hedge rates and more complex simulated hedge rates, considering all forwards and options. “We create a real-time view on all exchange-rate driven variances of our global FX positions, showing actuals and forecasts of our anticipated hedging results based on current market developments,” explains Mohn.