HP Inc. is an American multinational information technology company headquartered in Palo Alto, California, that develops personal computers (PCs), printers and related supplies, as well as 3D printing services.
The challenge
Even the most strategic corporate treasury teams with complex FX cash flow and balance sheet hedging programmes can still sharpen their hedging strategies. Ensuring treasury is hedging risk effectively reduces FX volatility and maintains global competitiveness. Ever mindful of the significance of balancing its pricing and hedging strategies to prevent impacts on financials, the treasury team at HP sought to further tighten their strategy.
Treasury at HP had recently implemented an option-based hedging strategy (running alongside existing hedge strategies) to give more flexibility to the business to adjust prices for FX and manage uncertain forecasts. However, the options product involved manual processes outside the company’s centralised treasury management system (TMS) and did not provide a systematic audit trail for the trade workflow. This operational risk meant it was time for a unified and automated solution.
“As we worked to improve our hedging strategies, we encountered several challenges. The most prominent one was to align different views among global stakeholders on the advantages of combining FX collars with existing hedging methods,” recalls Andrew Lehmann, Senior Manager, Foreign Exchange.
The solution
HP worked closely with stakeholders to inform and align on the advantages of using FX collars, ensuring compliance with hedge accounting standards, and spearheaded the development and implementation of an FX options platform within its existing system’s infrastructure.
This innovative solution simplified the company’s FX options lifecycle, from trade initiation to settlement and confirmation. Key features include automated orders and trade capture, centralised portfolio management and comprehensive reporting capabilities. By leveraging technology, HP improved its FX operations efficiency, accuracy and transparency.
Best practice and innovation
HP demonstrates best practices and innovation in FX risk management in several key aspects:
Aligning stakeholders and educating them on the benefits of integrating FX collars fosters collaboration and consensus.
Adoption of option-based hedging strategies showcases innovation in addressing complex FX volatility challenges while minimising financial impacts.
Integration of an FX options platform into existing systems infrastructure highlights a commitment to leveraging technology for operational efficiency.
Enhanced risk management practices, facilitated by comprehensive analytics and centralised portfolio management, underscore a proactive approach to mitigating FX risks.
Notable improvements in hedge accuracy and operational efficiency reflect a culture of continuous improvement, reinforcing HP’s commitment to excellence in financial management.
Through these initiatives, the company showcases its commitment to excellence and leadership in financial management practices.
Key benefits
Cost savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Improved visibility.
Errors reduced.
Manual intervention reduced.
Increased system connectivity.
Future-proof solution.
The tangible outcomes and achievements of HP’s solution underscore its effectiveness and impact. The new FX risk management programme has enabled the company to enhance its performance in terms of efficiency, precision, clarity and risk control. Notably, hedge accuracy has improved by 11%, while operational costs have been significantly reduced and compliance with regulatory standards has been enhanced. These quantifiable results validate the success of HP’s solution while demonstrating its potential for broader industry adoption and replication.
HP’s solution exemplifies innovation, excellence and leadership in FX risk management. From its innovative hedging strategies to its seamless integration of technology and collaborative stakeholder engagement, the company has demonstrated a commitment to pushing the boundaries of industry norms and redefining standards for financial excellence.
The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
Please enter the email that you signed up with below. If your email is
connected to a member account, we will send you a reset link.
This website uses cookies and asks for your personal data to enhance your browsing experience. We are committed to protecting your privacy and ensuring your data is handled in compliance with the General Data Protection Regulation (GDPR).
