Risk Management

FX decision making reimagined: the Ericsson story

Published: Jan 2017

Magnus Attoff

Head of Financial Risk Management & Operations

Wolfgang Koester

CEO

Ericsson’s exposures are huge. They operate in virtually every country, except North Korea, and trade in 100+ currencies comprising more than 500 currency pairs. Managing foreign exchange risk is, therefore, a major challenge for the Ericsson treasury team, especially in such volatile times.

In order to overcome this challenge, the Ericsson treasury team, led by Magnus Attoff, Head of Financial Risk Management & Operations have worked to transform how it manages FX risk enabling the company to dramatically improve its currency risk management. Over the three years of this incredibly impressive transformation project, Ericsson has executed over US$20bn in currency hedges.

Ericsson’s story, and the company’s use of the FiREapps currency analytics platform, was detailed in a recent webinar hosted by Treasury Today and highlights how the provision of better currency information is driving smarter currency decisions which has led to some very impressive outcomes.

Watch webinar now

A spotlight on the solution

Importantly, Ericsson needed to nimbly support three different types of hedging environments – restricted, on-shore and off-shore. “Our primary issue was to gather our exposure data in a much more timely manner. We have a protect our balance sheet policy which means we are trying to get to zero, or as close to zero FX P&L as possible,” Attoff explained.

During the webinar Attoff spoke about how Ericsson is now much more a learning and changing organisation. He also focused on one primary issue; data accuracy, and both he and Wolfgang Koester, CEO FiREapps explained how the data, process, structure and technology issues are inter-linked. They also emphasised the importance of a single SAP platform, the need to align the corporate strategy and to obtain the buy-in across the enterprise from functions with responsibility for risk, accounting, control, markets and information technology.

Key performance indicators (KPIs) were also cited as key and one clear overarching goal to guide their ongoing performance and improvement stood out – FX P&L as close to ZERO as possible. Ericsson approached this ambition by focusing upon four primary areas:

Time:

The team needed to use less time collecting data and more time running value added analysis and forecasts.

Insight:

The global scale of their business meant they needed to strike the optimal balance between local and regional insight.

Flexibility:

They needed flexibility in order to apply different strategies across the myriad of regulatory environments to which Ericsson is exposed.

Collaboration:

They needed to nimbly support the three different hedging environments mentioned above.

The results are staggering – 33% faster decision-making in the monthly cycle (2 days less), US$2m+ per year in cost savings (US$6.7m in total) and 180 days per year of unnecessary processes eliminated (human capital impact).

“If I had told you I could take risk off and save you US$2m a year, would you have believed me?”

Wolfgang Koester, CEO, FiREapps

Attoff summarised the key learning points from his transformational journey under three key headings:

  1. Don’t get deterred

    Smartly designed plans for evolution of the programme initially broke and the entire team had to find new solutions quickly to maintain momentum.

  2. Get the right people to buy-in

    Having the right mix of accounting, risk, IT and controlling on the team made all the difference when we were hitting setbacks and hurdles.

  3. You need a shared, clear goal

    Having a clearly understood and mutually shared goal of equipping our people with more time to act as strategic risk managers.

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