Currency Exposure Management within Philips
It is a major challenge to embed modern financial technology in the continuously changing organisational structure of a multinational company. The processes generating cash flow are to be controlled and proper forecasting models are to be implemented. Based on quarterly rolling forecasts the basic information for managing transaction exposures is provided. Clear guidelines from the “internal bank” and involvement of its financial experts in formulating currency policies at a decentralised Products Division level are key success factors in increasing awareness and knowledge at the level where the business decisions are taken.
The risks pertaining to the use of financial instruments are limited by defining the “internal bank” as the sole interface to the external financial institutions and by imposing limits.
The use of statistical analyses indicating the “normal variation” in currency movements is a powerful tool for increasing knowledge about risk. By adopting the use of multi-currency confidence intervals for a portfolio, the business risks can be made visible, and cost-effective policies for protecting margins can be implemented.
KeywordsCash Flow Foreign Currency Financial Instrument Multinational Company Internal Bank
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