As hedged as necessary, as cost-effective as possible
Learn how the medical technology firm Dräger saves time and money in FX hedging thanks to its’ solution for automated FX exposure calculations and optimised hedging implemented in TIP. The solution emerged as the winner in the 2020 AFP Pinnacle Award finals, competing with submissions by Google and Peloton.
Dräger manufactures medical and safety technology products. In so doing, Dräger products protect, support, and save people's lives around the world in hospitals, with fire departments, emergency services, authorities, and in mining as well as industry. The treasury department at this Lübeck-based group manages a portfolio of 41 currencies. This makes it essential for the associated FX exposures to be managed in a highly automated, cost-effective and practical manner.
When Dräger and TIPCO first sat down to discuss the issue of FX management, the company’s risk managers were still deriving their FX exposures in Excel based on SAP data exports and no end of manual work. The goal: Enable both – the exposure as well as the risk to be calculated fully automatically in TIP based on underlying data from SAP.
Based on the selected target risk and using cost-of-carry as the optimisation criterion, the TIP RiskSuite uses its optimisation function to determine THE single optimum hedge portfolio out of millions of possible hedge portfolios which keeps risk within the defined limit while minimising total cost-of-carry. The result is a curve of efficient hedge portfolios for a defined range of target risk taking cost/risk aspects into account.
“This perspective allows everyone involved in the risk management process to discuss the most suitable blend of risk and costs on a factual basis. This enables us to avoid scenarios with a relatively low level of additional hedging at considerable extra costs,” is how project leader Mark Blatt explains the value of this analysis.
Frank Freitag, Controller FX Risk Management at Dräger uses TIP on a regular basis. In this webinar he explains how the project has been brought to life and which features not only save him hours of manual extra work but generate valuable insights he would not be able to analyse from Excel spreadsheets.
Frank FreitagController FX Risk Management at DRÄGER |
Alexander FleischmannHead of Market Development - International at TIPCO |
