group vice president
Product managers like me are constantly looking for our customers’ pain points and designing ways to ease that pain. One of the more acute sources of pain was highlighted by the recent financial crisis which resulted in substantially increased market volatility and a strengthening of the U.S. Dollar. The effect that this volatility had on one U.S. corporation, Google, is discussed by Alix Stuart in an article on CFO.com.
According to the article, Google reported a $300 million dollar hit to revenues in its third quarter accounts as a result of currency fluctuations. Stuart adds, “The company’s foreign-exchange-related costs increased by a net $126 million in the first nine months of the year, according to its latest 10-Q, and Google expects to boost spending on hedging even further as revenues increasingly come from other parts of the world.” That’s a reasonable amount of pain by anyone’s measure.
When I am asked (as I regularly am) to justify why a corporation needs to invest in treasury technology, I naturally talk in terms of efficiency, risk reduction and cost control and a number of other things. However the most powerful stories are those of our customers.
Google has recently embarked on an “intense currency hedging program” and has adopted AvantGard’s FX management software to do this. The solution allows the treasurer, Brent Callinicos, more complete and timely information on which to base hedging policy, making it much less likely that over-hedging will occur and giving Brent and his team the confidence to do more hedging to reduce risk.
Stuart quotes Brent saying that, “The difference between having the system and not having it is material.” This is coming from a company that “recognized $316.6m in hedging gains to revenue in the first nine months of the year.”
The recent financial crisis has put the onus on the treasurer more than ever to show leadership and vision in financial management. Brent provides us with an example and Google’s experience is a clear demonstration that the deployment of treasury technology is a cornerstone to this.
For more information about FX Management, please visit FX and Interest Rate Management.