If you’re being tasked with finding a software tool to manage your FX hedges – look no further. We have tried to put together a comprehensive guide to selecting FX hedging risk management software based on key things prospects tell us they are looking for. While we absolutely hope you include Hedgebook in your search – this is genuinely looking to inform anyone looking for an fx hedging risk management software tool.
1. Core Functionality in Selecting FX Hedging Risk Management Software
First and foremost you need to ensure the FX hedging software tool meets your needs – without any unnecessary extras. So, what does that look like? We thought this would be best kept as a list you can check off:
The ability to record your FX hedges accurately with intuitive fields for entering the data and workflows to take you step-by-step through the process (or using APIs for direct connectivity for deal loading)
- Accommodate the type of instruments you use i.e. forwards, vanilla options, exotic option structures.
- Ability to apply your companies FX management policy and rules across the data set and be able to identify when certain conditions are met.
- To be able to see all your hedges in a single view – from wherever you are – and securely share that view with trusted colleagues and third parties.
- To comply with all the various regulations around treasury accounting and financial reporting standards including IAS 39, IFRS 9, CVA/DVA for IFRS 13, IFRS 7 calculations, and US GAAP.
- Provide the reporting you need – when you need it – with confidence it meets an auditable standard.
- Give you third-party independent valuations to aid in the audit process and meet all reporting requirements.
- While not absolutely essential, being able to model the impact of market changes on your hedges is becoming more of a ‘need to have’ than a ‘nice to have’. Particularly in periods of high market volatility it will give you a lot more confidence in the decisions you are making.
- At a price point that recognises you are only paying for the functionality you require.
2. Ease of Use
Very often FX Hedging tools are seen as highly specialised and therefore it is fine for them to be quite technical and require an in-depth understanding of FX hedging and the related risk management.
However, what we have found, for many treasury teams that experience is not a given. A core reason they are in the process of selecting an FX hedging risk management software tool is to bridge that knowledge gap – in terms of the highly technical calculations found in FX hedging solutions that aren’t easily replicated.
And if the treasury experience does exist, it can be in pockets across the team in highly complex, customised spreadsheets. Using an FX hedging tool should help to remove that single-person or data-corruption risk by embedding that knowledge into a platform that is inherently easy for most of the team to use.
Key things to look for in selecting FX hedging risk management software
- User-Friendly Interface: Designed for intuitive navigation, reducing the learning curve for new users.
- Quick Data Entry: For those with many hedges – or a portfolio of clients who are hedging – the ability to import data in bulk, in multiple wayswith absolute accuracy, is essential.
- Positive User Feedback: Other users of the tool have talked about and rated the system’s ease of use and new-user friendliness. Every software developer will tell you their product is easy to use…but the proof is with the user.
3. Simple Implementation/Onboarding
You need to take a good look at the upfront investment implementing the tool will require. This includes its ability to connect via a secure API into other tools and systems.
How long it takes to get up and running will obviously vary depending on the scope of what is required – but are we talking days, weeks or months? While case studies generally talk about using the product – do any of them mention how easy the onboarding was, how long it took and what the experience was like?
4. Training/Support – Crucial for Any System Purchase
It is also wise to understand the level of support available and to make sure there is a good range of documentation and ‘how to’ articles or videos to help you upskill or train others along the way.
Look for a knowledge base that covers a wide range of topics and technicality (not everyone wants the basics).
5. Client References
Can you see others who look like your business using the product? If not, are there businesses who you would inherently trust as references within the available case studies. Nothing published? You should be able to ask for a direct reference as you look to finalise your shortlist.
Be sure to look for both ends of the market.
Those with small portfolios are likely to be leaning heavily on the tool for risk management and its ability to automate the FX hedging risk management processes. Those with large portfolios of hedges are more likely to have the technical hedging knowledge but using the tools to manage volume, policy and reporting requirements…as well as supporting hedging decisions.
Testimonials from auditors and treasury advisors should also carry additional weight – particularly if they are talking about the system reliability, trust worthiness and performance.
6. FX Hedging Software Tool Pricing
It is always the bottom line. However, pricing isn’t necessarily as transparent as you think. Some things to look for:
- The upfront cost to set up and onboard your team. This can be more than the annual cost of the software itself, so you want to make sure you are getting everything you need from that investment.
- In addition to the software licence, are there any other fees involved in running the tools – integration with your other systems for example? Or is there a usage fee based on number of transactions made or the number of users?
- Identify the roles and responsibilities in your team in relation to the FX hedging software tool to accurately calculate the licence cost. There can be wide variation between ‘view only’ through to ‘active user’ and ‘ admin’.
Finally – generally you will be reading this because you are looking for a specialist tool to manage your FX hedging. You may already have a Treasury Management System in place but for whatever reason it just isn’t ticking all of the right boxes. Or, if you are at the start of your journey into this world of FX hedging management and finding an affordable tool to manage your FX hedging risk is the perfect supplement to your existing accounting tech stack.
Either way – stay focused on the end game. You want something that is easy to set-up and use, affordable, and does all the basics of FX hedging risk management really well – with the tools to enable you to grow your capability as your business expands.
Next steps
Good luck – and if you do want to see how Hedgebook could help – get in touch and one of our team will only be too happy to show you. You may also find our FX Hedging Risk Management eBook of interest as well and be sure to check out our quick overview video.