Systems That Can Adapt to Volatility and New Instruments, a Positive
While the vote in favor of Britain’s exit (Brexit) from the European Union shocked markets globally, companies that stress tested their FX portfolios with various scenario analyses, fared better, says Reval, a cloud technology provider to corporate treasurers.
“Companies that had done contingency planning and scenario analysis were in a much better situation waking up this morning,” says Reval Solutions Consultant Jacqui Drew. “We were recently in discussions with one company that entered into binary FX options to hedge specifically against Brexit and another company that performed advanced Cash Flow at Risk to plan for Black Swan events.”
The pound plunged to a 30-year low after Britain voted to leave the European Union with 51.9 percent of the vote, causing extreme market volatility from New York to Tokyo. “The future of the U.K. government and the practicalities of Brexit will leave many companies facing a number of challenges and opportunities,” Drew notes.
Drew believes more structured products will be coming to market in the near future. “Having a system that can adapt quickly to new instruments will be optimal,” she says. “Times like this remind us how important it is to have technology that provides global visibility into cash positions and exposures. The ability to do advanced scenario analysis to prepare for Black Swan events and to adapt quickly to market volatility and new instruments cannot be underestimated.”
Companies can hear more from Jacqui Drew about the impact of Brexit on corporate treasury in Reval's upcoming webinar, "Financial Risk Management in a Volatile Market," on June 27 at 10:00 a.m. EDT.