Best Corporate Foreign Exchange Awards 2019: Riding The Volatility Wave

Global Finance honors the companies that set the standard for FX hedging across regions and industries.

Global Finance’s Corporate Foreign Exchange Awards honor companies that have managed their currency exposures to protect their profit margin, cash flow, balance sheet and overall global competitiveness. The hurdles for doing so were especially high this past year, as fluctuations in foreign exchange rates and their impact on earnings volatility were still giving multinational companies heartburn—especially during the second quarter.

European corporations continued to see large negative currency impacts on earnings in the second quarter, the main culprit being unexpected swings in the euro. They and their US counterparts reported a collective $15.4 billion hit to their financial results for that period due to foreign exchange losses, according to FiREapps, which operates a leading currency analytics platform.

Amid these storms, however, the use of currency-hedge accounting—an elective method that reduces volatility compared to mark-to-market accounting—is getting less complicated, possibly prompting a shift in method as companies look to reduce volatility.

A new hedge-accounting standard, ASU 2017-12 from the Financial Accounting Standards Board (FASB), took effect on December 15 for companies that were not early adopters. US companies may now want to consider adopting the method, says Jon Howard, audit and assurance senior consultation partner for hedge accounting at Deloitte.

“The FASB has significantly simplified the process, but companies need to take the initiative,” he comments. “Make no mistake: This is a good update to a standard that has potential long-term benefits for a company,” particularly, he points out, in “reducing volatility in financial statements.”

Companies should engage in prudent risk management irrespective of the accounting implications, notes Bill Fellows, risk and financial advisory partner at Deloitte, who specializes in financial instruments and transaction valuation, accounting and risk management. However, “the new standard makes it easier and more manageable on an ongoing basis. By making the operational burden less, it could encourage companies to take a second look.”

For companies that use hedge accounting but follow international financial-reporting standards, another important new rule was unleashed last January by the International Accounting Standards Board. IFRS 9 specifies how companies should classify and measure financial assets and was designed to more accurately present a company’s risk-management activities. An entity applying hedge accounting is required to designate an inverse relationship between the hedging instrument and the hedged item. This matches the hedging activity with the exposure itself.

Whether to switch to hedge accounting is only one issue companies with FX exposure have faced in recent months, however, given the trade controversies, economic volatility and commodity-price fluctuations that have contributed to 2018’s currency ups and downs. Their expertise at addressing these challenges is reflected in the Corporate Foreign Exchange Awards, which recognize four global winners as well as honorees in seven regional and (for the first time) 11 key industry groupings.




Best Corporation in the World for Foreign Exchange Management Alphabet
Best Corporation for Use of Currency Hedging Ford Motor
Best Corporation for Use of Foreign Exchange Options Apple
Best Corporation for Use of Foreign Exchange Forwards Boeing


Africa Sasol Financing International
Asia-Pacific Taiwan Semiconductor Manufacturing
Central & Eastern Europe PKN Orlen
Latin America Cencosud
Middle East ACWA Power International
North America General Motors
Western Europe Siemens


Aerospace Lockheed Martin
Agriculture Cargill
Technical Analysis BASF
Consumer Goods Unilever
Energy Total
Health Care McKesson
Manufacturing Toyota Motor
Mining Vale
Retail Carrefour
Technology Apple
Transportation UPS


Global Finance’s criteria for the Corporate Foreign Exchange Awards are similar to those for its FX service providers: a mix of objective and subjective. We consider whether the company has clearly defined risk-management policies, how it handles currency-related crises, and whether it accurately measures its FX exposure and controls the cost of hedging.

Our criteria also include subjective factors such as customer service and technology innovations, using input from industry analysts, surveys, corporate executives, consultants and technology experts. Decisions are informed by provider submissions.




Although Google’s parent enjoyed a 21% rise in revenues year-over-year in the third quarter, CFO Ruth Porat says a strong dollar held it back. As a net receiver of foreign currencies, Alphabet benefits from a weaker dollar, particularly against the pound sterling, euro and yen. The company uses forward and options contracts to protect its forecasted dollar-equivalent earnings from exchange-rate shifts. Its cash-flow hedging contracts reduce but do not eliminate FX risk, however. Alphabet’s subsidiaries also use FX forwards to offset the risk on their assets and liabilities denominated in currencies other than the local.


Ford Motor

Ford understands that natural hedges can be achieved by manufacturing and selling in the same currency. The treasury risk-management department’s analysis of FX exposures is now taken into account in strategic decisions such as where to locate assembly plants. As an example, take China, where Ford plans to build its premium Lincoln-brand automobiles to get around the 40% tariffs Beijing has imposed on US-built vehicles. The company applies hedge accounting for some derivatives, evaluating those designated in hedging relationships for effectiveness, using regression analysis at the time they are designated and throughout the hedge period.



A currency option is a right—but not an obligation—to buy or sell a certain amount of foreign currency at a fixed rate on a specified future date. Options eliminate the risk of a loss on exchange movements; but unlike currency forwards, they still give the holder a chance to profit if the currency moves in the company’s favor. Apple plans to adopt ASU 2017-12 in its first quarter of 2020 and is currently evaluating the impact of adoption on its consolidated financial statements.



Boeing’s risk managers are keeping a close watch on the continuing tensions between Russia and Ukraine, as Russia is a major source of titanium products for the aerospace manufacturer and its suppliers. FX forward contracts help Boeing manage currency risk associated with certain transactions, such as forecasted sales and purchases made in foreign currencies. Boeing also uses commodity derivatives, including fixed-price purchase commitments, to hedge against potentially unfavorable price changes for items—like titanium products—that it uses in production.



General Motors

General Motors has confirmed in filings with the Securities and Exchange Commission that the simplifications under ASU 2017-12 may prompt it to expand its use of FX hedge accounting. For GM, an early adopter, ASU 2017-12 became effective last January. The update expanded disclosure requirements and mandated a cumulative-effect adjustment for certain items, but none of this is material to GM’s consolidated financial statements. GM says it will continue to take action to mitigate headwinds such as foreign-currency volatility and commodity costs.



Cencosud is the largest retail company in Chile; and its chain of supermarkets, department stores and malls also extends into Argentina, Brazil, Colombia and Peru. The costs and revenues it bears in these countries are mostly denominated in local currencies, while the company’s debt is largely denominated in Chilean pesos or converted to them through cross-currency swaps. At the end of the first quarter of 2018, approximately 68% of consolidated Cencosud’s financial debt was denominated in dollars. Using currency swaps, however, the company reduced its dollar exposure to 17.8% of its total debt.



Siemens’ corporate treasury department uses FX forwards, swaps and options to manage the effects of currency swings on the company’s foreign-currency-denominated receivables, payables, debt, firm commitments and forecast transactions. That means managing liquidity daily in 30 currencies, primarily using short-term FX swaps. Siemens believes in centralized management of interest-rate, currency, liquidity and credit risk; although in countries with currency restrictions, it usually lets local treasury entities handle daily operations.


PKN Orlen

Polish oil company PKN Orlen operates refineries and service stations with convenience stores and supermarkets in Poland, the Czech Republic, Germany and Lithuania. A financial-risk committee manages its currency and interest-rate risks as well as emission allowances and liquidity and credit risk. A key consideration is the average exchange rate of the zloty to the euro and the dollar. PKN Orlen actively hedges its currency exposure from cash flow using currency futures, also hedging selected elements of balance-sheet exposure to currency risk.


Taiwan Semiconductor Manufacturing

More than 90% of Taiwan Semiconductor Manufacturing’s sales are denominated in US dollars; while more than half of its capital spending is in currencies other than its functional currency, the Taiwan new dollar. TSMC Global was established in Tortola, British Virgin Islands, as a vehicle to reduce parent TSMC’s FX hedging costs. Last August, the board approved a capital injection of up to $2 billion into the subsidiary.

Middle East

ACWA Power International

Saudi Arabia’s ACWA Power International develops, operates and invests in power generation and water-desalination plants in the Middle East, Africa and Southeast Asia. Its finance team, split between Riyadh and Dubai, manages the company’s entire derivatives portfolio. Since some of ACWA Power’s subsidiaries are based in regions experiencing considerable currency volatility, the company buys FX forwards, which are then allocated to cash-flow hedge relationships.


Sasol Financing International

Sasol Financing is a subsidiary of South African energy and chemicals group Sasol. Based on the Isle of Man, the financing company exists mainly to provide treasury and related services to the group. Sasol is vulnerable to changes in the dollar-rand exchange rate and uses hedges to protect its cash flow and balance sheet. To offset the volatility risk, it uses collar instruments comprising short-term options to create a cap and a floor for potential currency moves.



Lockheed Martin

Lockheed Martin uses derivatives to reduce its exposure to market risk from changes in exchange rates and interest rates. The global aerospace and defense contractor’s most significant currency exposures relate to the pound sterling, the euro, and the Canadian and Australian dollars. It uses currency forwards and options to hedge forecasted foreign-currency transactions as a way to mitigate fluctuations in earnings and cash flows associated with currency moves.



Paris-based BNP Paribas has an onshore presence in 80 countries. Its GlobalMarkets portal offers access to the bank’s full range of information, research and analysis, including the latest market intelligence and trading ideas from its analysts, strategists and economists. Desktop alerts appear when newly published research meets preselected criteria. GlobalMarkets is integrated into Cortex, the bank’s global FX platform for cross-asset trading tools and services.



BASF, the world’s largest chemical producer, uses foreign-currency contracts in a variety of currencies to hedge FX risks from nonderivative financial instruments and planned transactions. The company incorporates purchase and sale transactions, planned for the following year, which are hedged if they fall under the currency- management risk system. It applied IFRS 9 Financial Instruments for the first time last January.



Unilever converts local currency revenue into euros at a fixed reporting date. This gives the Anglo-Dutch consumer goods company’s treasury department an incentive to hedge currency exposure to dampen revenue volatility. The new hedge-accounting requirements under IFRS 9 will allow it to employ hedge accounting based on the group’s risk-management policies rather than in prescribed scenarios only.



Total, which operates in more than 130 countries, strives to minimize each entity’s currency exposure to its functional currency, the euro. The French energy company’s use of financial instruments is governed by strict rules defined by management, including central control by the treasury division of liquidity, interest and exchange-rate positions. Net short-term currency exposure is periodically monitored against limits set by management.



McKesson conducts business internationally in US dollars and the functional currencies of its foreign subsidiaries, including the euro, pound sterling and Canadian dollar. The health care services and information technology company generally uses forward contracts and cross-currency swaps to offset the income-statement effects of intercompany loans denominated in nonfunctional currencies. These programs reduce but do not eliminate foreign-exchange risk.


Toyota Motor

Toyota Motor includes 53 overseas manufacturing companies in 28 countries under its corporate umbrella, with sales in 170 countries. Japan’s leading automaker, it uses derivative financial instruments, including forward contracts and FX options, to manage its currency exposure. The company has shifted more production to the US, lowering its structural exposure to the dollar. In January 2017, it announced plans to invest $10 billion in US-based facilities over the next five years, including a new $1.6 billion joint manufacturing plant with Mazda to open in 2021.



Vale is the world’s largest producer of iron ore and nickel. Its mining operations also yield a host of other vital materials including manganese, ferroalloys, copper, bauxite, potash, kaolin and cobalt. Substantial portions of the company’s revenue, trade receivables and debt are denominated in US dollars; while the majority of its costs are incurred in other currencies, mainly the Brazilian real and the Canadian dollar. Vale uses currency swaps and forwards to hedge these exposures. It began applying IFRS 9 hedge accounting rules last January.



French multinational retailer Carrefour operates 12,300 stores in more than 30 countries. Lately, it has been using blockchain technology to ensure food traceability; and it recently signed a strategic partnership with Google to create new distribution models and online experiences for shoppers in France. Carrefour makes use of hedging and hedge accounting, using derivatives classified as either cash-flow or fair-value hedges. It does not currently hedge its net investment in foreign operations, however.



Apple applies much the same level of innovation to financial matters as it does to its products and services. Apple teams cooperate worldwide to develop more-effective investment and risk-management strategies. To help protect gross margins from currency fluctuations, subsidiaries whose functional currency is the US dollar typically hedge a portion of forecasted foreign-currency revenue. To help protect its net investment in a given foreign operation, Apple may use forwards and options or nonderivative financial instruments such as foreign-currency-denominated debt purchases.



United Parcel Service, better known as UPS, is the world’s largest package-delivery company, serving more than 220 countries. UPS prefers to use options to hedge, citing the flexibility they offer. Its currency hedging program largely shielded it from the strong dollar in 2017. During the third quarter of 2018, however, currency exposures cost it $28 million, largely from emerging markets. Nevertheless, UPS uses a currency-neutral standard to evaluate the performance of its international package, supply-chain and freight businesses.