What’s going on and what will go on
Let’s come to the point quickly. Times are going to change and it will not stay for a short hello. The is a sustainable shift in fundamentals that will have a big impact of the markets in general and the FX markets in particular.
If we first look at the inflation, trends are already manifesting evidently. This is not just a regional phenomenon as inflation rates go up sharply in all major countries and currency zones, additional fired up by increasing price expectations. Nothing “massive” has happened yet, but you already can see that long term loans are getting more expensive. Even more important for the FX market is, that higher volatility of interest rates will cause higher costs of securing it.
How to address the situation
Still there are companies who believe that long term opportunities will outweigh hard hits in certain years. There is bad news for them. It is time to reconsider strategy as actively managing FX risk can become a real game changer in international treasury.
So, what can be done to take on the volatile nature of future? Industry had an alternative to a “non-hedging” approach, the well-known 80%-hedging standard. For most of the companies using this way to hedge exposures, it became a part of treasury-DNA.
However, still relying on rigid structures might become a problem in coming years. What we need is a flexible way of dealing with threats, building safety margins with occurring opportunities while being financially well-equipped for hard hits.
Introducing the idea of safety margins
Treasury in international environments is all about managing risks but also using trend-supported opportunities.
That’s why we came up with our “HedgeGo Safety Margin” system. 22 years of intensive consulting to international companies made us realize, that opportunities must be used to build up reserves for bad times. If you dig as deep as we do, trends become more reliable factors to improve financial results. Our internal consulting files showed a clear superiority of our “HedgeGo Safety Margin” approach over non-hedging or 80-hedging approaches. Ask for our fact sheets here.
How does the HedgeGo Safety Margin work
We defined the HedgeGo Safety Margin as: The yearly surplus (in %) gained for your financial result by using HedgeGo compared to ordinary hedging or “no-hedging” approaches.
Being experts for the FX market for over 20 years, we established a data set up that allows us to dig deeper and understand sooner which trends are going to be established. We aim to deliver suggestions for an improved financial result by beating non-hedging or 80%-hedging performances. Including the first weeks 0f 2022 we succeeded in doing so, making our clients enjoying a 7% safety margin p.a. to comparable hedging strategies.
How does the HedgeGo Safety Margin work in practice? Our internal system creates 4-6 order suggestions per year for one currency pair. For costs, that means good news as we don’t follow daily technical approaches rather than building an understanding for trends.
Concrete order suggestions
HedgeGo’s Safety Margin isn’t for pointless activity but for meaningful fundamental support. Our mission pushes us every day to help treasury managers making better decisions. That’s why our platform delivers only a few order suggestions per year while still superiorly building safety for FX treasuries.
If you would like to test our system, let us get in contact to discuss your specific challenges right away. However, whatever you decide: Have a good 2022!