The power of FX outsourcing & automation
How are businesses outsourcing their FX to maintain a competitive edge?
Created: 1 April 2022
Updated: 8 June 2023
One of the most prominent trends in the foreign exchange (FX) market, expedited by the Covid-19 pandemic, has been the notable increase in organisations seeking to embrace digitisation as a way to streamline operational processes.
The latest Citi Treasury Diagnostics Report found that 57% of treasurers are looking at transformative opportunities across their treasury function, while research from HSBC found that 70% of treasurers and 81% of CFOs believe the digitisation of treasury processes has become more important over the last three years. This drive for digitisation across the FX market is motivated by the desire to build for scale, increase efficiency and future proof treasury operations.
For many asset managers and corporates, manual FX processes are time-consuming and can increase the likelihood of errors. For example, FX price discovery can often involve multiple phone calls, e-mails or online platforms to log in to just to get a quote from your counterparties. If its best rate wins, because the market moves by the half second, price discovery requires a team of people; calling, e-mailing and logging in simultaneously before they can collectively decide who offered the best quote. This would have been particularly challenging throughout lockdown, with treasury teams working from home and not in close enough proximity to make quick decisions.
Price discovery is just the first step in the FX booking process! After a rate is booked in, trade confirmations usually arrive by e-mail, settlement must be processed, payment details entered and checked, approval from different layers of seniority can be required and, in some instances, trade information needs to be shared with third parties such as administrators or regulators. All this internal, manual and siloed communication can be extremely inefficient and may give rise to human error’. And this is just for one, single trade. Many organisations execute tens or hundreds of trades every month with different products and mechanics. This entire process can be a huge drain on time and resources.
An increase number of asset managers and corporates are moving away from traditional, cumbersome FX processes and instead are embracing simple, tech-enabled solutions which digitise the FX process from initial price discovery right through to reporting at the end of the trade lifecycle.
These solutions can offer:
With digitised FX processes, trades can be executed in minutes rather than hours, with full transparency. Don’t get left behind; embrace digitisation and level up your business in 2022.