Handle Foreign Currency Risk with Exposure Management

  • by Ajay Furtado, Principal Consultant, Fourth Signal
  • Gopa Kumar, Senior Consultant, Fourth Signal (I) Pvt. Ltd.
  • February 15, 2009
/GRC
Analyze and properly maintain your exposures in SAP Exposure Management before transferring them to SAP Hedge Management.
Key Concept

Buying and selling goods or services in foreign currencies can expose an organization to foreign exchange rate risk. The risk arises due to unfavorable movements of exchange rates between the foreign currency and the local currency. A foreign exchange exposure refers to the currency risk in a transaction due to exchange rate fluctuations. Placing a foreign exchange hedge can help to manage foreign exchange rate risks.

SAP Exposure Management, a part of the SAP Hedge Management solution, manages foreign currency risk based on up-to-date financial facts from business transactions in the system. It tracks foreign currency exposures and enables the transfer of the exposure to Hedge Management. Hedge Management controls all hedging activities in line with International Accounting Standard (IAS) 39 and Financial Accounting Standings Board Statement (FAS) 133, which require hedging transactions to be linked to exposures. Hedge Management, without Exposure Management, is standard with all SAP releases since R/3 4.7. Exposure Management is available in SAP ERP Central Component (SAP ECC) 6.0 systems.

We show you how to create, edit, analyze, and release exposures. You then transfer the exposures to Hedge Management, where you can link the exposure to the derivative (hedging) transaction to comply with accounting regulations and apply standard hedge accounting rules.

Ajay Furtado

Ajay Furtado is a principal consultant with Fourth Signal and has worked with customers worldwide in the areas of SAP Treasury and Risk Management. He is a certified SAP solution consultant and has more than eight years of experience in business and technology consulting.

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Gopa Kumar

Gopa Kumar is a senior consultant with Fourth Signal (I) Pvt. Ltd., a company specializing in SAP Financials with a focus on SAP Treasury. He is a chartered accountant with more than 16 years of financial management experience and a certified SAP solution consultant with SAP finance and treasury consulting experience in multinational organizations.

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