Articles

Robust Risk Management for the Institute of Physics

By Erin Harding November 18th, 2019

IOPP

Smart Currency Business has worked closely with the Institute of Physics to create and manage a bespoke currency risk management policy.

The Institute of Physics is the professional body and learned society for physics in the UK and Ireland. Their publishing subsidiary, IOP Publishing, is a society-owned scientific publisher with 400 staff members in eight countries. As part of the scientific community, they work closely with prestigious researchers, librarians and partners worldwide to produce academic journals, books and conference series, aiming to cover the best and latest research and to serve the needs of their readership.

Creating a robust risk management policy

Identifying the need to address their foreign exchange exposure and requiring external expertise, IOP Publishing was referred to Smart Currency Business through a mutual connection. Our first step was to understand the nature of their exposure, requirements and business goals through the use of our Budget, Risk and Solution approach.

Once we had established a full picture of their foreign exchange exposure and provided risk analysis, we then began to work closely with the IOPP finance and treasury teams to create a robust risk management policy for board approval. The process included carrying out sensitivity analysis, stress-testing of their foreign exchange exposures and identifying appropriate hedging instruments, asking questions such as, ‘what would a 5% FX movement mean to your budget?’

After the policy had been created and board approval granted, the next step was to execute against policy. Following execution and across the lifecycle of the trades, we supported IOPP with regular reporting, position monitoring and valuation activity. The transactions executed provided IOPP with a substantial uplift in GBP from the budgeted worst-case scenario. Prior to dealing with Smart, IOPP felt that their FX trading lacked flexibility in terms of cash flows and the realised exchange rates upon delivery of the contracts.

An ongoing relationship

Following the initial and ongoing consultation with Smart, IOPP believes that, owing to the ever-changing nature of the currency market, their hedging strategy is most effective when monitored and refined on a regular basis. Adjustments are made according to changing economic and business factors, as well as considering market movements, to ensure that their business is constantly protected.

IOPP receives custom reporting each month, detailing their hedge position and bespoke market analysis. This is hand prepared, direct from their dedicated Account Manager here at Smart. These tailored reports provide an important overview of the performance of their policy and serve as an efficient outsource reporting function for finance and senior management.

In addition to monthly reports, IOPP’s policy is reviewed on an annual basis, with Smart providing holistic support to their finance team. Our professionals offer guidance on everything from budgeting through to execution and monitoring.

Financial Accountant at IOPP, Annwyn Smith, explains the nature of their relationship with us:

“Smart are very easy to work with; our dedicated adviser is always available to answer my calls, whether it is to place a trade or answer a query about how to reduce our currency risk. They give honest advice in a friendly, professional manner which makes them great to work with.”

Taking our service to the next level

IOPP now benefits from complimentary access to SmartHedge, our risk management and valuations platform. This intuitive and effective tool gives the team at IOPP 24/7 access to their hedging positions, FRS 102 compliant reports to help with key decision making and allows them to check in on how their hedging strategy is performing. Using the platform reduces their reliance on spreadsheets and means that information is easily accessible for audits. We guided the team through a straightforward set up, and continually ensure that we are on hand to help with any queries that they may have.

If you want to know more about how Smart Currency Business can help your business remove uncertainty and mitigate the risks of foreign currency exposure, then email us at info@smartcurrencybusiness.com or give us a call on 020 7898 0500.