Unless your entity structure and level of FX exposures is extremely simple, using only spreadsheets for FX risk management can lead to a host of problems. Multiple dimensions such as currency, time, entity and exposure line items can quickly go beyond the two dimensional capability of spreadsheets. Linkages to multiple spreadsheet tabs or other spreadsheets can be extremely fragile and error prone, resulting in copying the wrong line of data, flipping the sign of an exposure, data entry errors, and multiple versions of data being in circulation stemming from a lack of adequate spreadsheet version control.

Ten warning signs your company is relying on spreadsheets too much to manage FX risk exposures are as follows:

  1. Your company does not have visibility into current and emerging FX risk exposures for each currency pair relevant to your company.
  2. Your company has executed a hedge based on incorrect data from a spreadsheet one or more times.
  3. Delays in updating one or more spreadsheets have caused one or more delays in actions necessary to effectively manage FX risk exposures. i.e., the untimeliness of a response to market and/or company conditions cost your company money.
  4. One or more spreadsheets that impact decisions rely heavily on inputting data manually.
  5. Scenario analysis to determine the impacts of currency movements on financial statement impacts is difficult to create at best.
  6. One or more monster spreadsheets can only be navigated by the person who built them.
  7. You are e-mailing spreadsheets back and forth across international borders, and have more than two parties entering data into any spreadsheet.
  8. You have links between three or more tabs within one spreadsheet or across two more spreadsheets.
  9. You spend more than 10 minutes explaining a spreadsheet to an internal or external auditor.
  10. You need to create spreadsheet magic to assess the potential impact of FX exposures created if your company enters new markets in terms of sales and/or sourcing goods and services.

Relying heavily on spreadsheets to manage FX exposures creates risks that a company with even moderate FX complexity can’t afford to take. The availability of cost-effective FX risk management solutions should inspire companies of all sizes to engage the internal and external parties necessary to assess how to upgrade from Excel and increase the effectiveness of their FX risk management programs.

For more information on this topic, please read our whitepaper:  Top 10 Mistakes that Companies Make in FX Risk Management.