31 January 2024

The Absa Hedgebook story: bank driven FX hedging innovation

Absa CIB – one of South Africa’s leading commercial banks and previously partly owned by Barclays Bank – recently revealed its Hedgebook story. It has given us a great example of bank driven FX hedging innovation to share.

We always love it when customers share the journey they have taken with Hedgebook. Absa CIB – one of South Africa’s leading commercial banks and previously partly owned by Barclays Bank – recently revealed its Hedgebook story.  In partnering with Hedgebook, Absa CIB has been able to give corporate treasurers across its client base access to live currency and FX risk management, as well as interactive forecasting and scenario planning. It’s a great example of bank driven FX hedging innovation.

Like many banks, prior to partnering with Hedgebook, Absa’s client companies largely used spreadsheets to monitor, report and forecast their currency hedging.
In 2022 the Absa CIB FX team started a pilot of what is now known as ‘Absa Hedgebook’. As Aphile Molefe, Head of eCommerce – South Africa at Absa CIB puts it in announcing the new technology:

“We put the value proposition in front of a few of our clients, offering them a tool that gives them insights into their hedge positions, analyses the risk they are exposed to and creates a range of reports detailing their hedging performance, valuations, and cash flow impact.

“Absa Hedgebook did a lot more for clients than we had hoped it would.”

What Absa Hedgebook covers

In designing Absa Hedgebook the aim was to take away the manual processing and calculations for those Absa customers looking to do regular cash flow and valuation reporting on their open FX forwards and options contracts – especially for multi-banked businesses.

As Aphile Molefe explains it:

“Our new system enables standardised valuation reporting using inputs that are acceptable by auditing standards. And those reports can be run quickly and easily with minimal input.

“Absa Hedgebook has generated interest because every corporate struggles with these issues – even those that have paid for treasury systems.

“The tool’s automated offering is one of its many appeals. Instead of relying on manual inputs, Absa will upload trades you’ve done with them automatically to minimise the inputs required.”

Bank driven FX hedging innovation

One of the big issues facing banks and their clients in today’s market is identifying risk and planning for it into the future. Absa Hedgebook enables clients to input their expected foreign cash flows and then simulate scenarios to see the impact of a market move on their P&L – based on a ‘do nothing’ approach or with a hypothetical trade idea in place.
As Aphile Molefe explains it in the article:

“With the input of what your dollar exposure is according to that plan, and immediately see if you’ve under- or over-hedged for that risk, as well as other stats based on budget rate, current market rates and the company’s hedge policy.”

Positive partnership

From Hedgebook’s perspective, it is great to see the value Absa is now able to deliver to its client base with Absa Hedgebook. It is also a very good example of how Hedgebook can securely and effectively partner with banks to deliver the specialised treasury management solutions they need for customers.

“Absa Hedgebook plugs a big gap, helping our clients to do their work with far greater ease.” Aphile Molefe Head of eCommerce – South Africa at Absa CIB

We have developed a guide for other banks FX Sales Teams interested in using a tool like Hedgebook – simply get in touch if you would like to get a copy or learn more.

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