For a long time, mark-to-market valuations were sent by your bank once a year, whether you wanted them or not. They might have been of interest, they might not. You might have felt compelled to put them in your financial statements, you might not.

Like lots of things recently, times have changed.

These valuations are no longer a nice to have or a necessary evil, they are in fact an important plank of what we loosely call good treasury management.

So, what’s changed for mark-to-market valuations?

Lots as it happens. In most countries it is now mandatory to include these valuations in your financial statements, no matter the size of your company. With the volatility we have seen some of these numbers are getting more airplay than they have previously.

A large unrealised gain or loss can impact the overall performance of the company and open up questions that may not have been asked before. Tracking these numbers is no different from keeping an eye on your cashflow forecasts, and just as important.

A bit like Covid, one of the things we are going to have to live with for the foreseeable future is market volatility. This ongoing volatility in financial markets means that valuations are moving around. More than a little bit. Keeping track of these movements is critical to managing your foreign exchange hedges and exposures.

It’s a two-edged sword

We have seen plenty of examples of companies closing out their profitable hedges because the company needs the cash. Equally, those in loss positions are looking at ways to restructure the hedges they have in place. But it’s a two-edged sword.

If you are in a profitable position it means your hedge is at a better rate than the current market, so you can close it out and take the money but if the market starts to go against you, you will be in a worse off position. But of course, the reverse is also true.

Financial markets and treasury risk management are dynamic and so must be your approach. Whether it’s for accounting purposes or managing your FX positions, mark-to-market valuations at your fingertips is now a must have, not a nice to have.

Hedgebook does have this covered

If you would like to know more about how we can put this at your fingertips please set up a “one-to-one” webinar and we’ll be pleased to show you, at a time that works for you. Or Contact us here and one of our team will be in touch.