US corporates struggling with shortage of hedging expertise

US corporates are clamouring to hedge against financial risks such as rates, FX, and commodities but there is growing concern many are struggling to action and manage programmes because of a shortage of in-house hedging expertise.

Travis Arthur, chief marketing officer at Illinois-headquartered GTreasury, a treasury and risk management platform provider, says his company has experienced a “pretty dramatic” increase in corporates looking for hedging advice and solutions this year.

“It is definitely one of the hottest topics for us at the moment. I think everybody thought that after getting past the pandemic things would settle, but the reality over 2022 has been intensifying risk, volatility, and complexity,” he says.

Hedge Trackers, a provider of accounting, consulting, and software services to mitigate financial risk acquired by GTreasury in January 2022, has been at the sharp end of helping GTreasury clients needing hedging advice, intelligence, and solutions.

Ashley Pater, General Manager at Hedge Trackers, says that prior to 2022 corporate client focus generally mainly revolved around cash and payments. “This year cash and payments have not been quite as prominent for us as a lot of potential and existing clients are absolutely clamouring for more risk and hedging help, especially with what has been happening with interest rates this year.

“Rate hedging has really been the big driver for us, followed by FX and commodities in light of supply chain issues,” she says. “A lot of our clients are just needing help and guidance with figuring what they should be looking out for and planning, all with one eye very much on a potential recession ahead.”

Treasurers wanted

In a recent interview with Global Treasurer, Amol Dhargalkar, managing partner and chairman at US-based financial risk manager Chatham Financial, noted US companies were experiencing treasury staffing and recruitment challenges more frequently. He noted a shortage of hedging expertise was an especially serious problem.

It is a development Dhargalkar says he has not come across before in his 20-year career. “We have had so many companies that want to run new hedging programmes, or maintain existing ones, but they’ve run into the problem of how they can actually operationally do so as they have lost key staff through retirement or moves into other roles. The market for treasurers is very competitive now,” he says.

Pater says GTreasury, whose clients include Asahi Beverages, Zurich Insurance Group, Canadian Tire and Keurig Dr Pepper, is also seeing similar problems amongst its clients.

“It’s clear a lot of organisations are struggling with this right now, and moreover at a time when effective hedging programmes are critical,” she says. Worryingly, Pater believes the problem is only likely to get worse due to the impending recession which will likely disrupt all areas of business.

“I do see it getting worse before it gets better, and it’s why we’ve seen such an increase in demand from organisations that need external help with their programmes,” she says.

“Companies experiencing recruitment or expertise problems are typically coming to us to see if we can essentially fill that function for them for six months or so.”

Sage advice

With the macro and geopolitical outlook uncertain, and no sign of in the conflict in Ukraine waning, GTreasury’s Arthur is clear treasurers and CFOs will have to remain at the top of their game for some time yet.

“With so much going on, so many unknowns, the key for corporates is controlling the controllables,” he says. “That means true control and visibility, securing cleansed data and leveraging it for informed decision-making and rapid action. So, taking inventory and stock of where you have true certainty, clarity and confidence in your data would be step one.”

Arthur also notes it will be critical for businesses to identify where there are “gaps” in both their cash forecasting, scenario analysis, and hedging. Once those have been determined, companies can decide what resources are needed to fill those gaps.

“If it’s people-oriented, there are multiple consulting and tool options available in the market to fill that gap,” he says.

Pater meanwhile emphasises the need for corporates to ensure they have right tools and partners in place to help support and guide them through the turmoil. “Good partners are ones you can count on to be your strategic advisers, who can help you hone your thinking and decision making,” she says.

Pater also strongly recommends treasurers leverage their community for help and advice. “Treasury really is a very small network – teams in companies are generally very small. There are community networks through which treasurers can talk to each other,” she says.

“Engaging with them can also really help treasurers deal with some of these very difficult challenges confronting them. Everyone is going to be facing similar challenges, right? So, have the right tools, the right partner, and the right community engagements in place to help you and your organisation.”