A well-defined foreign exchange (FX) policy serves as the firm’s window into managing overall risk within a complex global ecosystem, encompassing both direct and indirect FX exposures. It establishes transparency and fosters understanding across the organization, ensuring alignment with corporate objectives and buy-in from all stakeholders. An effective FX policy evaluates both economic and accounting risks, balancing the impact on cash flows and financial statements. It provides a thorough roadmap of its methodology, including risk identification, hedging strategies, and performance measurement, while maintaining flexibility for on-going assessment and adjustment. The policy supports consistency in decision-making while accommodating future considerations, such as evolving market dynamics, regulatory changes, and technological advancements. By embedding these elements, the FX policy enhances the company’s ability to mitigate risk, improve financial stability, and create long-term value.
Investment and Counterparty
An effective investment policy and counterparty risk framework balances long-term returns with liquidity to support strategic corporate needs. Company-specific tolerances define risk limits, guiding asset selection and ensuring alignment with organizational objectives. A rigorous counterparty selection process evaluates financial strength, creditworthiness, and alignment with ethical and sustainability criteria. Long-term partnerships with counterparties are cultivated to enhance economic value and foster collaborative growth. Emerging trends such as ESG investments and technology-driven analytics shape decision-making while ensuring portfolio resilience. Critical oversight, through governance structures and real-time monitoring, safeguards assets while optimizing returns and liquidity to support corporate strategy.
Investment and Divestment Best Practices
Investment and divestment decisions should align with an organization’s strategic goals, balancing risk tolerance and long-term objectives. Rigorous due diligence is essential, encompassing financial, market, and operational analyses to ensure informed choices. Our firm has conducted several company-specific studies in this area, with a particular focus on post-M&A integration and optimization. For investments, focus on opportunities with clear value creation potential, competitive advantages, and scalability. In divestment, prioritize assets that no longer contribute to strategic objectives or drain resources, ensuring smooth transitions to maximize returns. Transparency and communication with stakeholders are crucial throughout both processes to build trust and mitigate resistance.
FX Translation Risk
Translation FX risk management are vital for mitigating currency-related risks that can impact a company’s financial stability. This area is critical when establishing a company-specific policy tailored to risk tolerances and strategic objectives. Key areas of focus include identifying exposures, implementing hedging strategies, and ensuring compliance with financial reporting standards to protect the balance sheet and income statement. The absence of such policies can lead to significant and unexpected financial losses, as well as unforeseen risks affecting both profitability and valuation. Veritas Treasury Solutions has conducted multiple studies in this domain, providing insights across diverse geographies and industries. These practices ensure companies can proactively manage currency volatility and align financial strategies with operational goals.
Acquisition and Divestment
Acquisition and divestment decisions are critical for optimizing a company’s portfolio and achieving strategic objectives. Effective practices require thorough due diligence, clear alignment with long-term goals, and a focus on value creation. Our company has conducted several studies and implemented company-specific policies, with a particular emphasis on divestment strategies. With the advent of AI, integrating advanced analytics into these processes has become essential, particularly when re-establishing a company’s risk management policy post-acquisition or divestment. Divestments should target underperforming or non-core assets, ensuring efficient execution to maximize financial returns and strategic benefits. These practices enable organizations to allocate resources effectively and maintain agility in dynamic, technology-driven markets.
Foreign Exchange Accounting
Foreign exchange accounting practices are integral to managing financial risk and ensuring accurate reporting. A company-wide understanding of appropriate accounting methodologies is paramount for any best-in-class risk management policy. While these methodologies often vary by region, such as IFRS versus US GAAP, they must align with global standards and the organization’s strategic goals. Specific practices, including fair value and hedge accounting, should be closely linked to the company’s risk management policy to minimize volatility in financial statements. Our company has conducted multiple studies and provided recommendations to global boards, emphasizing the importance of aligning accounting practices with broader financial strategies. These efforts help organizations achieve transparency, compliance, and resilience in managing foreign exchange exposures.
Transactional FX
Managing transactional and on-balance sheet FX exposures is a critical workstream where establishing clear risk tolerance thresholds is essential. Understanding key factors such as forecasting errors and their potential impact on exposures is paramount to effective management. In this area, we have conducted multiple data-driven solutions incorporating industry and company-specific benchmarks, leveraging advanced quantitative tools to facilitate both linear and non-linear FX solutions. It is equally important to ensure that the company’s objectives are directly linked to actual practices, fostering alignment between strategy and execution. Key success factors include accurate exposure identification, robust forecasting, and portfolio-based post-risk optimization studies to refine hedging strategies. These comprehensive approaches enable companies to manage currency volatility while enhancing balance sheet resilience and financial performance.
I am pleased to recommend Erik. During our time working together, Erik expertly transitioned complex projects from planning to successful execution, showing a keen ability to manage both strategic initiatives and detailed financial analyses. His proactive approach in identifying potential risks and developing mitigation strategies greatly benefited our team and our clients.
Joakim Lidbark
Former Global Head of CitiFX Client Solutions
I had the pleasure of working with Erik on several high-level CFO and board projects, spanning capital risk, foreign exchange, global policy, and treasury transformation . His depth of knowledge and keen understanding of corporate priorities are unmatched. Erik’s forward-thinking approach to potential risks, coupled with his adaptability to industry and company-specific nuances, sets him apart. He is also an outstanding communicator, able to connect effectively at all levels of an organization.
Nick Pedersen,
Global Head of Digital – NatWest
I have known and collaborated with Erik Johnson for over 25 years, beginning with our roles as regional treasury heads at Siemens—Erik in Hong Kong and myself in New York. Together, we were responsible for designing, streamlining, and implementing customized processes and protocols aimed at clarifying and managing complex corporate risk profiles across various asset classes, including interest rates, foreign exchange, credit, and commodities. This work ensured alignment with company objectives and risk management practices. Over the years, we have frequently partnered on global hedging strategies for corporate clients. Erik has dedicated his career to advancing the field of treasury risk management, demonstrating an exceptional commitment to deep understanding, integrity, and high professional standards.
Mark Cipollina,
Former CFO Siemens Capital U.S.
I have collaborated with Erik on multiple global risk management C-suite initiatives over many years with several different corporates. His extensive experience as a corporate treasurer provided him with a deep understanding of our needs across various operational areas. Erik delivered a comprehensive policy and risk management framework that aligned with our objectives, while adhering to industry best-in-class practices. His proactive and strategic approach to identifying and addressing risks, combined with his forward-looking insight and ability to embed technology into both current and future needs, sets him apart. I highly recommend him.
Ciaran Fegan, CFA
Senior Director, FX Risk Management & Treasury Strategic Projects at Viatris
I have had the privilege of knowing Erik for nearly 30 years. During this time, and in my previous capacity as the head of foreign exchange trading at leading global financial institutions in the Asia-Pacific region, I have been consistently impressed by Erik’s extensive experience in global risk management and his deep understanding of financial markets across multiple asset classes. Erik displays a disciplined approach to risk management, spanning both emerging and developed markets, and stands out as an industry leader. His strong grasp of macroeconomic themes and expertise in financial risk modeling, allow him to translate complex data into practical, effective risk management solutions that consistently deliver value for his firm and their clients. I am confident in recommending Erik for roles requiring strong leadership, strategic vision, and deep expertise in financial markets and risk management.
Christopher de la Hoyde
Former Head of Foreign Exchange Asia Pacific at RBS
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