Keeping It Natural
I am old enough to remember a time when companies actually managed foreign exchange exposure without using derivatives. Outlandish as it may seem, multinationals of that Stone-like Age would establish operations and sales within the same country, hoping to mitigate any currency mismatch through a “natural hedge”. Moreover, since firing, hiring, relocating and investing tended to require approvals, these rebels elevated FX risk management to an executive- and board-level undertaking. Executive participation thus involved several officers and not just the CFO while board-level oversight required more than just an approval of a stale and boring FX risk management policy.