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Building a future-ready approach to mitigating FX risks

Insights Partner Success

Callum McGregor

Chief Financial Officer, Westcon-Comstor

As an international business operating and trading in more than 70 markets around the world, one of the challenges we need to be mindful of at Westcon-Comstor is fluctuations in the value of different currencies on the foreign exchange (FX) market.

Following a turbulent 2022, with global supply chain issues impacting the business, further exacerbated by the performance of the US Dollar (our reporting currency), it was clear that we needed a renewed and dedicated focus on our FX risk management.

That’s why we’ve revitalised our focus on mitigating FX risks and optimising opportunities, overhauling policies, procedures, and controls to be relevant for now. By developing dynamic frameworks, we have made ourselves future-ready to be able to quickly adapt to changes in the overall market and business needs.

Winning Gold in Best Risk Management Solution at the 2023 TMI Awards

I’m pleased to announce that our hard work and focus have resulted in Westcon-Comstor winning a Gold in Best Risk Management Solution – Corporate Recognition Awards at the 2023 TMI Awards for Innovation & Excellence.

Organised by Treasury Management International (TMI) on 7 March 2024, the 2023 TMI Awards is regarded as a quality benchmark of treasury management excellence globally.

As the Chief Financial Officer at Westcon-Comstor, I take pride in our treasury governance and innovation, and this award highlights our commitment to best-in-class corporate governance.

Here’s how we got there

Beginning in January 2023, we embarked on a comprehensive journey with Dukes & King, a corporate finance and risk management firm to revamp our FX Risk Management framework, anchored by key strategic pillars:

  • Managing exposure to FX Spot Rates
  • Understanding the importance and risk associated with interest differentials as well as the underlying tenor of our risk
  • Managing credit and credit line availability (including a full counterparty review)
  • Capturing value from accepted risk to better protect against unacceptable outcomes enabling us to use (and self-fund) optionality, should a “Truss” event – Liz Truss’ disastrous UK Budget when she was Prime Minister for 50 days in 2022 – happen again

What this means to us as a business, our partners, and vendors

Our commitment to innovate to achieve risk mitigation excellence has yielded a host of positive changes that have had a profound impact on our organisation.

  • Improved control: A strengthened FX risk management framework with clear exposure mapping and real-time monitoring has given us greater control and agility to respond to currency fluctuations.
  • Reduced risk: By overhauling our FX risk management practices, including a proactive approach and a deeper understanding of exposures, we’ve significantly reduced risk for our business, partners, and vendors, and ensured our financial stability.
  • Improved governance: Aligning with the FX Global Code of Conduct has strengthened our risk management practices, improving our governance and instilling confidence in our partners and vendors.
  • Improved reporting: By boosting our Hedge Accounting through a groundbreaking model, we now have a clear, real-time picture of risks and opportunities, enabling better decision-making.
  • Saved costs: A holistic FX risk management approach with early risk identification and counterparty benchmarking has minimised losses and reduced costs.
  • Created value: By proactively managing FX risk, we’ve unlocked cost savings, improved hedging, and enhanced customer service, creating real value for our partners and vendors.

What’s next for us as a business, our partners, and vendors

Winning this award is a unique experience for Westcon-Comstor as it is unlike the awards we usually win. Very often, we’re recognised for our capabilities within the IT distribution industry. But this award comes in an unexpected and different sense.

Not only am I happy we managed to bag an award for our innovation in treasury and risk management, but also proud that our Enhanced FX Risk Management framework has had a significant impact in strengthening our position for future volatility and commitment to driving success for our partners and vendors.

I look forward to achieving more with and for our partners and vendors this financial year with Westcon-Comstor’s best-in-class corporate governance.