TRACKING FOREIGN EXCHANGE

MAJOR CURRENCY PAIRS

GBPUSD -34.42% USDCHF -21.60% USDCAD +17.53%
EURUSD -12.25% USDJPY -13.17% AUSUSD +1.78%
TEN-YEAR MOVEMENTS IN MAJOR CURRENCY PAIRS
PERCENTAGE CHANGE BETWEEN OCTOBER 13, 2006 AND OCTOBER 7, 2016

40% 40%

20% 20%

0% 0%

-20% -20%

-40% -40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Google/SIX Financial Information 2016

TOP CHALLENGES TREASURIES FACE IN MANAGING FX RISK (%) KEY FACTORS AFFECTING
CURRENCY MARKETS
Lack of visibility/
reliability of FX forecast
56

Emerging market/
restricted currency volatility
49

Manual exposure
identification/capture
48
INTEREST RATES ECONOMIC
Business unit understanding 33 GROWTH

Inadequate treasury/financial
risk management systems
22

Informal or immature
hedging practices
19

Analysing exposures and

measuring hedging results
16
POLITICAL STABILITY MONETARY POLICY

Hedge accounting compliance 15

Lack of understanding
by senior management
12

Non-standard FX
management processes
9

Inadequate FX skills
and knowledge
7 RATE OF INFLATION
TRADE BALANCE
Source: Deloitte 2016

RISK MANAGEMENT APPROACHES USED TOP REASONS FOR NOT HEDGING FORECAST
BY TREASURERS (%) REVENUES/EXPENSES (%)
Hedging using
89 Exposures are small 42
derivative instruments
Inability to forecast MARKET FACTORS NATURAL DISASTERS
Matching costs and revenue in the exposures accurately 33
same currency in the same entity 58
Lack of expertise/resources
to hedge effectively 23
Managing or netting
of exposures across entities
46
Hedge accounting
is difficult
17
Pass-through to suppliers/
28 Senior management
customers
does not believe in hedging 12

No FX risk management 2 We do not fully

undertaken 6
understand our risks LABOUR MARKET/CONSUMER CURRENCY
Source: Deloitte 2016 Source: Wells Fargo 2016 SPENDING DATA SPECULATION

CHANGES MADE TO FX RISK MANAGEMENT AMID HEIGHTENED CURRENCY VOLATILITY (%)

47 29 26 18 13 7 3 15 6

Increased the Developed/ Improved/ Extended Altered Decreased Shortened Other None
amount that revised FX enhanced the maturity of the mix of the amount the maturity
is hedged policy systems hedges hedging that is hedged of hedges
instruments
Source: Wells Fargo 2016