Leon Tompkins, Featured Speaker: Managing FX risk in emerging markets

Leon Tompkins, Director of Global Financial Risk with World Vision International, has helped to develop an award-winning strategy for dealing with difficult markets exposed to sudden jumps in risk levels. Emerging markets are still great sources of business growth but that growth comes at the expense of increased risk. A key component of this is FX risk, as companies with operations from Turkey to South Africa have found recently. The publicised losses are generally a simple consequence of local currency depreciation versus foreign-currency costs and an inability to pass on price increases sufficiently to offset the difference. The first question companies face is whether their policies were sophisticated or robust enough to deliver the right hedge ratios at the right time. Hedge ratios often rise and fall with volatility, delivering the lowest level of hedging just as unexpected spikes hit the market. However in emerging markets there are often also structural reasons for poor hedge performance including heightened political and trade risk, a lack of appropriate or liquid hedging instruments or complex regulatory and documentary requirements associated with FX hedging or even moving money in and out of the country.