When Thomson Corp. acquired Reuters in 2008 to create Thomson Reuters, the merged entity's much larger geographic footprint dramatically increased its foreign exchange exposure. Measuring the cash flow risk and economic volatility of its global FX exposures was a daunting task put before the treasury organization.

Roughly 30% of Thomson Reuters' $13 billion in annual revenues and about 35% of expenses and capital expenditures were in currencies other than the U.S. dollar, driving significant cash flow risk. The largest mismatch was its meaningful euro revenues and large sterling cost base, which resulted in about $800 million long euro and $600 million short sterling cash flow exposures a year.

Added up, the potential annual cash flow risk related to the company's top eight exposures, considered individually, was more than $350 million. "We needed to roll up our sleeves to understand the FX exposures, build a model to measure the impact on our business, and then develop an effective FX hedging program to reduce economic FX risks," says David Shaw, treasurer and senior vice president of the New York-based information provider.