2020 Alexander Hamilton Awards: Financial Risk Management

Financial risk management is a core treasury challenge. The first step toward success is ensuring that currency, interest rate, credit, and other financial risks are well-understood by the organization’s senior leadership. The second step is mitigating any risks that exceed the company’s threshold of acceptable exposures. And the third step is meeting these responsibilities without holding back the business—serving as a support rather than a hindrance to revenue growth.

Technology can certainly help organizations improve their financial risk management, but an innovative attitude helps even more. That winning mind-set is what made the three projects that received 2020 Alexander Hamilton Awards in Financial Risk Management stand out from the crowd.

• Bronze Award:  Moody’s updated its currency risk management practices by taking a holistic approach to companywide foreign exchange (FX) risk, by employing a Value-at-Risk (VaR) approach to understanding and mitigating those risks, and by transforming its hedging programs. Moody’s now has new insights into the risks it faces and has found exposures that offset one another, enabling the company to optimize hedging practices.
• Silver Award:  Customer credit risk is a constant concern for Paychex because the service provider makes payroll credits via ACH to a customer’s employees at the same time it debits the customer’s operating account to cover those paychecks. The company further reduced its already-low rate of non-sufficient funds (NSF) returns by developing a custom and automated credit scoring model.
• Gold Award:  After the 2017 change to U.S. tax law, eBay wanted to repatriate funds from around the world, but the treasury team realized the process for getting cash out of some jurisdictions would take time. They developed an innovative solution for mitigating the risk that currency shifts might reduce the value of funds in markets such as India and Korea during the period when eBay was waiting for approval of its repatriation transactions.

All three of these treasury groups put in the hard work and employed the creativity necessary to effectively mitigate the complex risks they faced. “Patience is crucial,” says Alexander Ilkun, vice president of treasury for Moody’s. “As a risk assessment firm, Moody’s wants to take measured steps and to take only calculated, well-informed risks. We took our time with this initiative, and—in the end—it paid off.”

Congratulations to eBay, Paychex, and Moody’s for their outstanding initiatives! And thank you to the judges of the competition: Jean-Francois Heitz, former deputy CFO and treasurer of Microsoft; Erik Smolders, former treasurer of Ingram Micro and a vice president in Deloitte’s Global Treasury Advisory Services practice; Craig Jeffery, managing partner of Strategic Treasurer; and Marie Hollein, former president and CEO of Financial Executives International.

Finally, thank you very much to ION for sponsoring the 2020 Alexander Hamilton Awards program.

Treasury & Risk will begin presenting our 2021 Alexander Hamilton Awards on March 17. Join us for our 2021 Technology Excellence Awards webcast—register today!